A few weeks ago, I spoke to a couple hundred technologists at a top life insurance company about the changing financial services consumer and the implications for insurers.

Later, as moderator of a panel discussion between the firm's top executives, I asked, "Won't it be difficult to move agents to electronic channels because they're typically older professionals?" The head of sales didn't hesitate with his answer: "They have no choice. If they don't adopt the new tools, they're out."

Agents are getting the message. We just surveyed 1,600 life agents from five top insurers on what they think about technology -- and more than half said that technology will have a huge impact on their client and support team relationships. Two-thirds told us that the ability to submit new business online was critical to their business.

But agents' technology use lags behind financial advisors'

Still, life insurance agents use technology less than financial advisors -- putting agents at risk of losing business to their brokerage competitors. Agents do less work online, for example, and do less with their contact management software.

To boost adoption of electronic tools, insurers
need to bring their agent systems up to the standard being set by broker-dealers like UBS.

Insurers scale back their IT spending

Alas, insurance industry budgets are headed in the wrong direction. Almost a quarter of the insurance firms we surveyed in our midyear tech spending survey say that their Internet and eCommerce spending will fall below budget for 2003. In fact, the insurance industry is more likely than other sectors to come in under budget for the year in each of the eight technology categories Forrester tracks.

Meanwhile, many brokerages, banks, and credit card companies are spending more: financial services firms outside of insurance are more likely than firms in other industries to be spending on or over budget in the IT categories Forrester tracks. For example, more than three quarters of non-insurance financial services firms expect to spend all of what they budgeted for Internet and eCommerce initiatives this year.

What's an insurer to do?

We've got advice for insurers on how to:

• Improve their agent tools. It's critical to their business -- but just 38% of agents give their insurer's site a passing grade for the functionality to submit new business online.

• Segment their sales force. By mapping agents' relative production against their technology optimism, we've built a segmentation that helps firms prioritize IT projects and spending.

• Encourage technology adoption. Firms that acknowledge differences in technology attitudes among their own agents can design applications and training that are more likely to take.

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