The environment in which insurance companies find themselves approaching the end of this century can be characterised as extremely turbulent. Internalisation has led to a redefinition of the size of standard markets, with many companies deciding to compete not just at a local or regional level but on a world scale. This phenomenon has been encouraged by developments in legislation which aim to liberalise global exchanges. A notable example is the scope of European deregulation of insurance markets
Another emerging characteristic of the insurance environment is the growing importance of information technology. The general view seems to be that the phenomenon of new technology and its diffusion throughout industrialised society will lead to radical change.
However, this phenomenon is far from new. In fact, the current debate would appear to be a repetition of those conducted in the Sixties, on the question of the spread of the computer, and in the Eighties, on the role of microelectronics. Researchers examined the questions of the influence of new technologies (those which existed at the time) on areas such as unemployment, professional qualifications, control procedures, decisions on centralisation or decentralisation and the structure of management. Thus, to some extent, those who now preach technological revolution would seem to be merely repeating what has been said before.
With the creation of a vast electronic insurance market at stake, the question arises of the influence of information highways on a given sector, in this case insurance.
From
Technical Revolution to Market Revolution ?
The case of Insurance Business on the information highways
COMPETITIVE PAPER
ref : ART402B
Introduction
The environment in which insurance companies find themselves approaching the end of this century can be characterised as extremely turbulent. Internalisation has led to a redefinition of the size of standard markets, with many companies deciding to compete not just at a local or regional level but on a world scale. This phenomenon has been encouraged by developments in legislation which aim to liberalise global exchanges. A notable example is the scope of European deregulation of insurance markets
Another emerging characteristic of the insurance environment is the growing importance of information technology. The general view seems to be that the phenomenon of new technology and its diffusion throughout industrialised society will lead to radical change.
However, this phenomenon is far from new. In fact, the current debate would appear to be a repetition of those conducted in the Sixties, on the question of the spread of the computer, and in the Eighties, on the role of microelectronics. Researchers examined the questions of the influence of new technologies (those which existed at the time) on areas such as unemployment, professional qualifications, control procedures, decisions on centralisation or decentralisation and the structure of management. Thus, to some extent, those who now preach technological revolution would seem to be merely repeating what has been said before.
Notwithstanding the repetition described above, the subject is all the more important given the attitude of western governments towards information technology. Just as the conquest of Space was put forward as the new frontier of the twentieth century by President Kennedy, the National Information Infrastructure project has been presented as the new frontier of the twenty-first century by Vice-President Al Gore. Unprecedented levels of investment are anticipated : 200 billion dollars in the USA over a period of ten years, 920 billion dollars in Japan up to the year 2010 (Pateyron, Salmon, 1996 : 16).
Given such huge investments, with the creation of a vast electronic insurance market at stake, the question arises of the influence of information highways on a given sector, in this case insurance. The characteristics of the insurance sector seem to lend themselves to the opportunities offered by information highways. For example, using the information highways, money flows could be transferred and the mutual insurance system could be managed. Above all, information highways could be an important channel for information flows which are used to evaluate risk. Of course, this would depend on the type of risk to be evaluated. It would be difficult to resort to a system of electronic subscription where the product is complex and important to the client, however, a product such as car insurance could benefit from such a system. The important point is that information flows can be transferred using the information highways, a relevant example is the initiative of the G7 countries who have set up the Global Emergency Management System (in order to encourage the development of an information network which will permit risk situations to be properly managed, European Commission / G7, 1995).
Within such a context, knowledge of consumer behaviour could be refined using data gathered through instruments which record individual insurance decisions rather than data based on observation of more or less homogenous groups. This could include factors such as analysis of past transactions and cross-referencing data with socio-demographic information : sex, age, nationality, place of residence and number of children for example. Information held by insurance companies could also be combined with several databases in order to establish a clearer picture of the risks involved.
Such a system is not without drawbacks. Indeed, one consequence could be a process of anti-selection where consumers become more proactive than insurance companies and, as a result, the least loyal clients will tend to choose the companies which offer the cheapest rates. In addition, if a vast electronic market were created, then quite possibly consumers would be better informed about the rates offered by different insurance companies. This new market transparency could lead to a price war, which in turn would affect the companys' financial results (this point will be developed later in this paper).
Another problem is the nature of the networks themselves. At the moment information highways do not exist on a global scale. The image which is used, that of highways, refers to a physical reality which is totally inappropriate (Henault, 1996 : 15). Information highways therefore are not a reality. They are, at most, a project, which even in its finalised form will correspond to a virtual communications network.
Using highly normative documentation, which is far a far cry from research literature, an intellectual process must therefore be engaged to imagine the repercussions on the insurance sector.
Before dealing with these repercussions, it would seem useful to study the characteristics of of the technological evolution that has been already described. The influence of information highways on the management of the insurance sector will be examined, paying particular attention to both their strategic impact and their influence on the relationship between the consumer and the company.
1. Technological evolution
1.1 Characteristics of information highways
Information highways are characterised by four fundamental traits. Firstly, the opinions expressed on information highways are part of the larger question of new information technologies. How new these technologies are is debatable. The adjective "new" placed next to the word "technology" is by its very nature paradoxical. Indeed, information technologies are currently evolving faster and faster. This rapid rate of evolution means that new technologies should be subject to caution, given that today's new technology is bound to be, within a very short time span, an old technology. It should be pointed out that revolution in information technology has been talked about for the last twenty years. As Child indicates(1984 : 245) "the application of technology to information processing is not at all a new phenomenon".
Secondly, they are combinatory. In fact, each technology has often no value unless it is combined with another. Historically, the period from the 60s to the 80s was dominated by information processing. The 90s will be typified by the transport of information. Towards the end of the 60s, communication between computers began. At the time, manufacturers proposed their own connection policy essentially to join up terminals to a central site. From the 70s on, market leaders like IBM and DEC started to impose standardisation but through obligatory use of of their products. In 1977 the International Standards Organisation (ISO), formed a committee to examine the setting up of communication protocols which would not be specific to one manufacturer. The ISO defined a set of standardised functions covering areas such as access to files, the submission of work and control of terminals. These norms were gradually imposed on manufacturers and, to a certain degree, against their wishes. In fact, the explosion in the use of the Personal Computer (pc) in the 80s eventually forced the manufacturers of large systems to open up their computer configurations to outside use. On the one hand, increasing numbers of users were buying pcs and consequently demanding that their own systems be compatible with older ones. On the other hand, the manufacturers of large systems found themselves in the following dilemma :
- either to refuse to open up their systems to outside use and, as a result, to lose the advantage of interconnection with an environment made up increasingly of pcs
- or to open up their systems to pcsand thus give pcs a considerable advantage which in turn would lead to their own extinction.
This brief historical reminder illustrates the progressive and necessary combination of transmission and processing technology. Information highways should not only be regarded as a support to information flows but rather as a complex set of signal producers (traditional mass media, multimedia and data processing) and distribution channels (telephone, cable operators, satellite braodcasting and telecommunications) connected by a network of worldwide communication networks.
Thirdly, a new techology continues to develop after its appearance. Insurance companies cannot therefore reason in terms of set technology but must place themselves in the context of continuous technological evolution. The traditional understanding of set technology must be replaced by an approach where technologies are transformed gradually as businesses learn to exploit the technological assets at their disposal while at the same time modifying the characteristics and applications of those assets.
Fourthly, new technologies are transverse, in the sense that they influence a vast number of economic sectors. In this way, microcomputing has many different business applications and can modify production conditions or influence the nature of certain products. For example, banks in competition with insurance companies will be tempted to use all the technological resources at their disposal in order to break into the newly deregulated insurance market. The success of Direct Line, the direct insurance subsidiary of Royal Bank of Scotland, through the use of information technologies in particular, is a recent example. It would seem that if insurance companies do not use information highways to manage their business, then other firms such as banks will do so in their place.
I.2 Absolute determinism/Gradual determinism
Certain documents which deal with information highways may lead one to believe that information highways lead to absolute determinism on organisations. Thus, the term "techno-globalism" has led to the idea that a certain determinism would lead to the globalisation of technology (Archibugi, Michie, 1993).
The Commission of the European Community White Paper (1993, chapter 5.1) is symptomatic of the pervading determinism : "The last decade has witnessed the creation of a new link, both in terms of its scale and extent, between the process of technological innovation and economic and social organisation. Many innovations have combined to give rise to a major transformation in the organisation of social relations and activities" The terms "scale" and "major transformation" illustrate the strong belief in a profound revolution. For Tapscott (1996), the digital economy will be the fundamental source for change in society. Théry maintains that the development of digitalisation associated with that of fibre optics in particular, will provoke a veritable (liberating) break with the past (1994 : 11).
The danger here would be to think that the influence of a given technology can be found in a chain of independent causality, whose only explanation lies in technology. Nevertheless, it is necessary to take different peripheral, but fundemental, elements into account. Much literature on the subject contains the terms of the effects of technology, as though an organisational norm resulting from technology could be established. There is also the point that cause and effect terminology seem to indicate a type of continuum between the impact of a cause and the forseeable effects, as though a definitive paradigmatic certainty in the domain of organisations could be declared. The voluntary choice that has been made in this paper is the term "influence", which appears less normative than the terms of effect or consequence.
This absolute determinism is in keeping with a teleological process. However, the fact that the objective is clearly identified does not mean inevitably that the transition to that objectivve will be realised. No analysis of the possible influences of information highways on the management of the insurance sector should lead to the construction of an ideal solution, composed of an obligatory objective for the companies concerned and of a unique approach in order to attain that objective.
Indeed, several approaches to technology confirm the absence of a real determinism. The technologies of today are not capable of imposing a change in individual behaviour by themselves.
The work carried out by Evolutionists has shown that technology cannot be considered as an element which is fully understood from the moment it is discovered. Technological change is a social process which cannot be analysed from a single technical perspective. Any analysis of technology must integrate the learning processes of companies. To a certain degree, the diffusion of technology is often more important than the discovery of the technology itself.
In addition, even though many visionaries speak of "technological revolution" when describing the present state of information highways, it is necessary to to acknowledge that beyond the rare major innovation, technological progress is definitively made up of incremental innovations. In this type of analysis, the concept of technological trajectory (Dosi, 1984), the means of exploiting and developing technology, tends to clearly distinguish between radical innovations and minor innovations. The idea of trajectory is not solely based on the separation between two levels of innovation, but the illustration of the continuous nature of the diffusion of the technology, due principally to the efforts made in learning through use of the technology or due to the organisational transformations which result from the use of the technology. In this way, information highways constitute a technological potential. The various innovations which appear and the different applications which the insurance industry puts in place will gradually create the technological trajectory of the sector as a whole. Within this trajectory, insurance companies have left some room to manoeuvre in terms of their desire and capacity to exploit the existing technological potential. In order for an insurance company to identify influences, not THE influences, it must analyse elements such as the economic climate, the cost conditions in relation to the transfer of one technology to another, the willingness of management to invest in new technology and the influence of pressure groups. This non-exhaustive list illustrates the strategic nature (in the context of the consequences of an action on the whole organisation) of technology for a firm in general, and an insurance company in particular. Futhermore, it is clear that when these elements are taken into account the possiblities of choice in terms of technology are abundant.
If the absence of absolute determinism is accepted, it is then possible to imagine the opportunities offered to companies by technology. Indeed, the criticism of technological determinism on organisations does not mean that technology is neutral. It should be remembered that the determinist movement came into being at a time when technology was relatively inflexible and referred to certains type of organisations which certain observers have called "soft" determinist (Alsène, 1990 : 323). Alsène commented that "if technology is not neutral on its arrival in the organisation, this can be explained principally by the fact that it "incorporates" the technical and social vision of its conceptors and producers" (1990 : 327).
So then, what is the vision of those who promote information highways ?
Literature which deals with information highways reveals a strong neo-liberal inspiration. The essential idea is that in order to permit the development of information highways, it is advisable to encourage competition so that suppliers and consumers can make contact in optimum conditions (Bouquillon, 1997 : 142). Whether one subscribes to this point of view matters little. However, it is important to keep the principle in mind in order to clearly understand the different contributions to the debate on information highways.
Indeed, the myths that surround the New Communication Technologies are not necessarily incorrect. They play a part in mobilising opinions and in the technical construction and diffusion of the information highways themselves (Flichy, 1997 : 64).
Vedel (1996 : 15-16), stresses the similarity of the developed world governments cognitive charts of justifications on the question of information highways.
A type of mythology exists in relation to information highways which is common to developed countries. Vedel has pinpointed 3 distinct lines of argument which legitimise a neo-liberal approach to information highways. These are economic, socio-political and regulatory.
From an economic point of view, the information highways are seen as an instrument of competitiveness. The Bangemann Report (1994) illustrates this European credo : "Europe's entry into the information age will be dictated by market forces".
On the socio-political level, information highways are seen as a vector of social change. Riché, Magnier and Metthey comment that "the development of the information society is highly politicised" (1995 : 410). For Lopez (1996), the emergence of the information society is being used "to reinforce the liberalist offensive in the US and in Europe".
Finally, the regulatory aspect merits attention as information highways go hand in hand with a liberalisation of the telecommunications sector. The liberal principle implies that the regulations will be designed to enable competition.
2. Possible Strategic Impact of Information Highways on Insurance firms
The changes resulting from the creation of information highways are difficult measure for the simple reason that these highways are still only a project. But it is possible to make certain assumptions given the changing technological environment.
The choice between a strategy of cost domination or a strategy of differenciation.
As Braddock (1989) and Glazer (1989) have pointed out, information technologies are likely to challenge classic winning strategies of cost reduction or differentiation.
Traditionally, low costs are achieved by standardisation and economies of scale. The main objective of this approach is to reach as large a market as possible. The strategy of differentiation seeks to target precise segments of a market. Information technologies offer the possibility of using both strategies at the same time. Through the use of information technologies, it is now possible to be rapid, flexible and inexpensive while at the same time answering the specific needs of certain targets. In a word (Little in Allen, Scott Morton, 1994 : 472) information technologies permit the management of "large groups with a high degree of individualism". Pine use the term "Mass Customisation" (1993) to describe the new method of envisaging strategies which allow for the identification of the needs and wants of consumers, without sacrificing the objectives of efficiency and low costs. Tadjen (1996 : 238) points out that the era of commercial information will enable the emergence of this "mass-customisation", in other words that it becomes possible to identify and target increasingly specific segments. The idea here is that the knowledge, generated by information flows which are themselves facilitated by the information highways, is a vector of mass-customisation.
Integration / Externalisation
The question of the effect of these technologies on subcontractors to insurance companies is worth examining. Breton points out that a large part of the services on the information highways is linked to the externalisation of business functions (1995 : 575). The parallel trend of companies recentering on their core business has led them to tender out activities which are not judged to be of strategic importance by handing them over to specialists. The choice and type of management function can be explained by the search for transaction cost reductions (Williamson, 1975, 1985, 1990). It follows that new technologies will imply a change in the strategic choices of insurance companies, given that an immediate result of their use would be a potential reduction in transaction costs. Indeed, the capacity of information technology should allow for an increasingly market-led approach and less dependence on hierarchy in terms of coordinating business activity (Jonscher in Allen, Morton 1994 : 36).
For example, a pivotal
choice for insurance companies is the selection of an internal or external distribution
system.
Will the transaction between company and distributors be subject to modification
in the light of the development of information highways ?
Effectively, the choice to be made by companies between internalisation or externalisation is, historically speaking, dated. Given that the variables of their environment have changed profoundly (increasingly demanding clients and the spread of electronic transfers), the urgent issues facing insurance companies are to identify whether :
- their strategic choices in terms of their relations with their customers are still relevant,
- they can better manage their distribution networks in the context of different (and new) information technologies.
It would be tempting to declare that the world of tomorrow will have no intermediaries. There are those who talk of "friction-free capitalism" (Gates, 1995 : 157). Tensions can arise between insurance companies and their intermediaries following the opening of web sites designed to sell insurance products, for example in the USA : "as some agents see it, their firms are employing it as both carrot and stick to enforce corporate production goals and operations demands" (Hays, 1997 : 117).
However, the relationship between disintermediation and new information technologies is not all that obvious. It is possible that the intermediaries will seize the opportunities offered by these technologies in order to modify the products they sell to the final consumer. The example of the large investments being made in the World Insurance Network by 4 big brokers (Aon Group, Marsh and McLennen, Sedgwick and Willis Coroon) illustrate how seriously some intermediaries view the potential of the information highways (Pike, 1997 : 117). The philosophy behind a web site such as that of Benfield in Great Britain is very much of added value to the customer, as their Chief Executive puts it : "Our customers, wherever they are in the world, should have the ability to access not only us, but their files and their placements on a live basis, 24 hours a day" (Millburn, 1997 : 24).
The localisation of insurance business
In the 19th century, the means of production were confined and often highly costly. The information technology economy would seem to tend value to any form of intelligible information.
This value has an immediate quality and it is not costly, no matter where the person using that information is situated. The emergence of an electronic insurance market on the information highways could thus call into question the value of the localisation of "insurance stations".
In the past, insurance companies have mainly set up in town centres. The classic image of an insurance station is that of a large, opulent building, situated in a well-known business area, which reflects the financial standing of the company. Lovelock and Yip illustrate (1996 : 82) that all businesses using large amounts of information (i.e. those who function through the collation, manipulation and transmission of data in order to create added value) have a large choice in terms of where they locate front office and back office activities. The unit which relies on information can be set up almost anywhere and delivered to consumers all over the world using the information highways. Thus, information highways could be an opportunity for insurance companies to relocate their operations. A regulatory limit on such relocations could be based on the level of local investment made by insurance companies. National legislation could set the rules concerning the levels to be respected (Dickinson, Dinenis, 1996 : 169).
From technical convergence to sectorial convergence
The phenomenon of technical convergence, facilitated by the interconnections resulting from digitalisation and deregulation (Yoffee, 1996a : 36), has led to a sectorial convergence. The most frequently evoked example is surely that which opposes :
- Telecommunications companies operating over long distances,
- Local Telecommunications companies (for example the American companies resulting from the break up to AT&T in 1984, now called RBOC's, Regional Bell Operating Companies),
- Cable companies or cable operators,
- Computer and software manufacturers,
- Content providers.
The computer is taking on the functions of the telephone and vice versa, albeit in a simplistic manner. In the same way, computer manufacturers, software manufacturers and telecommunications companies have finished up in competition with eachother.
In the financial sector the phenomenon of convergence is illustrated by the interpenetration of the banking and insurance markets. The difference between a bank and an insurance company has become increasingly difficult to identify. France is witnessing the development of "Transactionnal Business Information Systems" which correspond to diversification of client bases where banks are selling insurance products to their clients and insurance companies are selling financial products to their clients. This convergence of financial intermediation poses the problem of the emergence of sytemic risk, where the collapse of one financial institution could lead to the collapse of all the others. Indeed, one of the pillars of the regulatory framework was the principle of compartmentalisation between the different areas related to financial services (OECD, 1992 : 18). Sectorial convergence, made all the easier by information highways, will possibly lead to even greater decompartmentalisation of financial activities.
The substantial increase in the number of potential competitors stems from the fact that insurance companies are no longer selling insurance products but are increasingly selling greater amounts of information on insurance products, the risks covered and the price structures. In general, financial institutions have been highly effective in discreetly applying the flexibility offered by information technology in order to develop their product range. This is reflected in the development of products such as deposit accounts, interest-paying accounts, credit cards and revolving credit. These institutions have themselves become increasingly creators of "business information".
A visible sign of this convergence phenomenon could be the proliferation of competitors in the insurance sector, in particular the institutions at the origin of information highways : cable operators, telecommunications companies and content providers for example. The case of AT&T entry to the banking market is a good example (Blattberg, Deighton, 1991 : 5) : "When AT&T penetrated the credit card market in March 1990, the company had extremely powerful competitive advantage : they knew the names and reputations of millions of potential clients. In 3 months, AT&T succeeded in placing over a million credit cards which had already made purchases worth in excess of 100 million dollars".
A reason for the potential success of new entrants to the electronic insurance market will be their position in the value chain. Companies will try to guarantee upstream (programme content) and downstream (client bases) access (Constanza, Garcia-Allvez, 1996 :42). The problem of access to insurers clients thus becomes crucial. Who will have the monopoly on this contact with the clients ? The insurer or the insurance agent who controls means of access ? The organisation which controls the means of access can thus control access to the clients, observe the clients' behaviour and evaluate the service providers who are given access to the clients.
Management in Insurance Companies called into question ?
As Child points out (1984)), technological innovation contributes to, or is often justified by :
- cost reductions (operating / distribution)
- increased flexibility
- improved quality of service
- increased monitoring
These objectives are obviously interdependent. For example, increased control control can imply improved quality.
Cost reductions is often the argument put forward when justifying the introduction of new technology in a company. The automation of quotes for car insurance is an example of a task that can be carried out by a machine. Information highways could also permit insurance companies to reduce their workforce, to reduce the costs of intermediation or to remove them altogether and to better manage internal and external transfers.
The search for flexibility is another strategic objective which is closely linked to cost reductions. Flexibility stems from the possibility of varying the sources of information, from the adaptability of the technologies used on the information highways and from the ease of change once new technology has been put in place.
In fact, information highways are not capable of providing the solutions on their own. They should be integrated into an existing organisational environment which should attempt to exploit fully the knowledge available on the information highways and the organisational innovations which follow. Thus, information highways will mean resorting to technologies which often require a certain degree of automation in the processes of insurance production. Putting quotes for car insurance on the Internet can only be done if the insurance company puts a reliable system in place. It would therefore seem obvious that internal and external users would be potentially obliged to accept the automation arising from the use of new technologies. This automation would be carried out using programmable machines which are supposed to be, by definition, capable of responding to the varying needs of insurance companies.
Increased flexibility could be linked to company reorganisation once the new technology has been introduced. Information highways could be an argument for restructuring insurance companies and their networks. A new technological solution could be a legitimising factor in the new organisational choices of the company. Rather than being just a simple definitive choice of structuring the company, new information technologies could be an opportunity to increase the company's organisational flexibility, i.e. the opportunity to constantly adapt the systems of servuction. Certain authors believe that a company in network form could be a solution where the company would concentrate on core strategic business and would decentralise operational activities while seeking to satisfy the demands of the market (Sandoval, 1995 : 117). In this domain it appears that it is not possible to identify any organisational norm resulting from the generalisation of information highways.
Another objective is improved levels of quality. Information highways can contribute to improved quality because they allow rapid access to information necessary in decision making. For example, centralising information available to teams in the field.
Finally, the monitoring capacity of the company can be increased through use of information highways and associated technology. The question of measurement of effectiveness is all the more important given that exchanges have been dematerialised with the arrival of the "information age business" (Tjaden, 1996 : 233). On the one hand, the information that is used in the monitoring process can circulate rapidly to the desired place. On the the other hand, information flows are connected to processing centres, which allows for monitoring of activities and results. For example, an insurance firm can easily supervise the computerised portfolio of contracts of its representatives (agents, brokers or salesmen).
3. Towards a new relationship between insurance companies and their clients ?
The strategic changes
outlined above can be classified into four types of innovation depending on
the level of change that can be identified :
- technology
- production
- market
- consumer
The first two levels are known as architectural innovations because they challenge
the basis of the industry concerned which in turn leads to the appearance of
new sectors and the redeployment of the outdated industries. The level of change
in the market obviously depends on the strategies of the companies present on
a given segment and new entrants to the market. The last level, consumer, holds
many questions, as yet unanswered, for insurance companies. Indeed, it is one
thing for a company to accept technological change but it is quite another to
make consumers accept that change. The first 3 levels are based on a double
perspective of command of the technology in question and constitution of potential.
This applies as much to individual insurance firms as to the insurance sector
as a whole. Insurance firms must ensure that their technological potential is
emphasised.
The obstacle of familiarisation
The mechanism of inductive choice in terms of technology will be and still is to a large extent exogenous : the capacity of consumers to accept a new type of relationship. The question that insurance companies need to find an answer to is "when will the market be ready ?". When will invention, a combination of new scientific knowledge, make way for innovation, the introduction of new ideas to the market ? Breton points out that the technology is available but that the main difficulty is the capacity of the economy to assimilate it (1994 : 14). The impression is that the technical advances, illustrated by the products and services that the information highways carry, are the effects of technical invention and not really the result of an explicit demand from consumers.
Two types of information technology socialisation need to be highlighted : basic socialisation (familiarisation) and in-depth socialisation (demanded for professional tasks) (Lacroix 1997 : 45). European Union experts confirm that the diffusion of information technology to consumers will have to include the following elements :
- familiarisation
through concrete projects,
- credibility through objective evaluation of the impact of the information
society,
- information explaining what is at stake and work in progress to as large a
public as possible (Council of the European Union, 1994 : 8).
However, this socialisation is still limited. The problem of familiarisation is reflected in the current state of the diffusion of the Internet. This network of networks, the precursor of information highways, is still relatively unknown. The number of users per 100 inhabitants is scarely 0.5 in France, 0.6 in Germany and 2.3 in the USA (Claude, 1997 : 41). In addition, 80% of Internet users are currently white male Americans. Kalogeropoulos and Laramée (1995 : 29) comment that even with a 15% increase of internet trafic per month, the forecasts on the diffusion of the internet and the idea that the entire planet will be connected by the year 2001 are highly misleading. This point is crucial given that the strength of a media lies in its mass diffusion. If only one person on the planet had a fax, that fax would be of no interest to the rest of the human race.
A more active rôle for insurance company clients
Research into the service sector has led to the emergence of the concept of servuction (as opposed to production) (Eiglier, Langear, 1991). An essential characteristic of servuction is the participation of clients in the production of services, for example, the tourist goes on and participates in the holiday organised by the tour operator. Insurance clients communicates with the insurance company in order to indicate the elements of their risk. Information highways could possibly generate an even more active participation of clients in the production of insurance products. The expression "prosumption" (Henault 1996 : 14) has been used to emphasise the new terms of cooperation between a servuctor and consumers, from the conception of the service up to its production and purchase and also throughout the life cycle of the service (Glazer, 1991).
This more active role is not an unattainable objective but a potential reality due to the technological possibilities on offer. In spite of the initial hesitant beginnings of electronic commerce, it is already possible to call on intelligent agents who will carry out the job of finding the best offer for the client (the most common intelligent agent is currently the broker). It is quite easy to imagine increasingly sophisticated search engines which would carry out the job of identifying the best offers on the electronic insurance market. The major change here would be the emergence of "Upstream Direct Marketing" - where clients would seek the most attractive suppliers of insurance products ( Tixier, Pras, 1995 : 7). The concept of unimedia is a symbol of this more active role for the client. The connection or even combining of services offered by the telephone, the television and computer (Dalloz, Portnaoff, 1994 : 14) where the client could eventually choose the vector of the information desired at a given moment from a quasi-infinite range.
The repercussion on the stability of the insurance sector could be quite profound. On the one hand, the clients will find themselves in a position of strength vis à vis the insurance companies, as they will be in a situation where in theory they will be able to compare a large number of different offers, and thus exploit the laws of the free market. They will have a clearer idea of the products on offer from the market makers. New technologies may imply lower costs in terms of access to and evaluation of insurance products (Venkatraman, Zoheer, 1995 : 189 in Allen, Scott Morton).
On the other hand, insurance companies will be selling insurance products without knowing the exact cost price at the moment of selling. They therefore run the risk of selling at a loss without realising it. This mechanism of inversion of the production cycle could lead to price wars where a new entrant to the market is liable to want to gain market share through a policy of lower prices without being immediately aware of the real cost of such a policy (there would obviously be a difference between Life and non-Life business) (Valin, 1983 : 51). In addition, to a certain degree the insurance market functions thanks to a certain assymetry of information between the firms and their clients, where the clients are rarely aware of the probability of the risk that they insure against actually taking place. In this way good clients (in particular those who never have accidents) even though they pay their insurance premiums in exchange for eventual protection against loss, are paying too high a price in comparism to their accident record. It should be pointed out that 90% - 95% of those insured do not have accidents and the only economic effect on them is the payment of their premiums (Lambert, 1996 : 11). It is that payment of premiums without compensation for accident which allows the mutual insurance system to work. If these good clients understood more clearly the real prices involved, they could destabilise the mutual insurance system by purchasing the most competitively priced products on the electronic insurance market.
Towards a new approach to using information ?
It is relatively easy to understand how the information highways will modify the status quo in terms of sharing market intelligence. Up to now it has usually been the case that only the larger economic agents such as governments, local administrations and companies had access to economic intelligence. The definition of economic intelligence for the purposes of this paper would be (Martre, 1994 : 16) : all the coordinated initiatives of research, processing and distribution of information which is of use to and exploitable by economic agents. Martre makes no mention of consumers as though economic intelligence excludes automatically one basic constituent of economic agents, that of consumers. However, consumers can be the purchasers of useful information. The transformation of consumers into intelligent economic agents through use of information highways will include consumers in the cycle of economic intelligence. In fact, the acquisition of useful information by consumers will encourage them to demand more information on insurance products. The problem which then arises is no longer access to information but rather information on information.
CONCLUSION
The preamble to this paper shows that we do not find ourselves in an outdated determinist perspective. The relationship between the organisation and technology has been the subject of numerous analyses, which have called into question the classical approach of technological determinism. However, as we have seen, technology is not a neutral question for organisations, in particular technology engenders opportunities and contraints, and it influences the form of relationships between companies. Even so, it cannot be said that a technology implies one single and unique type of organisation because opportunities will be missed and different organisational choices can emerge from the same set of constraints and opportunitie.
Information highways offer definite opportunities to insurance companies, the principle one being without doubt the possibility of creating an electronic insurance market. In this context regulation and the insurance business are no longer opposed, or at least far less opposed, due to this situation. According to Yoffe (1996 a) the question is : "are we at the dawn of technological revolution which will totally transform the economy ?".
The question is not easy to answer given the inherent difficulties in developing insurance products on the information highways. Certain constraints will be short-lived. For example, solutions will most likely be found quite rapidly to the problems of secure payments ; the low number of people connected to the Internet ; the rejection of electronic commerce, in particular by those who pioneered the existing networks and the time taken in connecting to the Internet ( the phenomen of World Wide Wait).
However, there are definite obstacles which, when combined, still limit the prospects of information highways. These are :
1/ The lack of government control over the dematerialisation of exchanges, in particular the monitoring of insurance transactions and the financial health of insurance companies ;
2/ The difficulty in applying national laws (Dufour, 1995 : 11) given the non-territorial nature of the networks. This is a fundamental problem for a sector such as insurance where law is essential. For example, the principle of intellectual property is difficult to apply because of the low cost of transferring signals in relation to the information that they represent ( Jonscher in Allen, Morton, 1994 : 6) ;
3/ The difficulty in identifying the contact. For clients, which insurance company will they do business with ? For the insurance company, what do we know about the potential client ?
4/ The emergence of systemic risk as a consequence of sectorial convergence, in particular in the financial sector ;
5/ Rising connection costs which could limit the developing trend for internet use (Cats-Baril and Jelassi shoned that this was an essential factor in the successful development of the Minitel in France) ;
6/ A dematerialisation of human relationships as a result of increased communication without real contact ;
7/ The eventual exclusion of certain groups and economic agents, in particular small companies (Husein, Moreton, Sloane, 1996 : 77) ;
8/ The difficulty in creating stable mutual insurance systems given the increased transparency of the insurance market.
Whatever the obstacles, it should be stressed that the information highways constitute a formidable opportunity for insurance companies. The choice of the most suitable trajectory for survival and growth remains a decision that they must take with great care.
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