From May 2009 Resource

Web 2.0 for Insurers
Some life insurers are already using Web 2.0 in their business practices and finding it useful. See how blogs, wikis and even social networking can help your company.

By Tammy McInturff Appel

The life insurance industry is changing rapidly as insurers struggle to adjust to the "new economy." And it’s not just the economy changing, but customers and employees as well. How your company responds to market and technology changes could make a difference in whether you survive or thrive in the future. However, finding a way to stay current and grow in this volatile environment is no easy task. Now may be the time to take a second look at Web 2.0 and how it can help your company both internally and externally.

At LOMA’s Emerging Technology Conference, Karlyn Carnahan, a principal in the Insurance practice at Novarica, discussed how Web 2.0 can be useful to the insurance industry and how some insurers are already using blogs, wikis, user-generated content, mash-ups and other Web 2.0 applications.

According to Wikipedia, Web 2.0 "refers to a perceived second generation of Web development and design that aims to facilitate communication, secure information sharing, interoperability, and collaboration on the World Wide Web. Web 2.0 concepts have led to the development and evolution of Web-based communities, hosted services, and applications; such as social-networking sites, video-sharing sites, wikis, blogs, and folksonomies. Although the term suggests a new version of the World Wide Web, it does not refer to an update to any technical specifications, but rather to changes in the ways software developers and end-users utilize the Web." In other words, how companies and consumers use the Web is changing and Web 2.0 is a big part of that.

Novarica is a division of Novantas LLC, a leading management consultancy and information services provider for the financial services industries. Novarica provides information, insights, and perspective on markets, operations, and technology to financial services and insurance executives and project teams. "We manage the Novarica Insurance Technology Research Council, a moderated community of over 80 insurer IT executives and insurance carriers," said Carnahan. The Novarica Insurance Technology Research Council (NITRC) provides insights on issues of interest to insurer technology executives in a way that promotes knowledge sharing, provides quantitative data, and fully preserves participant anonymity.

Beyond the Hype

Web 2.0 has been a buzz word at industry conferences for several years now. In fact, there is actually a good reason for all the hype surrounding Web 2.0 today. According to The Pew Internet & American Life Project’s research on Internet usage trends, the number of people using Web 2.0 technologies has continued to increase over the last several years. The Pew Internet & American Life Project’s survey asked participants if they ever did any banking online, read someone else’s online journal or blog, used online social or professional networking sites like Friendster or LinkedIn, looked for information on Wikipedia or posted a comment or review online about a product they bought or a service they received. Not surprisingly, the number of people answering in the affirmative has increased sharply over the last couple of years.

Even though Web 2.0 applications may be gaining in popularity with the general public, many insurance companies may find it hard to imagine how blogs, wikis, mash-ups, social networking, etc. might be useful to their business practices. However, some insurance companies are already using Web 2.0 tools and finding them useful, according to Novarica’s research.

By surveying the NITRC, Novarica set out to separate the facts from the hype surrounding Web 2.0. There were 23 participants representing different U.S. insurers in the P&C, life, health and annuity fields. Company size of the participants ranged from small to very large.

Novarica surveyed participants about their companies’ usage or plans for a variety of Web 2.0 applications including AJAX, wikis, blogs, social networking, other user-generated content, mash-ups and cloud computing. Through this research, Novarica found that some insurance companies are already successfully using Web 2.0 in their business and have found it to be valuable.

According to Carnahan, AJAX (Asynchronous JavaScript and XML) is not always considered part of Web 2.0. However, Novarica included it in their research and found that 39 percent of the participants’ companies are already using AJAX and find it valuable. Thirteen percent said they were planning to use AJAX in the next 12 months, 17 percent said they were playing around with it to see how it might work for them and 13 percent said they were thinking about using AJAX. "We found that AJAX is being utilized very heavily in the insurance industry today, which will help facilitate additional projects down the road," Carnahan said.

Wikis and blogs have been around for a while and are already very popular with Internet users today. Wikis are, of course, collaborative Web sites which can be easily edited by anyone with access to them; while blogs are online journals, sometimes shared, where one or more people can post entries on a particular topic. According to The Pew Internet & American Life Project’s research, 32 percent of Internet users, about 47 million American adults read blogs and 81 percent of Internet users, or about 118 million Americans, look for information online about a service or product they are thinking of buying.

According to Novarica’s research, 39 percent of the insurance carriers surveyed use wikis today and find them valuable and 22 percent are using blogs and finding them valuable. "Wikis are probably the Web 2.0 function that is being used the most by insurance companies today," said Carnahan. "We also asked the participants where they thought wikis and blogs might have the greatest potential to affect their business. Internal team communication is where insurers see the most value for blogs and wikis. Companies also see value for wikis in claims and underwriting and value for blogs in customer communication and distribution management."

Novarica found that there are several ways insurance companies use wikis, including to store their "manual of procedures." Companies can also use wikis to capture underwriting guidelines, track competitor information and track and manage large projects. "There are several ways to use wikis, but you want to make sure that you have some kind of control over the content to make sure it is accurate," said Carnahan. "A wiki is a great way to help track and manage large projects because it is a single source where people can come and exchange information. You don’t have a million e-mails going back and forth."

Carnahan said insurance companies are using blogs to facilitate communication across groups. For example, a blog might help facilitate communication between employees and agents, so insurance companies are using blogs mostly internally. "Companies are also using blogs to share information with project teams and to track large customer information, service plans, account notes and call reports," she said. "So there are a lot of ways of using blogs and wikis as internal communication tools."

However, Carnahan advised attendees to examine the pros and cons of using external blogs before making any decisions. She mentioned several benefits to having an external blog. "One benefit of having an external blog is that you increase your search engine rankings when your content changes frequently," she said. "A blog is also a great way of giving people information about your products and services. It can help improve the frequency of calls you get when customers are looking for a new product or service. Other benefits to having a blog are that it can help strengthen the brand image and to get more inbound links."

There are also challenges to having an external blog. "Someone has to actually write the blog," said Carnahan. "Blogging is a lot of work. It is a real challenge to blog about something in a way that is interesting and relevant. It can be easy to get into the marketing mode when doing a company blog. Managing the voice of your company to strengthen your brand is a real challenge."

Social networking Web sites like Facebook, MySpace, LinkedIn, etc. are becoming increasingly popular. Whereas a few years ago, social networking was mostly popular with Generation Y, today it is being used by people of all ages. According to Facebook’s Web site, it now has more than 200 million users and more than two-thirds of Facebook users are outside of college. In fact, Facebook’s fastest growing demographic is those 35 and older.

Although this Web 2.0 tool may be gaining in popularity with the general public, most insurers are not using it today in their business practices. According to Novarica’s research, only four percent of insurers are currently doing anything with social networking. Nine percent said they were planning to use it, 17 percent are playing around with it and 39 percent of carriers are thinking about using social networking. "A lot of insurers, around 31 percent, said they were not planning to do anything with social networking," said Carnahan.

Novarica found that insurers believe social networking’s greatest potential is in internal team communication. "Most insurance companies believe that internally is where you can find the greatest value for social networking," Carnahan said. "It is not surprising that this is where the industry sees the most value for social networking because before we expose something to our customers or agents, we need to know that it is adding value and that we can actually deploy it. You don’t want to send something out to your customers that has this much visibility if you are not really prepared to keep up with it and manage it."

Companies also think that social networking could be valuable in distribution management. Although it did not rank as high as internal communication, some carriers thought that social networking with agents could provide value. Carriers also said that social networking might be useful in customer communication, underwriting and claims.

So how could you use social networking? Carnahan explained several ways that insurance companies could use social networking. "You could use a Facebook, LinkedIn, or a Ning type of platform to solicit customer input or feedback," she said. "Some insurance companies already have a Facebook page. Although your first reaction might be that customers are going to use this type of platform to complain, I would say first of all it is not a bad thing for people to complain because it allows you to learn a lot about what is going on in your company. Of course, you might not want to see complaints on such a public application but the interesting thing is that on social networking sites like Facebook, people will often post a concern or complaint about a company and other customers will respond to the complaint by standing up for the company. When a company tells you that a problem isn’t real you don’t really believe it but when a customer tells another customer, the power of social peer pressure will often kick in. That is something you find on some of these social networking sites."

Another way insurers can use social networking is by creating a LinkedIn Group to maintain connections between alumni and current staff to enhance knowledge sharing. This could be particularly useful as more Baby Boomers retire. Carnahan said this could be a good option for companies that are worried about losing critical knowledge as employees retire. "Having an alumni group that can maintain a connection can be very valuable," she said. "Companies could also create a social networking site for tips, stories, or advice from policyholders to each other. Social networking can help deepen employees’ personal relationships with agents through links on LinkedIn or Facebook or to deepen relationships between case managers and independent adjusters."

Another social networking tool that might be useful for insurance companies is Twitter. It may seem odd, especially since the number of characters is limited to 140, but Carnahan said there are several ways that it can be used by insurance companies. "You could set up one Twitter account or several accounts that people could follow. Companies can use Twitter accounts for announcements to agents about new products or financial results for the company. You could even use Twitter for job postings," Carnahan said.

She also said that Twitter could be used to send questions to a broader audience. For example, if you needed to find a work around for a particular process you could send out a question about that. Twitter could also be used for disaster messages and to announce new products or press releases. "Disaster messages are really where Twitter has come into its own, in events like the wildfires in California," Carnahan said. "Twitters were going so rapidly that people were able to keep on top of where help was and where they could evacuate to. So you might set up a number of different Twitter accounts. My advice would be, even if you are not quite sure how to use a Twitter account right now secure a Twitter name for your company. You don’t want to get in a situation like what happened during the dot com boom when people were securing company names just so the companies with those names would have to buy them back."

We are continuing to see more user-generated content on the Web. Sites like YouTube, Flickr, Delicious, TripAdvisor, etc. are continuing to grow and increase in popularity. While some insurers are thinking about this technology, most are not using it right now. Novarica’s research showed that nine percent of insurance companies are using user-generated content and finding it valuable, while nine percent of insurers are planning to use it in the next year. It also found that 22 percent of insurers were playing around with user-generated content to see how it might work for them and 30 percent of insurers were thinking about using it. "We found that many insurers are thinking about how to use user-generated content to find ways to build functions and capabilities that might be valuable to the organization," Carnahan said.

With user-generated content, again, companies see the most value being in internal team communication. Claims, however, came in a close second as the business area in which user-generated content could have the greatest potential effect, according to Novarica’s research. Companies also listed underwriting, distribution management and customer communication as areas where user-generated content might have potential. "It is in this progression that companies believe they should be using user-generated content," Carnahan said. "First they need to find the business value, which they can do by testing it out with internal team communication. Then once we get that then maybe we can use it with our customers. But there is a concern about what the customers might generate and whether we are prepared to handle that."

Carnahan listed three particular areas where user-generated content might be utilized—underwriting, enrollment and distribution management. "In underwriting you could have discussion boards for complex account questions between the field and home office," she said. "You could also have photo and video sharing. Even though that might sound a little odd, if you are underwriting a large account, particularly in the property and casualty world it is great to have a place where you can go and see old photos and videos of the account you are working on. Social bookmarking sites, like Delicious, could be valuable as well. If an organization has a number of Web sites that they think offer a tremendous value they can bookmark them and allow other people to use them across the organization without having to find the sites themselves. User-generated content could also help with coordination of travel. When there are a number of people going on a business trip, it can help with coordinating air flights, cabs, etc. So you can leverage user generated content for these kinds of simple things. It can also be useful for collaboration on new product development. Set up something where you have document storage, threaded discussions, and online messages."

According to Carnahan, companies can also utilize user-generated content in enrollment. For example it could be used for video enrollment, PodCasts, or discussion boards. User-generated content could also be used in distribution management. "You could create discussion boards for agent and home office issues," she said. "You could also do social bookmarking or solicit ideas and innovation from your agents. So there is a whole variety of ways that companies can use this."

Mash-ups are Web 2.0 applications that combine data from several sources into one tool. Novarica found that 13 percent of carriers are using mash-ups today, while nine percent are planning to use them in the next 12 months. Another nine percent of carriers are playing around with mash-ups to see if they might be valuable to the organization and 43 percent of insurers are thinking about how to use mash-ups in their business to find value.

Carnahan said that the Novarica Insurance Technology Research Council thinks mash-ups will have the most impact in claims and underwriting. They also think mash-ups could be useful in customer communication, distribution management and internal team communication but to a lesser degree.

According to Carnahan, mash-ups could help improve account underwriting. "Companies could mash maps with newswire, claims data, census data, crime data and health statistics to help improve underwriting," she said. "If you are able to pull all that information together you have a very different level of analysis. Mash-ups could also be helpful for finding which industries you should be focusing on for Group. If you are trying to get some new business you can mash some SIC codes with maps and current agent locations with your network and get a better picture of where your gaps are in concentrations. Mash-ups can also help companies figure out where to appoint new agents. You can mash demographics with maps, production and current agency locations and see where it would be most effective to put more agents and drive up business."

Cloud computing has gotten a lot of press lately. This type of computing is based on sharing resources rather than having local servers or personal devices to handle applications. Despite the media buzz around cloud computing, Novarica found that most insurers were not even thinking about it at this point. "There are still not a lot of people using cloud computing," said Carnahan. According to Novarica’s research, only 13 percent of carriers are using cloud computing today and finding it valuable. Thirteen percent said they were playing around with cloud computing to see how it might work for their company and another 13 percent said they thinking about it. "That leaves 61 percent of insurers that are not even thinking about cloud computing right now," she added.

Web 2.0 Top Ten

Although many insurance companies are not embracing Web 2.0 yet for their business practices the enormous amount of use of Web 2.0 from the consumer side will continue to create interest on the business side. Carnahan listed the top ten areas that the NITRC expects to be delivering value. They are:

--Wikis for internal communication

 --Blogs for internal communication

--Mash-ups for claims

-- Mash-ups for underwriting

 --User-generated content for internal communication

--Social networking for internal communication

--User-generated content for claims

 --Cloud computing for other functions (especially actuarial)

--Wikis for claims

--Social networking for distribution management

"So beyond all the hype this is what is really going on in the world of insurance," she said.

Carnahan gave attendees some advice about how to approach Web 2.0. "We recommend that companies try not to go crazy on this stuff initially," she said. "It is easy to think, ‘wow everything is moving so fast, we have to do it all.’ But companies should be thoughtful about it. Avoid trying to catch a consumer hype wave driven by media and venture capital dollars, but don’t blind yourself to the real value that Web 2.0 is bringing today and will bring tomorrow. Maintain a balance. Don’t let yourself get overwhelmed by the hype, but don’t just walk away and forget it because there is real value."

She also recommended that companies explore blogs and wikis for their potential benefits in improving internal communications and knowledge sharing. "Evaluate carefully the potential role of blogs as part of customer and distributor communication strategies," she said. "It may take a while to establish a readership for a blog, so be patient. I would also recommend that companies examine the potential value of creating mash-ups of internal data and applications with external services like GoogleEarth and others to speed information gathering for both underwriting and claims."

"We also recommend that companies consider the potential to leverage user-created content in claims processing," she said. "And evaluate the potential of cloud computing as a cost effective solution for occasional processing-intensive tasks like actuarial calculations. Evaluate carefully the potential for these tools and make sure you have thought through the whole process of how you want to use these technologies. Don’t just blindly go out there and put them in place, make sure that they are in line with your overall strategy." n

Contact Resource at resource@loma.org