|
 |
|
|
Imagine building a powerful new business in just a few months. Imagine
competing in a marketplace in which your company’s fixed expenses
are as much as 70 percent less than the competition. Now imagine
generating millions of dollars in annual sales with just a handful
of employees.
Imagine if you will, a virtual company. It exists, to be sure, but
in a different plane of reality than the traditional company. And
two local companies can build you one. In fact, they’ve already
built several for the insurance industry and will soon be building
more.
“There’s a tremendous amount of interest in building virtual insurance
companies,” says Bill McCormick, senior vice president of sales
and marketing for G.A. Sullivan, a St. Louis-based Internet software
development company.
(left)
GREG A. SULLIVAN,
president, G.A. Sullivan and BILL
MCMORMICK, senior vice president of sales
and marketing, G.A. Sullivan |
|
“You build a virtual company to enter new markets, develop new distribution
channels and to control expenses,” says Michael E. Conley, chief
executive officer of Global Financial Technologies, Inc., a company
that specializes in e-business solutions for the financial services
industry.
“Who doesn’t want to do that?”
Indeed, experts say that the virtual companies are made to order
for the insurance industry, especially for life insurance products.
“The virtual model can be applied to any type of business, but it’s
perfect for insurance,” says Greggory A. Sharpe, president and chief
operating officer of GlobalFT, as the Fairview Heights, Ill., company
is known. “Insurers are suffering from declining return on investment,
falling sales and increasing overhead and expenses. They can’t do
anything about mortality rates, and they can’t do much about declining
investment returns. The only thing they can do is to control their
expenses.”
Sharpe and Conley should know. They’re both insurance men, and in
1995 they gave birth to and nurtured what was then the world’s first
virtual insurance company, GeneraLife Insurance Company of America.
It has since been re-united with its parent company, General American
Life Insurance Co.
As a company that appears to its customers to be more than it is,
a virtual company is not necessarily an Internet company, and GeneraLife
did not sell policies over the World Wide Web. Rather, according
to Sharpe and Conley, GeneraLife was one result of General American’s
strategy to enter the brokerage business.
But for General American, GeneraLife was a whole new insurance beast,
the perfect beast. Established, of all places, on the campus of
Southern Illinois University at Edwardsville, GeneraLife sold term
life insurance, universal life policies and annuities through a
network of independent agents. Using tools developed by G.A. Sullivan,
the company employed the Internet for communications between the
home office and the field, but it was the outsourcing of traditional
back office administrative and processing functions that made GeneraLife
a virtual company.
(left)
GREGGORY A. SHARPE,
president and chief operating officer, GlobalFT and
MICHAEL E. CONLEY,
chief executive officer, GlobalFT |
|
“Rather than being heavily weighed down by on-site back office fixed
expenses that are such a big part of the traditional insurance company,
GeneraLife’s expenses were largely variable,” says Sharpe, who served
as the virtual company’s chief operating officer. “We outsourced
work and incurred expenses only as business grew. While the expenses
of insurance companies are usually 80 to 90 percent fixed with only
a small percentage variable, we were able to flip-flop that.”
Conley, an insurance marketer who is credited with creating the
virtual insurance company concept and bringing GeneraLife to fruition
in just eight months, says the company operated with just 16 to
18 employees and generated sales of more than one billion dollars
within its first five years.
“It was about as untraditional as an insurance company could be
at that time,” adds Sharpe, an authority in insurance administrative
matters.
That is until the virtual cousin of the Basic Life Insurance Co.
of the Netherlands came along. Conley, Sharpe and G.A. Sullivan
created the all Internet-based company in just four short months
in 1999. Operating on an annual budget of less than $3 million,
Basic Life reached $10 million in premiums in just 18 months, Sharpe
says, and is now the fastest growing life insurance company in Holland.
Conley became so enamored with the virtual insurance company model
that he left GeneraLife and started GlobalFT in July 2001. Sharpe
and others joined him. By October of last year, the new GlobalFT
and G.A. Sullivan were building a term life virtual division for
Empire General Life Assurance Company of Kansas City, Mo. Unlike
GeneraLife, Empire General sold policies over the Internet. Using
proprietary Internet Quick Issue software developed by G.A. Sullivan,
Empire General was able to increase term life insurance sales while
reducing associated expenses by up to 70 percent, Sharpe says.
G.A. Sullivan’s McCormick, who also has a background in insurance,
says that a typical insurance company incurs costs of $170 for each
term policy issued. “With Internet Quick Issue, you can issue it
for $30 or less. The customer is generally approved on-line without
intervention by people and is eligible for up to $250,000 in term
life over the Internet without a medical exam. If seven basic medical
questions are answered to fit underwriting criteria, the policy
is issued in five minutes.”
Term life insurance over the Internet, McCormick adds, is the right
match for the target audience: persons aged 50 and older who want
to add to an existing insurance estate and who have the discretionary
income to do so. “All the customer wants to do is add some more
insurance. This market is under served because life-long insurance
agents are retiring, and few are replacing them. It is tremendously
convenient for the customer.”
Although the first virtual companies were not Internet-based, it
is technology that allows these companies to do more with less.
“Technology becomes the enabler for solving business problems,”
McCormick says.
Internet Quick Issue (IQI), now in its fourth generation, is, like
all of the virtual company software solutions jointly developed
by GlobalFT and G.A. Sullivan, based on Microsoft platforms. Besides
IQI, which provides a true instant-issue life insurance e-sale,
virtual insurance company technology components typically include
a relational database, an Internet agent site, an Internet policyholder
site, and an Intranet executive intelligence module to provide performance
reports to management.
GlobalFT and G.A. Sullivan are currently negotiating virtual company
creation agreements with two U.S. companies and one in the United
Kingdom.
“The virtual model can be applied to most any type of business,”
Sharpe says. “The fact of the matter is that you don’t have to have
thousands of people processing paper any more.”
William V. Poe is principal of Poe Communications, a St. Louis
advertising and marketing communications firm. |
|
|
|
|
-
- - - - - - - - - - -
- - - - - -
-
- - - - - - - - - - -
- - - - - -
-
- - - - - - - - - - -
- - - - - -
-
- - - - - - - - - - -
- - - - - -
|
