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.
