Web Services in Insurance: Overview and Case Studies
Celent estimates that spending on Web services in integration projects by insurers will increase nearly ten-fold from US$78 million today to US$740 million by 2006.
Web services burst onto the scene in the past two years as "the next big thing." Reams of propaganda from technology vendors promoted Web services as the next killer app, a revolutionary new technology that would change business to a degree matched only by the birth of the Web and the use of email. Although the dynamic, any-to-any connections promised by the brave new world of Web services has yet to make an impact on the insurance industry, insurers are already deriving real business value from the use of Web services as an integration methodology used within the enterprise and between partners. Five of these initiativesat Allstate, State Auto, Aon Surety, EMC Insurance Companies, and Lincoln Financial Groupare examined in Celents new report, .
"The insurance industry was rightly cautious about the early hype surrounding Web services, but it is now time for insurers to look at Web services again," says Matthew Josefowicz, manager of Celents insurance group and lead author of the report. "Web services address a key business problem for insurersreducing the burden of systems integration. Using Web services can provide insurers with a simple, reusable systems integration methodology for both internal and external systems."
Celent estimates that in 2002, US insurers spent approximately US$1.4 billion on internal and external integration for new IT projects alone, roughly 7% of the overall spending on IT. Based on conversations with industry participants and observation of industry trends, Celent broadly estimates that approximately 5% of current integration spending, or roughly US$78 million, is being spent on Web services-related initiatives today. By 2006, Celent expects that more than 40% of new project systems integration spending will involve Web services, or roughly US$740 million.
Five companies with recent insurance Web services initiatives are profiled in the report: Allstate used Web services to integrate back-end systems with a new agent portal, creating reusable components and enabling a rapid system deployment; State Auto provided communications between internal systems, reducing internal integration costs and laying the groundwork for partner integration; Aon Surety provided a cost-effective way to transmit surety bond information to underwriters, letting them handle small transactions profitably; EMC Insurance Companies provided as-needed information to its glass replacement provider instead of requiring them to sort through a massive database of customer information; and Lincoln Financial Group syndicated content and functionality seamlessly into its partners Web sites.
Celent expects the number of Web services implementations to grow rapidly in the next two to four years, and advises insurers to consider making Web services the basis of future internal and partner systems integration efforts.
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of Celent Communications' Life/Health Insurance and Property/Casualty Insurance research services can download the report electronically by clicking on the icon to the left. Non-members should contact firstname.lastname@example.org for more information.
Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].
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|New York, NY, USA August 12, 2003|
Web Services in Insurance
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