[LTPC-discussions] Article from the National Underwrtiter, The Chase for Insurance sales.
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Mon, 7 Jul 2003 21:04:17 EDT
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Financial Services: The Chase for Insurance Sales=20
By Lisa Gray=20
The convergence of financial services presents particular challenges to each=
=20
segment of the industry. Financial services are in a state of flux, trying t=
o=20
understand both the opportunities as well as the obstacles that must be face=
d.=20
Immediate challenges include IT hurdles, a new and still changing regulatory=
=20
environment, and the necessity to broaden the expertise of previously=20
segmented sales forces=E2=80=94not to mention competitive issues. Opportunit=
ies such as=20
immediate access to new markets and expanded product and service offerings a=
re=20
significant. Taking advantage of the opportunities while keeping the obstacl=
es to a=20
minimum are the tasks at hand.
=E2=80=9CFinancial convergence impacts have been slow in coming, but they co=
ntinue to=20
grow,=E2=80=9D says Judy Johnson, vice president, insurance information stra=
tegies,=20
at New Brunswick, N.J.-based META Group, Inc. =E2=80=9CInsurers are looking=20=
to the=20
future, trying to understand whether they can continue business as usual in=20=
a=20
world that is rapidly reconfiguring itself from the ground up.=E2=80=9D=C2=
=A0=20
In facing the challenges posed by convergence, insurers need to stay aware o=
f=20
what is happening in the other financial segments. Banks are developing=20
innovative ways of integrating insurance products with existing and new=20
distribution channels. Not unlike their insurance cousins, complying with th=
e regulatory=20
changes, streamlining processes, and cutting costs are paramount to success.=
=20
Keeping timely sales opportunities in front of the sales force is another=20
challenge.=20
Making the Transition
One example of a bank broadening its horizons is Chase Insurance Group,=20
formed in the mid-=E2=80=9990s as part of J.P. Morgan Chase & Co. =E2=80=9CW=
e have evolved,=20
beginning with credit insurance and moving into life products, auto, homeown=
ers, and=20
employee benefits,=E2=80=9D says Paul Petrylak, senior vice president of Cha=
se=E2=80=99s=20
Regional Banking Group. =E2=80=9CAnd we=E2=80=99re among the lead banking di=
stributors of=20
insurance products.=E2=80=9D=20
Chase recently introduced its first in-house underwritten insurance product,=
=20
a fixed annuity. Petrylak says customers think of it as more of an investmen=
t=20
product than an insurance product. =E2=80=9CThe economics for an annuity are=
=20
competitive, but our competitive advantages bring a higher return on equity=20=
than a=20
traditional underwriter,=E2=80=9D he says.=20
A third-party carrier normally pays a six percent distribution fee to=20
financial institutions for selling their product. Since Chase is now underwr=
iting its=20
own annuity, it can save that six percent. The product was easily assimilate=
d=20
into Chase=E2=80=99s current environment. Since the firm has been selling an=
nuities=20
for several years, underwriting its own product was a natural step.=20
=E2=80=9CWithin Chase Insurance, we have a carrier management and new produc=
t=20
development group. The product was developed within that group, with the add=
ition of=20
a third-party administrator (TPA). So the TPA adds the capabilities we didn=
=E2=80=99t=20
already have=E2=80=94it=E2=80=99s definitely an outsourced solution,=E2=80=
=9D explains Kevin Rice,=20
vice president of the customer solutions group.=20
The end-to-end process works like this. The customer fills out a paper=20
annuity application, which is then sent to a unit in the bank that consolida=
tes all=20
the applications and forwards them to the carrier. The carrier completes the=
=20
applications and sends a feed back to Chase through the National Securities=20
Clearing Corporation (NSCC), which provides clearance, settlement, and=20
information services to the securities industry. The NSCC sends information=20=
back to Chase
=E2=80=99s processing systems for posting to the master customer information=
file, to=20
the investment data mart, and to the commission payment systems. =E2=80=9CRi=
ght now it
=E2=80=99s a fairly upfront manual process that we=E2=80=99re looking to aut=
omate within=20
eight to 12 months,=E2=80=9D adds Rice.=20
Chase uses its own distribution channel of brokers, which it calls Personal=20
Financial Advisors (PFAs). =E2=80=9CWe=E2=80=99re working toward providing i=
nsurance solutions=20
through financial planning for a targeted customer base=E2=80=94those with $=
250,000=20
or more in investable assets,=E2=80=9D explains Petrylak. =E2=80=9CInsurance=
is a natural=20
component of a financial plan.=E2=80=9D
Having brokers sell insurance products is a program Chase initiated last=20
year. =E2=80=9CIt=E2=80=99s a natural transition for a PFA to incorporate se=
lling insurance along=20
with other investments. Once they become more familiar with the product and=20
integrate it fully into financial planning, we=E2=80=99ll have greater succe=
ss. We=E2=80=99re=20
moving in that direction,=E2=80=9D Petrylak says.
Insurance and IT Working Together
At Chase, insurance and IT work hand in hand to improve cost efficiency,=20
product availability, and client data mining, which determines profits and t=
he=20
level of client service. =E2=80=9CWe integrate customer information from a d=
ata mining=20
perspective, and we use that information in our target marketing,=E2=80=9D e=
xplains=20
Rice.=20
The carriers that underwrite the various products provide the customer=20
information through tapes, data feeds, or some other medium. This enables Ch=
ase to=20
keep tabs on what products are being bought and by which types of clients.=20=
=E2=80=9C
Within the branches, we have a platform that allows access to the customer r=
ecord,
=E2=80=9D says Rice. =E2=80=9CWe can use those records to provide informatio=
n to the rep=20
regarding sales opportunitiesby employing an application that=E2=80=99s desi=
gned to=20
create more timely offers than batch updating processes. It results in a mor=
e=20
timely delivery of event decisions to the rep.=E2=80=9D
Data mining is just one function that is outsourced. =E2=80=9COur strategy i=
s to=20
leverage our existing bank systems and processes where we can and outsource=20=
the=20
processes our systems are not designed to handle. We leverage the third-part=
y=20
administrator to do customer tracking and administration,=E2=80=9D notes Pet=
rylak. Chase=20
gets favorable pricing in this case by outsourcing the functions that are no=
t=20
within its core competencies. =E2=80=9COutsourcing was key in creating highe=
r profits=20
for the annuity than the norm. We are able to provide variable pricing, and=20
there=E2=80=99s no fixed cost,=E2=80=9D he says.
The bank has insurance-dedicated servers at Pinnacle, its outsourced data=20
center, as well as a client-server environment that allows the gathering of=20
client information both internally and externally. =E2=80=9CWe use this info=
rmation for=20
marketing purposes,=E2=80=9D explains Rice. =E2=80=9CBasically, what we=E2=
=80=99re doing is creating a=20
lead file.=E2=80=9D The lead file is subsequently sent to the telemarketing=20=
vendor and=20
the third-party carrier, which executes the campaign.=20
=C2=A0
How Chase Does IT
=E2=80=9CIndustry organizations integrating insurance products with other fi=
nancial=20
service offerings focus on smoothing and enhancing business processes to=20
increase operational efficiency and improve distribution capabilities and=20
relationships,=E2=80=9D says Johnson. As a result, these firms are focused o=
n streamlining the=20
organization=E2=80=99s ability to comply with changing regulatory demands an=
d to=20
respond to sudden market shifts.=20
Chase has a good start down that road. =E2=80=9CWe have some segmentation pr=
ograms=20
that point to product opportunities if we can get the right information [fro=
m=20
the client],=E2=80=9D says Rice.=20
These segmentation programs are part of a =E2=80=9Cdecision engine,=E2=80=
=9D which is=20
designed to take multiple inputs and provide a business rule based on those=20=
inputs. =E2=80=9C
If you=E2=80=99re tracking a group of customers and an event happens, such a=
s a large=20
deposit, a large withdrawal, or a new mortgage, that would lead to a busines=
s=20
rule that might say, =E2=80=98based on the activity of this customer, you sh=
ould=20
offer them life insurance, or offer them an extension on their home equity l=
oan,=E2=80=99=E2=80=9D
says Rice.=20
The decision engine being deployed by Chase is not yet complete. =E2=80=9CWe=
have the=20
systematic piece down, but we don=E2=80=99t have the real-time piece down ye=
t. We=E2=80=99re=20
working toward that this year,=E2=80=9D he says.=20
By hosting all its data at a vendor and using a Web-based interface to its=20
remote salespeople, the bank avoids having too much software or data on its=20
remote reps=E2=80=99 laptops. It=E2=80=99s easier to manage, and Chase doesn=
=E2=80=99t have to spend the=20
money to build a massive infrastructure. It also avoids all the costs=20
associated with managing such an infrastructure. In selecting third-party ve=
ndors,=20
Rice says, =E2=80=9CWe do a strict due diligence and risk management profile=
. It=E2=80=99s=20
difficult to find vendors that have a lot of market experience with Web-base=
d=20
applications, and we don=E2=80=99t want to be a guinea pig. So we want to fi=
nd a vendor=20
that has experience in the marketplace doing the application we are focusing=
on.=E2=80=9D
Future Developments
Petrylak and Rice agree the future of financial services in general lies in=20
Web-based applications. Keeping costs down is also key, a function vastly ai=
ded=20
by interfacing with the Web. =E2=80=9CChase Insurance is well prepared to be=
nefit=20
[from this movement to the Web]. We don=E2=80=99t have a lot of legacy syste=
ms and no=20
mainframe applications, so there=E2=80=99s very little or no conversion to W=
eb-based=20
applications,=E2=80=9D says Rice. =E2=80=9CFortunately, since insurance is r=
elatively new to=20
banking, we haven=E2=80=99t built up those large infrastructures.=E2=80=9D
Adds Petrylak: =E2=80=9CAgain, our strategy is not to create a lot of infras=
tructure.=20
We=E2=80=99re trying to find the best solutions, and those might not be inte=
rnal.=20
They reside at times externally, and one has to reorient one=E2=80=99s think=
ing to get=20
the best possible solution from an economic perspective and a core competenc=
y=20
perspective through outsourcing. So, we already think, =E2=80=98How do we ge=
t the best=20
solution=E2=80=94by leveraging within the bank or outside of the Chase Insur=
ance Group=20
or through other partners who can provide significant scale?=E2=80=99 We wor=
k with the=20
IT division for that purpose.=E2=80=9D
META Group=E2=80=99s Johnson points out that banking and insurance firms in=20=
general=20
are moving to address the management of internal data, documents, and record=
s.=20
Few companies are presently equipped to manage, distribute, and act upon the=
=20
kind of market information needed to conduct today=E2=80=99s business of fin=
ancial=20
services. =E2=80=9CInsurers need a robust data input channel to enhance deci=
sion-making,=E2=80=9D=20
Johnson says, =E2=80=9Cand to allow market leaders to take advantage of emer=
ging=20
opportunities.=E2=80=9D
=20
=20
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=C2=A0 <BR>
<P ALIGN=3DCENTER>Financial Services: The Chase for Insurance Sales <BR>
</FONT><FONT COLOR=3D"#000000" style=3D"BACKGROUND-COLOR: #ffffff" SIZE=3D2=
FAMILY=3D"SANSSERIF" FACE=3D"Arial" LANG=3D"0">By </FONT><FONT COLOR=3D"#0=
00000" style=3D"BACKGROUND-COLOR: #ffffff" SIZE=3D3 FAMILY=3D"SANSSERIF" FAC=
E=3D"Arial" LANG=3D"0">Lisa Gray <BR>
<P ALIGN=3DLEFT><BR>
<BR>
The convergence of financial services presents particular challenges to each=
segment of the industry. Financial services are in a state of flux, trying=20=
to understand both the opportunities as well as the obstacles that must be f=
aced. Immediate challenges include IT hurdles, a new and still changing regu=
latory environment, and the necessity to broaden the expertise of previously=
segmented sales forces=E2=80=94not to mention competitive issues. Opportuni=
ties such as immediate access to new markets and expanded product and servic=
e offerings are significant. Taking advantage of the opportunities while kee=
ping the obstacles to a minimum are the tasks at hand.<BR>
=E2=80=9CFinancial convergence impacts have been slow in coming, but they co=
ntinue to grow,=E2=80=9D says Judy Johnson, vice president, insurance inform=
ation strategies, at New Brunswick, N.J.-based META Group, Inc. =E2=80=9CIns=
urers are looking to the future, trying to understand whether they can conti=
nue business as usual in a world that is rapidly reconfiguring itself from t=
he ground up.=E2=80=9D=C2=A0 <BR>
In facing the challenges posed by convergence, insurers need to stay aware o=
f what is happening in the other financial segments. Banks are developing in=
novative ways of integrating insurance products with existing and new distri=
bution channels. Not unlike their insurance cousins, complying with the regu=
latory changes, streamlining processes, and cutting costs are paramount to s=
uccess. Keeping timely sales opportunities in front of the sales force is an=
other challenge. <BR>
<BR>
Making the Transition<BR>
One example of a bank broadening its horizons is Chase Insurance Group, form=
ed in the mid-=E2=80=9990s as part of J.P. Morgan Chase & Co. =E2=80=9CW=
e have evolved, beginning with credit insurance and moving into life product=
s, auto, homeowners, and employee benefits,=E2=80=9D says Paul Petrylak, sen=
ior vice president of Chase=E2=80=99s Regional Banking Group. =E2=80=9CAnd w=
e=E2=80=99re among the lead banking distributors of insurance products.=E2=
=80=9D <BR>
Chase recently introduced its first in-house underwritten insurance product,=
a fixed annuity. Petrylak says customers think of it as more of an investme=
nt product than an insurance product. =E2=80=9CThe economics for an annuity=20=
are competitive, but our competitive advantages bring a higher return on equ=
ity than a traditional underwriter,=E2=80=9D he says. <BR>
A third-party carrier normally pays a six percent distribution fee to financ=
ial institutions for selling their product. Since Chase is now underwriting=20=
its own annuity, it can save that six percent. The product was easily assimi=
lated into Chase=E2=80=99s current environment. Since the firm has been sell=
ing annuities for several years, underwriting its own product was a natural=20=
step. <BR>
=E2=80=9CWithin Chase Insurance, we have a carrier management and new produc=
t development group. The product was developed within that group, with the a=
ddition of a third-party administrator (TPA). So the TPA adds the capabiliti=
es we didn=E2=80=99t already have=E2=80=94it=E2=80=99s definitely an outsour=
ced solution,=E2=80=9D explains Kevin Rice, vice president of the customer s=
olutions group. <BR>
The end-to-end process works like this. The customer fills out a paper annui=
ty application, which is then sent to a unit in the bank that consolidates a=
ll the applications and forwards them to the carrier. The carrier completes=20=
the applications and sends a feed back to Chase through the National Securit=
ies Clearing Corporation (NSCC), which provides clearance, settlement, and i=
nformation services to the securities industry. The NSCC sends information b=
ack to Chase=E2=80=99s processing systems for posting to the master customer=
information file, to the investment data mart, and to the commission paymen=
t systems. =E2=80=9CRight now it=E2=80=99s a fairly upfront manual process t=
hat we=E2=80=99re looking to automate within eight to 12 months,=E2=80=9D ad=
ds Rice. <BR>
Chase uses its own distribution channel of brokers, which it calls Personal=20=
Financial Advisors (PFAs). =E2=80=9CWe=E2=80=99re working toward providing i=
nsurance solutions through financial planning for a targeted customer base=
=E2=80=94those with $250,000 or more in investable assets,=E2=80=9D explains=
Petrylak. =E2=80=9CInsurance is a natural component of a financial plan.=
=E2=80=9D<BR>
Having brokers sell insurance products is a program Chase initiated last yea=
r. =E2=80=9CIt=E2=80=99s a natural transition for a PFA to incorporate selli=
ng insurance along with other investments. Once they become more familiar wi=
th the product and integrate it fully into financial planning, we=E2=80=99ll=
have greater success. We=E2=80=99re moving in that direction,=E2=80=9D Petr=
ylak says.<BR>
<BR>
Insurance and IT Working Together<BR>
At Chase, insurance and IT work hand in hand to improve cost efficiency, pro=
duct availability, and client data mining, which determines profits and the=20=
level of client service. =E2=80=9CWe integrate customer information from a d=
ata mining perspective, and we use that information in our target marketing,=
=E2=80=9D explains Rice. <BR>
The carriers that underwrite the various products provide the customer infor=
mation through tapes, data feeds, or some other medium. This enables Chase t=
o keep tabs on what products are being bought and by which types of clients.=
=E2=80=9CWithin the branches, we have a platform that allows access to the=20=
customer record,=E2=80=9D says Rice. =E2=80=9CWe can use those records to pr=
ovide information to the rep regarding sales opportunitiesby employing an ap=
plication that=E2=80=99s designed to create more timely offers than batch up=
dating processes. It results in a more timely delivery of event decisions to=
the rep.=E2=80=9D<BR>
Data mining is just one function that is outsourced. =E2=80=9COur strategy i=
s to leverage our existing bank systems and processes where we can and outso=
urce the processes our systems are not designed to handle. We leverage the t=
hird-party administrator to do customer tracking and administration,=E2=80=
=9D notes Petrylak. Chase gets favorable pricing in this case by outsourcing=
the functions that are not within its core competencies. =E2=80=9COutsourci=
ng was key in creating higher profits for the annuity than the norm. We are=20=
able to provide variable pricing, and there=E2=80=99s no fixed cost,=E2=80=
=9D he says.<BR>
The bank has insurance-dedicated servers at Pinnacle, its outsourced data ce=
nter, as well as a client-server environment that allows the gathering of cl=
ient information both internally and externally. =E2=80=9CWe use this inform=
ation for marketing purposes,=E2=80=9D explains Rice. =E2=80=9CBasically, wh=
at we=E2=80=99re doing is creating a lead file.=E2=80=9D The lead file is su=
bsequently sent to the telemarketing vendor and the third-party carrier, whi=
ch executes the campaign. <BR>
=C2=A0<BR>
How Chase Does IT<BR>
=E2=80=9CIndustry organizations integrating insurance products with other fi=
nancial service offerings focus on smoothing and enhancing business processe=
s to increase operational efficiency and improve distribution capabilities a=
nd relationships,=E2=80=9D says Johnson. As a result, these firms are focuse=
d on streamlining the organization=E2=80=99s ability to comply with changing=
regulatory demands and to respond to sudden market shifts. <BR>
Chase has a good start down that road. =E2=80=9CWe have some segmentation pr=
ograms that point to product opportunities if we can get the right informati=
on [from the client],=E2=80=9D says Rice. <BR>
These segmentation programs are part of a =E2=80=9Cdecision engine,=E2=80=
=9D which is designed to take multiple inputs and provide a business rule ba=
sed on those inputs. =E2=80=9CIf you=E2=80=99re tracking a group of customer=
s and an event happens, such as a large deposit, a large withdrawal, or a ne=
w mortgage, that would lead to a business rule that might say, =E2=80=98base=
d on the activity of this customer, you should offer them life insurance, or=
offer them an extension on their home equity loan,=E2=80=99=E2=80=9D says R=
ice. <BR>
The decision engine being deployed by Chase is not yet complete. =E2=80=9CWe=
have the systematic piece down, but we don=E2=80=99t have the real-time pie=
ce down yet. We=E2=80=99re working toward that this year,=E2=80=9D he says.=20=
<BR>
By hosting all its data at a vendor and using a Web-based interface to its r=
emote salespeople, the bank avoids having too much software or data on its r=
emote reps=E2=80=99 laptops. It=E2=80=99s easier to manage, and Chase doesn=
=E2=80=99t have to spend the money to build a massive infrastructure. It als=
o avoids all the costs associated with managing such an infrastructure. In s=
electing third-party vendors, Rice says, =E2=80=9CWe do a strict due diligen=
ce and risk management profile. It=E2=80=99s difficult to find vendors that=20=
have a lot of market experience with Web-based applications, and we don=E2=
=80=99t want to be a guinea pig. So we want to find a vendor that has experi=
ence in the marketplace doing the application we are focusing on.=E2=80=9D<B=
R>
<BR>
Future Developments<BR>
Petrylak and Rice agree the future of financial services in general lies in=20=
Web-based applications. Keeping costs down is also key, a function vastly ai=
ded by interfacing with the Web. =E2=80=9CChase Insurance is well prepared t=
o benefit [from this movement to the Web]. We don=E2=80=99t have a lot of le=
gacy systems and no mainframe applications, so there=E2=80=99s very little o=
r no conversion to Web-based applications,=E2=80=9D says Rice. =E2=80=9CFort=
unately, since insurance is relatively new to banking, we haven=E2=80=99t bu=
ilt up those large infrastructures.=E2=80=9D<BR>
Adds Petrylak: =E2=80=9CAgain, our strategy is not to create a lot of infras=
tructure. We=E2=80=99re trying to find the best solutions, and those might n=
ot be internal. They reside at times externally, and one has to reorient one=
=E2=80=99s thinking to get the best possible solution from an economic persp=
ective and a core competency perspective through outsourcing. So, we already=
think, =E2=80=98How do we get the best solution=E2=80=94by leveraging withi=
n the bank or outside of the Chase Insurance Group or through other partners=
who can provide significant scale?=E2=80=99 We work with the IT division fo=
r that purpose.=E2=80=9D<BR>
META Group=E2=80=99s Johnson points out that banking and insurance firms in=20=
general are moving to address the management of internal data, documents, an=
d records. Few companies are presently equipped to manage, distribute, and a=
ct upon the kind of market information needed to conduct today=E2=80=99s bus=
iness of financial services. =E2=80=9CInsurers need a robust data input chan=
nel to enhance decision-making,=E2=80=9D Johnson says, =E2=80=9Cand to allow=
market leaders to take advantage of emerging opportunities.=E2=80=9D<BR>
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