Forrester Pc Insurers Itspend 060409

Teleconference Do US Insurers Spend IT Budget On The Right Multichannel Customer Experience Initiatives? Ellen Carney Senior Analyst Forrester Research Chad Mitchell Senior Analyst Forrester Research June 4, 2009. Call in at 12:55 p.m. Eastern time

Insurance IT investment is evolving as firms try to lower costs and improve sales and service.

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Agenda • What’s the outlook for US insurance IT spending in 2009? • What will be the major business themes for US insurers in 2009? • How are insurers improving multichannel customer experiences? • How should P&C carriers and tech provider strategies change?

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The economy weighing more heavily on the minds of US insurers Across the board, 2008 insurer profits took hits: – Investment losses – Underwriting performance – Catastrophe losses – Declines in written premiums – Declines in policyholder surplus – Employment cuts

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No turning back when it comes to committed CAPEX in US insurance

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But 2008 industry business performance not translating into dramatic IT budget impact Insurance declines less dramatic than across all industries

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Insurers spending slightly less than average for staff, slightly more for ESPs

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Insurers will spend less than average in ‘09 on CAPEX

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And are consistent when it comes to “changing the business” versus “running the business”

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Agenda • What’s the outlook for US insurance IT spending in 2009? • What will be the major business themes for US insurers in 2009? • How are insurers improving multichannel customer experiences? • How should P&C carriers and tech provider strategies change?

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Biz ops improvement services are top priorities across all industries % top priority, very important 30% 21% 21% 18% 17% 25% 22% 19% 16%

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Demand gen and Web apps top the list in ’09 for US insurers % top priority, very important 30% 17% 18% 28% 25% 11% 10% 17% 23%

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Modernizing apps and servers that support them are top priorities for all industries % critical, high priority 45% 42% 42% 45% 41% 42% 37% 35% 34% 34% 31% 28%

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And even more so for US insurers, along with eCommerce and security % critical, high priority 60% 37% 54% 48% 43% 60% 43% 30% 28% 26% 26% 34%

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Keeping the business up and running efficiently tops the agenda for all industries % critical, high priority 56% 49% 48% 45% 37% 42% 40% 44% 43% 40% 41% 30%

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While data utilization, biz innovation, and standards drive US insurance BT in ‘09 % critical, high priority 55% 52% 51% 39% 34% 39% 42% 48% 43% 26% 40% 35%

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Big IT does a good job on CRM, productivity — not so hot when it comes to innovation % strongly, moderately supports 59% 54% 59% 58% 55%

40% 31%

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US insurers feel IT does less well on the basics but better on innovation % strongly, moderately supports 53% 59% 58% 46% 44%

59% 39%

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To recap the 2009 US insurance IT market outlook • 2008’s business performance is not translating into big IT budget cuts. • Creating demand and shifting to the lower-cost online channel are top US insurer business initiatives this year. • Replacing/modernizing core apps and the servers that support them (finally!) and online security are big ’09 insurance tech initiatives. • Tapping into data to drive business innovations and standards like ITIL are big IT management themes this year. • When it comes to managing customer relationships and reducing costs, US insurers are not Lake Woebegone material. 19

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Agenda • What’s the outlook for US insurance IT spending in 2009? • What will be the major business themes for US insurers in 2009? • How are insurers improving multichannel customer experiences? • How should P&C carriers and tech provider strategies change?

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P&C insurers are improving multichannel customer experiences through IT investment • Leaders invest in: – Customer-centric technology. – Technology that lowers cost. – IT that improves sales and service.

• Insurers use IT innovation across all channels.

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Insurance fairs well when ranking customer satisfaction across channels

Source: April 14, 2009, “The Experiences That Satisfy Consumers, 2009” Forrester report 22

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Insurance leads all industries in customer phone interactions

Source: April 14, 2009, “The Experiences That Satisfy Consumers, 2009” Forrester report 23

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USAA is No. 1 in Web customer experience, GEICO and Progressive rank highly

Source: April 14, 2009, “The Experiences That Satisfy Consumers, 2009” Forrester report 24

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Improving online customer experiences lowers costs • Chat and enhanced search lowers call center volume. • IT executives can save $500,000 annually for every 10,000 call center calls shifted to the Web.

Source: December 1, 2008, “Need To Cut Costs? Improve The Web Site Experience” Forrester report 25

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ROI models support IT investment in improved eBusiness technology

Source: December 1, 2008, “Need To Cut Costs? Improve The Web Site Experience” Forrester report 26

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Nationwide and MetLife invest in call center IT solutions to improve service and retention

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Insurers are improving multichannel customer experiences with application prefill • Prefill reduces application process time by up to 25%. • Insurance.com increased call center conversion up to 24% with prefill.

Source: November 24, 2008, “Application Prefill Increases Sales Conversion” Forrester report 28

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Progressive improves online experience with best in-class application prefill

Source: November 24, 2008, “Application Prefill Increases Sales Conversion” Forrester report 29

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USAA invested in technology to improve cross-sell and paperless adoption

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GEICO invests in chat and click-to-call technology for sales and service

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Web user monitoring technology identifies flaws in online customer experiences

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Source: March 23, 2009, “Case Study: Customer Centricity Drives Esurance’s eBusiness Strategy” Forrester report Entire contents © 2009 Forrester Research, Inc. All rights reserved.

Esurance improves online claims experience by letting customer sneak a peak at repairs

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Source: March 23, 2009, “Case Study: Customer Centricity Drives Esurance’s eBusiness Strategy” Forrester report Entire contents © 2009 Forrester Research, Inc. All rights reserved.

Progressive’s IT enables iPod, RSS, Twitter, and mobile catastrophe updates

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Nationwide invested in mobile IT to develop an iPhone app that improves the claims process

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Agenda • What’s the outlook for US insurance IT spending in 2009? • What will be the major business themes for US insurers in 2009? • How are insurers improving multichannel customer experiences? • How should P&C carriers and tech provider strategies change?

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Recommendations for insurers . . . • Use customer research to drive IT investment. • Invest in customer-centric technology. • Look for opportunities across all channels. • Focus on improving service and conversion. • Find ways to lower costs, but keep customers in mind. • Innovate with new channels like mobile.

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. . . and the tech vendors who love them • Emphasize vendor service and support as business is disrupted in a disruptive economy. • Lead with the ability to drive innovation with a “run the business” budget since, saving money and improving productivity are perennial themes. • Show how you can help in customer acquisition and great customer experiences, including measurement of IT for proof of business impact. • Throw insurers a data lifeline, showing how you help them make better business decisions that drive upsell/cross-sell and customer loyalty. 38

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Thank you Ellen Carney +1 617.613.6328 [email protected] Chad Mitchell +1 617.613.8847 [email protected] www.forrester.com 39

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Selected Forrester research • June 2, 2009 “Demand Insights: Predictive Analytics In The Financial Services Sector” • June 2, 2009 “B2B Digital Marketing: A Deep Dive Into Insurance IT Decision-Makers” • March 6, 2009, “Best And Worst Of Cross-Channel Design, 2009” • March 23, 2009, “Case Study: Customer Centricity Drives Esurance's eBusiness Strategy” • February 20, 2009, “Case Study: New York Life's eBusiness And Agents Live Happily Ever After” • January 9, 2009, “Trends 2009: Insurance eBusiness And Channel Strategy” • October 28, 2008 “How Banks And Insurers Shop For Technology” 40

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