NOIE Sets E-commerce Cross-hairs on Insurance Industry
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The insurance industry is the focus of the National Office for the Information Economy's (NOIE) latest investigations into the benefits of e-commerce, as a new study has outlined the potential benefits of new economic perspectives within the sector.
The report, Insurance@Risk, investigates how business processes may be made more efficient through the adoption of e-commerce, and in its recommendations it proposes a collaborative approach for the increased use of B2B e-commerce in all branches of insurance.
"While some business has been conducted electronically in the general, life and health sectors of the insurance industry, a whole of industry approach is most likely to deliver maximum benefits from the adoption of e-commerce," said Minister for Communications, Information Technology and the Arts, Senator Richard Alston, at the launch of the report.
The insurance industry contributes two per cent to Australia9s Gross Domestic Product, according to the report, generating $3.3 billion in profits after tax in 1998-99. The report asserted that the application of e-commerce in the industry can 3bring improved procurement, supply, transaction costs and customer service. It creates the opportunity for greater commercial collaboration to achieve industry-wide benefits.2
"Enhancement of current business processes and the creation of new lines of business are two of the main areas where the insurance industry could benefit from e-commerce," the report stated, citing examples such as claims management and suggesting insurance companies could even enhance their product offerings by introducing new financial services with the expanded capacities e-commerce has the potential to create.
The report identified greater efficiencies can be created in an electronic system to "reduce turnaround times and improve communication processes between relevant players." Importantly, the report looked beyond the effect of e-commerce on the industry to those it aims to serve, maintaining improvements in communication and cuts in turnaround times can potentially reduce costs and increase service levels to consumers.
Collaboration forms the crux of the report's recommendations for drawing the greatest business benefit from e-commerce, as it outlines the need to develop collaborative mechanisms for the increased use of e-commerce by the risk market.
"Collaboration between health funds, associations, healthcare providers and government is also recommended in the implementation of e-commerce standards for health insurance messaging and claims processing," said Senator Alston.
The Insurance@Risk report also identified the needs of specific areas of the insurance industry. In life and general insurance, for instance, the report claimed that the development of industry-wide e-commerce and messaging standards pose a major issue, just as the need for common standards for messaging systems and streamlining claims processes continue to be an issue for health insurance organisations. Following these discoveries, the report identified a need for national industry standards, and recommended collaboration from insurance industry members to achieve this goal as well.
The report did not claim the process of moving the insurance industry would be without challenges, identifying the integration of new and existing business systems, the need for industry-wide e-commerce standards, security and authentication issues, the creation of new distribution channels and the need for a philosophy of collaboration as potential obstacles to be surmounted on the road to e-commerce. "In order to achieve 'end to end' processing, further collaboration between key stakeholders needs to occur," the report maintained.
The Internet introduces a new distribution channel for the industry and the associated benefits and risks need to be managed. Senator Alston said that such challenges could be overcome through strong industry leadership to facilitate change on agreed business processes and relationships and mapping processes to identify areas of improvement and cost saving.
In its recommendations to introduce e-commerce to more core operations in the insurance industry, the Insurance@Risk report identified government as having a major role in developing a whol-of-industry approach to adopting e-commerce, a recommendation Senator Alston indicated the Federal Government would take up.