Simon Hearn looks at the skills executives will need to keep their firms competitive as e-commerce becomes the norm.
The year is 2010 and you are sitting in front of an enlarged television screen which is divided into quarters: the latest news bulletin and your personal stock selections occupy the top left of the screen, a digital camera shot of your own face is in the bottom left, with a face of an insured confronting you from bottom right. The remaining quarter contains a treaty reinsurance contract that you are currently negotiating. There is no need for a telephone as you conduct your negotiations through the high density digital screens that give you an accurate picture of every facial expression from the other side of the Atlantic. You complete the deal. It is direct, quick, cheap and it is electronic.
Now scroll back to 2003. The e-commerce revolution is in full throes, but do you have the expertise to ensure your company is a winner not a loser?Analysts predict on-line purchasing of services and goods will increase globally from $10 billion in 1998 to $108 billion by 2003 and the insurance and reinsurance sectors are going to feature heavily. Businesses are changing the way they operate, and those that move fastest are usually the ones that succeed. Charles Schwab, the online stockbroker, has been so successful globally that traditional brokers have been forced to revise their distribution strategies post haste.
In developing markets, such as China, extraordinary changes are afoot. If Bill Gates goes ahead with his threat to provide cheap internet access using television screens, China will leapfrog the west's mainstream distribution channels and go straight into e-commerce.In the North American operations of my firm, an international executive search business with a large practice in financial services, e-commerce is already a major growth area. However, Tuck Rickards, who runs the e-commerce practice in the US, reports that these executives are difficult to find and where they cannot be found, they have to be created. Prime candidates are those who already have marketing roles within the industry combined with a good basic understanding of technology.
Within European markets, the need for e-commerce professionals is already being reflected.
The (re)insurance industry
How prepared is the (re)insurance industry for this change? This industry, like so many others, currently relies on intermediaries to introduce and initiate business. With the development of e-commerce, there will undoubtedly be increasing pressure on traditional ways of doing business. Today, the insurance industry seems reluctant to embrace this new technology and appears to be denying the opportunities presented by e-commerce in dealing directly with clients at the touch of a button. If it fails to seize this opportunity, the insurance industry faces the risk that new entrants will do so to create a competitive advantage.For insurance and reinsurance carriers to embrace the opportunities offered by e-commerce, they first need to have people who can recognise and exploit the potential. Increasingly, e-commerce driven companies are looking for marketing professionals with a good background in brand development. The impact commercially aware e-commerce executives can have on a business is enormous; you need look no further than Freeserve in the United Kingdom for an example.
Recently, we were hired to find an e-commerce director for one of the major global insurance players. During the course of the assignment, the structure of the job and the reporting lines were reviewed and changed so radically that the candidate now reports directly to the group chief executive - an indication of how seriously some businesses are taking this issue.
In London, the newly amalgamated electronic network, WISe (which stands for worldwide insurance - e-commerce), has just put together a board of 16 major insurance chief executives. This is the first evidence of the serious response to e-commerce among the industry's global players.
Many in the reinsurance industry believe that whatever technological advances occur, there will always be a need for face to face contact to do “the deal”. However, I urge these sceptics to observe the changes which have occurred in the rest of the financial services sector and re-consider their views. With a mixture of high quality video conferencing and quick easy access to the internet, e-commerce is going to be the way that much of this business will be conducted in the next century. It is the companies that harness the potential of this technology which will survive.
I believe this is the most serious change in financial services product distribution that we have seen since the first risk was broked in the coffee shop at Lloyd's more than 300 years ago. Suddenly, location is not an issue, individual markets have become one global cyber market where product, brand and client servicing have never been more important. The companies that get these things right will not only survive, but prosper. We should all be prepared for e-volution.
Simon Hearn is co-head of global financial services, and joint head of the global insurance practice at Russell Reynolds Associates. Tel: +44 (0) 171 839 7788; fax: + 44 (0) 171 873 0071.