SOCIAL NETWORKING AND INSURANCE DISTRIBUTION. Author s Name: Krishna Sathyanarayanan and Nilay Banerjee

Transcription

1 SOCIAL NETWORKING AND INSURANCE DISTRIBUTION Author s Name: Krishna Sathyanarayanan and Nilay Banerjee

2 TABLE OF CONTENTS INTRODUCTION... 2 HISTORY AND GROWTH OF SOCIAL NETWORKING SITES... 4 SOCIAL NETWORKING IN INSURANCE... 5 BUSINESS BENEFITS FOR INSURERS... 7 TECHNOLOGY CONSIDERATIONS... 9 SOCIAL NETWORKING PRODUCTS FOR INSURANCE...10 ON THE FLIP SIDE OF THE COIN CONCLUSION APPENDIX ABOUT WIPRO TECHNOLOGIES AND WCIR WIPRO TECHNOLOGIES

3 INTRODUCTION Nov 11, 2009 (7:10pm EST) Bob posts a wall message on Ryan s Facebook page: Hey, Ryan, I finally got the Mazda v6. Took in on a lease; but you know what, my premium shot up crazy. ABC Insurance is charging 900 bucks! Hey, btw, which car insurance did you go for the new Acura? Nov 11, 2009 (5: 20pm PST) Ryan replies. Wow Bob, so u finally got your dream Mazda! Hey, 900 bucks is insane. Why don t you get a quote from XYZinsure.com? Their rates are reasonable and they do also give a good discount when you club it with your renters. Bob got a quote from XYZinsure.com and got a great deal for a just $567. So, XYZinsure.com got a new customer and may be a few friends of Bob s as their prospect. What do you call this insurance distribution channel? Well, the buzz word is social networking. Social networking is not a new topic; it probably existed since the start of mankind. But the advent of internet has made it a phenomenon. So, what is social networking? In simple terms, it is the art of making contacts with known and unknown people or groups through the use of internet. Initially, the connections are made with homogeneous groups; but they eventually expand and explore into other areas. For example, 'Facebook' one of the most used social networking sites was formed for the purpose of keeping in touch with the students of Harvard over the internet. In a matter of few months, it gained popularity, and was given to other colleges; then to high schools and then to everybody. 3 WIPRO TECHNOLOGIES

4 HISTORY AND GROWTH OF SOCIAL NETWORKING SITES Social networking started as early as mid 90's in the form of online communities like Geocities and Tripod which tried to bring people together to communicate using chat rooms. The 'blogging' phenomenon carried this concept forward in the late 90's. But it was the emergence of MySpace and Friendster in early 2000's which actually kicked off this revolution. Tweeting and scrapping have become the new lingo of this generation which is becoming more and more tech savvy. Some of the most common social networking sites across the globe are depicted in figure 1. Figure 1: Common Social Networking Sites 4 WIPRO TECHNOLOGIES

5 SOCIAL NETWORKING IN INSURANCE 'Networking' has always been a mantra for successful business. Over the years, carriers have networked with agencies, banks and others to reach out to their potential customers. But, can they reach them directly? There are many ways of reaching the end customers; in the age of Gen Y, 'Social Networking' is one of them. But the question is Is it just a way of creating awareness or can insurance companies view this as a new channel of distribution? In the past few years, there has been an increasing trend in customers buying online auto insurance, personal insurance, travel insurance and so on. The online distribution channel across the globe has beaten the sales predictions. According to a 2008 independent Forrester Research, Inc. report, in USA, the Internet generated auto insurance sales will grow to $22.4 billion in 2012 from $12.2 billion in A more recent Forrester report also says that the use of online social media has exploded with 75% of adults in the US either participating or consuming social media at least once a month. Nearly 4 out of 10 of the auto & life insurance researchers are now visiting the social insurance sites monthly. Figure 2 is an excerpt from the Forrester report which shows the usage of social networking sites by adults in the US: How often do you participate in the following social activities online? (At least monthly or more) Visit social networking sites (e.g. MySpace, Facebook, and LinkedIn) Researched auto insurance in past year 37% Applied for auto insurance in past year 34% Researched life insurance in past year 38% Applied for life insurance in past year 34% Update/maintain a profile on social networking sites (e.g. MySpace, Facebook, LinkedIn) Researched auto insurance in past year 33% Applied for auto insurance in past year 30% Researched life insurance in past year 33% Applied for life insurance in past year 30% Base: US online adults North American Technographics Benchmark Survey, 2009 (US, Canada) 5 WIPRO TECHNOLOGIES

6 Figure 2: Usage of Social Networking Sites by US Adults (Source: Forrester Inc.) The insurance business is slowly but steadily identifying the impact and reach of this medium. 6 WIPRO TECHNOLOGIES

7 BUSINESS BENEFITS FOR INSURERS Building or altering their brand image Creating online communities and discussion forums to bring buyers and sellers together Creating a medium for agents to use this as a lead generation tool Increasing online sales by driving traffic to company websites Using it as a feedback tool to improve product quality and customer service Helping customers through catastrophes Providing ongoing education to customers and field force Developing communities for targeting customer segments Enabling employees to blog using internet In the years 2008 and 2009, recession hit the industry hard and companies could not progress much due to budget and other constraints. The recent activities by insurers and associated companies indicate a movement towards the not so much explored social networking. Some examples are: Progressive, one of the largest auto insurance groups in the US recently started using the microblogging site, Twitter, to promote customer participation and improve customer service. This insurer also uses the site as a communication channel to reach out to customers at times of catastrophes. Recently, they launched their second online game Route rageous on Facebook & Yahoo games which is aimed at promoting 'safe driving'. Interestingly, the gaming software which was launched in August 2009 has already been played more than a million times! Allstate, a leading US insurer, is creating a social network to connect middle market consumers with other consumers to share experiences, insights, and knowledge on financial products and services. Their approach is to harness the collective experience of consumers through interactive communities and affinity groups. Salesforce.com, an application service provider for managing the distribution network, has announced its linking with Twitter, Google and Facebook so that companies can connect with customers and access knowledge. The insurance agents linked to Salesforce.com can now monitor the conversations on Twitter. Penetrate Increased sales and market share Market Educate Collaborate Steps for a successful social networking strategy for insurers Figure 3: Steps for a Successful Social Networking Strategy for Insurers 7 WIPRO TECHNOLOGIES

8 Anthem (Blue cross Blue shield) is leveraging social networks like Twitter, Facebook and YouTube to engage and respond to customers. The ACT (Agent Council for Technology) Web 2.0 workgroup is preparing a workbook to guide independent agents to become engaged in social networking. Insurers should look at social networking as an important medium in communication and should invest in all the above ventures in a step by step fashion (as depicted in figure 3) to increase sales and market share. 8 WIPRO TECHNOLOGIES

9 TECHNOLOGY CONSIDERATIONS Huge amount of data is collected via social networking, mainly in the form of texts. Complex algorithm/artificial intelligence software is used to cull key data from these messages. The use of technology will help insurers to: Analyze the text and identify homogenous data or related types based on given business definitions Intelligently and dynamically form patterns which make sense to the business Develop analytics based on the available patterns which influence business decisions on Product, Sales and Operations Sending information as raw material to another application for processing for example to the Sales & Distribution team to perform Customer Relationship Management (CRM) activities, lead generation, outbound calling and query resolution Appropriate business and IT strategy must be formulated to finalize social networking implementation. This can be done through Selecting social networking website partner(s) Identifying type of data needed from social networking partner Creating an appropriate business case as to buy versus build or versus SaaS (Software as a Service) model at each one of these stages Engaging a systems integration partner to provide consulting on Feasibility study IT platform selection/upgrade/fitment analysis Engagement with business/operations areas for defining requirements Product evaluation (COTS package) Defining IT Implementation strategy and roadmap Development of interfaces to integrate with other business applications Testing, training and rollout of the application 9 WIPRO TECHNOLOGIES

10 SOCIAL NETWORKING PRODUCTS FOR INSURERS There are several products currently available in the market that offer great flexibility. However, the fitment of a product depends on the requirements of the insurer, current IT environment, budget availability, speed to market how soon or late can such a tool be launched and various other related parameters. Some products listed below are indicative and not exhaustive: ProspX ( enables real time collaboration within and across organizational boundaries. It streamlines the sales process through a web based sales portal and simple customer relationship management solutions for insurance brokers and insurance carriers to drive best practices and improve sales effectiveness. Aqua Social Networks of Neo Metrics ( allows in depth knowledge of clients by analyzing the spread of information and opinions between individuals who make up part of the community. SAS Social Network Analysis (SAS Fraud Framework) of SAS ( For the insurance industry, the SAS Fraud Framework detects and prevents opportunistic and organized claims fraud across all lines of business WIPRO TECHNOLOGIES

11 ON THE FLIP SIDE OF THE COIN There are some inhibitors to the effective use of social networking to businesses. Insurers need to be careful of the way data is collected, stored and used. There is huge risk to insurers in terms of errors & omissions, security of intellectual property information and potential loss of data to hackers etc. The client acquisition cost via direct marketing with leads from social networking sites may sometimes be more than the cost of getting the same through traditional sales channels. General perception is that 'blogging' and browsing on the internet without certain objective or outcome could be unproductive and hence waste of time for employees. The current technology setup may limit an insurer to implement or integrate social computing tool as part of its existing IT estate. Appropriate strategies must be adopted to mitigate limitations or constraints. Adherence to prevailing compliance requirements on data security, data privacy and data protection policies is mandatory. Proper cost benefit analysis must be undertaken before an insurer invests in social networking WIPRO TECHNOLOGIES

12 CONCLUSION The insurance industry has so far taken a 'wait and watch' approach on investing in social networking; reasons being: Insurers are still struggling to create a business case and identify an estimated ROI (Return on Investment) for investment in social networking. There is always a fear that social networking can result in negative publicity and make them lose customers. Due to the recent economic downturn, many insurers had to defer or cancel new initiatives like social networking due to lack of funding. There is still a perceived risk of data security in user driven social networks. Despite these concerns, there are numerous potential benefits in terms of brand building, increasing consumer base and generating more business through the use of social networking. Insurers are slowly but steadily realizing that social networking can transform the way carriers, agents and customers communicate. It is inevitable that insurers will embrace this potential channel and leverage on it to move ahead of competition. SNA (Social Networking Analysis) could be the DNA of future sales and distribution! 12 WIPRO TECHNOLOGIES

13 APPENDIX References Forrester Research, Inc., US Online Automotive Forecast, 2007 To 2012, February 2008 Forrester Research, Inc. Crafting An Insurance Social Media Strategy Chad Mitchell, June About the Authors Krishna Sathyanarayanan is a principal consultant in Wipro Technologies. He has more than 20 years of industry and IT experience across USA, UK, Canada and Indian subcontinents, working with major Insurance and IT companies. Nilay Banerjee is a business analyst with the Insurance Consulting Group of Wipro Technologies. He has more than 3 years of experience in business and IT consulting and has worked with leading Life and P&C customers in UK and North America WIPRO TECHNOLOGIES

14 SOCIAL NETWORKING AND INSURANCE DISTRIBUTION ABOUT WIPRO TECHNOLOGIES Wipro is the first PCMM Level 5 and SEI CMMi Level 5 certified IT Services Company globally. Wipro provides comprehensive IT solutions and services (including systems integration, IS outsourcing, package implementation, software application development and maintenance) and Research & Development services (hardware and software design, development and implementation) to corporations globally. Wipro's unique value proposition is further delivered through our pioneering Offshore Outsourcing Model and stringent Quality Processes of SEI and Six Sigma. ABOUT WIPRO COUNCIL FOR INDUSTRY RESEARCH The Wipro Council for Industry Research comprising of domain and technology experts from the organization aims to address the needs of customers by specifically looking at innovative strategies that will help them gain competitive advantage in the market. The Council in collaboration with leading academic institutions and industry bodies studies market trends to equip organizations with insights that facilitate their IT and business strategies For more information please visit WIPRO TECHNOLOGIES