Case study, November 1999

Interview with Niek Ligtelijn

INEAS is a rather young company, founded in 1997. Could you describe the impulse and the considerations that lead to the formation of INEAS?
I have personally worked three years on this project. Two important changes occurred when I started, one is related to Europe with the European single market and the other is the emergence of e-commerce and network technology. In our business model we are not using the internet not just on the distribution side but also for our back-office by organizing as a so-called virtual organization. We see ourselves as a company that is in the middle of the web and uses network technology to distribute insurance products to European customers, the largest single market in the world. The same technology is being used to access knowledge, experience and capacity in the core competencies of the insurance industry, which are marketing, legal aspects, underwriting and IT.
We decided to become a property/casualty company as for a life insurance company it takes more time to build up trust, our products are better known and understood. Our strategy is that we transfer our three benefits, which are efficiency, absence of system problems and dynamic access to competencies of partners and suppliers, into a business model that is not just based on being cheap but instead on competitive price and enhanced service.
We don't like to describe ourselves as a virtual insurer, because that is only the organizational side. Instead we talk about the value to the customer which is the interactive side of the model.

What is the target group of Ineas and your internet presence?
In the beginning we are offering standardized products the customer knows about, that is homeowner's, automobile, accident and personal liability. We have a strategy of soft targeting but hard positioning. Soft targeting means that we want to grow with the internet population. Two or three years ago we had a clear profile of the internet user, young people willing to explore with technical orientation. We were afraid that if we launched too early we would be associated with just the 'techies'. Today a certain profile does not exist any more. So at the moment we are targeting the internet population as a whole. As the internet grows we will focus our marketing strategy, that is why scalability is an important element of our strategy, in systems as well as in marketing.

Are the products you offer especially designed for the internet?
Our products are standard products that are well-known to the customer, they are not specially designed. We are operating in a new medium and we are a new company. To come up with new products does not really make sense, that would be too much for the customers. They still have to learn the benefits of the internet and they are learning very quickly. Gradually we may enhance the products and perhaps come up with products that are particularly designed for being international, for being interactive and for being informative.
You can do beautiful things with the internet and insurance products, they can be very complex because the systems allow for that, but it will take time until we will see this happen.

As far as we know all customer contacts should be made over the internet. Do you offer some kind of call center facilities?
We offer all kinds of services to our customers, including a call center. But before someone becomes our customer, we do not offer a call center for buying our products. Where traditional insurance companies offer all kind of contacts before you get into the tunnel, we do it the other way around. As a customer you can write us, visit us, mail us or use our call center. What will happen is that over time we will more and more integrate our channels earlier on, that of course also depends on the type of products you sell. We are now only concerned with private individuals, rather than business-to-business. There is a huge potential out there.

What potentials do you foresee for the internet as a service tool for existing customers?
It depends also on your products, but in any case the provision of service and the fulfillment are important operational areas. Fulfillment is crucial, especially in the claims area. What we already have to offer in terms of loyalty is a number of tools. Once you are a registered customer you have facilities like online account look-up and Primes, our tool for managing personal risks.
For me it is a basic mistake to think of the internet as just a distribution tool. The insurance contract has three stages: buying insurance, being insured and using your insurance. We maintain that we can add value and enhance the process in each of these stages. For Sales it is obvious, in the second stage you can access your policy with just one mouse click. In the claims stage we offer claims notification and tracking which is making the process more transparent and convenient for the customer.

How do you promote your web site and your company in general?
We have a strategy of being active in all marketing media. We will do traditional promotion in the radio and newspapers, but also a lot of web advertising, in the form of banners as well as link exchange. In addition to this, we will focus on publicity work as we are doing something new in the marketplace.
What we will not do is aggressively mail customers, as this belongs to another business model.

You outsourced many functions of a typical insurance company. What was the basis for your decision what to do yourself and what to give away?
If you want to build up an international organization very quickly you have to rely on partnerships and third parties for their services. You have to analyze which kind of knowledge is available in the marketplace. Most of the underwriting is with Ineas, as it is not freely available. Marketing, IT, legal services are abundant. All of our communications with our partners go through either e-mail or the internet. For the claims handling we built an extranet with our partners.
Concerning alliances it may well be that we will not be able to quickly take positions in those countries where we want to be other than through alliances.

What were the experiences you made with outsourcing? Will there be more outsourcing activities in the insurance industry?
I expect more outsourcing contracts in the future for certain competencies of an insurance carrier. For example in the IT area it is almost impossible to keep up with the speed of the developments. Even specialist IT firms find it difficult to stay up-to-date on all the possibilities in that area. The same is partly true with marketing, especially for e-commerce marketing.
The communication opportunities allow for this kind of collaboration and facilitate the exchange of information and ideas between the partners.

What does your IT infrastructure consist of?
We have five systems. We have of course the web system for the communication with our customers and online transactions. Besides we run our own mail system, an intranet, the extranet for the collaboration with our partners and a separate claims system.
We use only one database because that allows us to use more sophisticated data mining technologies. Our advantage is that we don't have to reengineer our systems but instead we can engineer our system towards that goal.

What are the major obstacles in broadening the online value chain? Why do not more insurance companies use the internet to communicate with their agents/brokers, give quotes and sell their products online?
I have heard about ten explanations. Some people say it is because of the conservative nature of the industry or the nature of the business itself. Some point to the existing distribution channels, some point to general problems of the industry, like Y2K, restructuring, the Euro and M&A. My opinion is that it is a mixture of all these factors. It is true that the industry is a bit more traditional than other businesses and that the existing channels pose a major problem, especially for the big players which have heavily invested in these.

What does the advent of the internet as a serious business model mean for insurance agents? How can they adapt to the changing customer behavior?
At least they can use the first two features of the medium, information and interactivity. They can immediately enhance their services by making information available, perhaps also private information to their customers only and can use e-mail communication. The international scope of the medium is of course hardly relevant to the agents.
One of the challenges they have to face is the much more transparent market for insurance products. Meanwhile you can find so much information on insurance needs and products in all kinds of publications and sites.

How do you judge the future importance of the internet for the insurance industry in general?
If you look at some of the studies the customer acceptance for online insurance is already very high as insurance always ranks very high in feasibility for web commerce. Consumer expectations are already more advanced than what the insurance industry has to offer. Coming back to information, interaction and international, in e-commerce that means more transparency, online transactions and more competition. The result is that it is more convenient for the insured but more difficult for the insurance company. At the same time this is good for us as an insurance company because we don't have to be too afraid of other organizations stepping into the insurance industry. Sales of insurance products over the internet is one thing, being an insurer is another thing. The real benefits stem from the integration of all the interactions and the data as an insurance carrier.
Another important point is that time-to-market is getting so much shorter. We can put a new product on the web in a few days, in the industry that used to be months.

What percentage of insurance products will be sold online in the Europe in 2004?
I think between 15 and 20 per cent for both life and property & casualty products. In the life insurance business you have complex products and simple products, the same is true for the property & casualty business. For automobile coverage the percentage will be higher.