The Digital Economy: What's in it for Agents and Brokers?

In the realm of technology, Don Tapscott, keynote speaker for ACORD Technology Conference '97, holds the crystal ball. His book, The Digital Economy, has influenced the direction of automation in the corporate world. Excerpts from an interview with Tapscott, published in In ACORD magazine, follow.

Today we are witnessing the early, turbulent days of a revolution as significant as any other in human history. A new medium of human communications is emerging, one that may prove to surpass all previous revolutions, including the printing press, telephone, television, computer, in its impact on our economic and social life.

Interactive multimedia and the so-called information superhighway with its exemplar the Internet are enabling a new economy based on the networking of human intelligence. In this digital economy, individuals and enterprises create wealth by applying knowledge, networked human intelligence, and effort to manufacturing, agriculture, and services. In the digital frontier of this economy, the players, dynamics, rules, and requirements for survival and success are constantly changing.

Middleman functions between producers and consumers are being eliminated through digital networks. Intermediaries need to move up the food chain to create new value, or they face being disintermediated.

Disintermediation: Cutting out the middleman. In the insurance world, this means eliminating the agent.

This new way of thinking demands that the broker have instant access to extensive information. Coupled with strong human relation skills, solid knowledge of key variables, and powerful tools to package deal scenarios, the broker can move up the value chain to forge trusted partner relationships. Rather than being disintermediated, the broker can use the new technology to create new value.

If your company uses midst agents, wholesalers, distributors, retailers, brokers, or middle managers, it's time to do some serious strategizing (or career planning if you are one of them). All these roles in the past have been in the business of executing transactions, brokering, or in general boosting the faint signals that passed for communications in a predigital economy. Disintermediation is changing the signal pattern.



In ACORD:  In the digital economy, which industries do you think technology will affect the most? Is insurance one of them, and why?

Tapscott: Every industry is being affected profoundly, insurance and, more broadly, financial services are great examples. This is a time of both opportunity and peril. I'm convinced that insurance companies that don't reinvent themselves around the digital media will be gone in a decade. Look at banks. Walter Riston, the former chairman of Citibank, points out that 70% of financial assets in the world used to be owned by banks. Today it's 30 percent.

So, who's going to deliver the financial services supermarket? Will it be a bank, an insurance company, Microsoft or AT&T? Or as Riston speculates, General Electric? I think many insurance companies are simply implementing first generation websites, which are purely informational, saying "What a great insurance company we are." Or brochure-ware, you know - put up your annual report or advertise your services. The ones that will survive will move quickly to second generation sites where the whole business model is changed. They're not just informational, they're transactional. They'll enable a customer to build a relationship with you.

In financial services, it's a cliche that walls are falling, yet many companies still stick their heads in the sand and refuse to investigate the implications of that statement. Who's going to deliver insurance? We're talking here about building relationships with customers enabled by a new medium, not selling them services. Increasingly, it's about building relationships in the digital economy. Because there's a new medium in human communications to do this, it makes it easier for any company to do it. When you sell anything you bundle in some insurance.

In ACORD:  How do you think the role of insurance will be altered in people's business and personal lives? For example, it's projected that all this technology will make people more home-centered. Will most purchase decisions (including insurance) be made from the home? What about business insurance?

Tapscott: Increasingly, many of the functions dispersed from the family by the industrial economy can come back into the home, such as work, learning, health care, and interactive entertainment. But increasingly there will be integrated financial services environments where a family or single mom can sit in front of a workstation and take a look at everything. Again, it's not to see how much money we have in our savings account, where our line of credit is, and how much our house insured for. Building relationships is not about seeing all of your statements on one screen. Relationships are about creating new value for customers.

So what kinds of new integrated services can be provided? For example, I'm planning my retirement. There are many insurance pieces to that whole picture, not just life insurance. It has to do with managing the risk in my life. Who will I call? Right now I don't call my life insurance agent, because I view him as a flogger of product, as opposed to someone who has an interest in my financial success.

In ACORD:  What is your position on the convergence of cable, telecommunications, entertainment, Internet, and E-mail? And how will this affect business?

Tapscott: They're definitely converging. This is creating a new economic sector, which is the engine of the new economy. But it's a lot more than a sector, it's becoming the basis of all sectors, including insurance. And insurance companies need to join this sector. Insurance companies need to become new media companies in order to survive.

Reprinted with permission from ACORD (Agency/Company Organization For Research and Development), Pearl River, NY. For more information about ACORD, call (800) 444-3341, extension 506. You may also find them at http:\\www.acord.com on the World Wide Web.