Adoption of Web-Based Applications in the Financial Sector: The Case of Online Insurance

Teuta Cata Sang M. Lee

ABSTRACT. Implementation of new technologies is a never-ending process that attempts to secure the best available tools to accomplish organizational goals. Previous studies on technology implementation discuss the technology adoption process and the multiple factors that are important for making this process successful. This study focuses on the adoption of web-based applications in the insurance industry. An in-depth investigation of relevant literature on the technology adoption process and data collected from insurance companies helped us identify the success factors for online insurance. Relevant factors include infrastructure flexibility, website availability, the degree of business integration, and company age. [Article copies available for a fee from The Haworth
Document Delivery Service: 1-800-HAWORTH. E-mail address: <docdelivery@ haworthpress.com> Website: <http://www.HaworthPress.com> 2006 by The Haworth Press, Inc. All rights reserved.]

KEYWORDS. Web-based technology adoption, online insurance, technology innovation model, exploratory study

Teuta Cata is affiliated with Northern Kentucky University, Highland Heights, KY (E-mail: catat@nku.edu). Sang M. Lee is University Eminent Professor, Firstier Bank Distinguished Professor, President, Pan-Pacific Business Association, University of Nebraska-Lincoln, NE (E-mail: slee1@unl.edu) . Journal of Internet Commerce, Vol. 5(2) 2006 Available online at http://www.haworthpress.com/web/JICOM 2006 by The Haworth Press, Inc. All rights reserved. doi:10.1300/J179v05n02_03

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INTRODUCTION Electronic commerce (e-commerce) has been defined as any economic activity conducted via electronic connections (Wigand, 1997). Electronic business (e-business) is generally considered as a broader concept than e-commerce. For example, Alter et al. (2001) define e-business as the automation of business processes and integration of e-commerce applications to organizational strategies, creating a seamless digital organization. Thus, e-business has become an integral competitive strategy of the organization and its growth has been dramatic. For example, Forrester Research reported that US online retail sales would reach $172 billion in 2005 and the figure is projected to grow to $329 billion by 2010, an annual growth rate of 14% during the next five years (eCommerce Forecast, 2005). The e-business concept includes not only buying or selling via websites, but also facilitating communication, information exchange, collaborative work within or external to the organization, electronic document transfer, and customer support via telecommunication networks (Min & Galle, 2001; Phan, 2003). This study is interested in exploring the key factors that encourage organizations to adopt a web-based technology. According to a previous study (Phan, 2003), an organization can successfully integrate online activities if web-based technologies support the organizations activities in four broad areas: Information access and distribution, Work collaboration, Business transactions, Customer care applications.

Web-enabled technologies have changed the mentality of conducting business in the financial markets. Web-based financial firms have reduced transaction costs by eliminating the traditional expenses and conveniently delivering their products and services to customers via the Internet (Panko, 2001). Recently, the financial industry has been trying to integrate all online activities at a single point of entry (Chung et al., 2003). Financial portals allow users to access a variety of financial information such as financial news, product information, stock quotes, etc., with a single log-on access. Financial portals in the insurance industry do not only simplify the access of insurers, but at the same time facilitate the access of agents, brokers, advisors, and integrate communication across the companys departments.

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This study focuses on the insurance industry. This is an informationintensive industry, where technology adoption has a significant impact not only on products and services offered, but also on business strategies and the process of core business redesign (Dos Santos & Peffers, 1995). In the financial services sector, information technology (IT) applications are very important in enhancing services and expanding them beyond geographic boundaries. The insurance sector has increased IT spending in their budgets, up to $25 billion in 2004 (Best Review, 2004). There are two primary factors that are forcing insurance companies to expand their online activities. First, online access reduces costs by providing a less expensive delivery channel, expanding the existing network of agencies and branches, eliminating paper work, and decreasing the level of personal interaction that institutions provide through call centers and branch offices. Second, online access increases customer perception of the level and quality of service, thus creating and enhancing loyalty (Manning, 2003). Nevertheless, the insurance industry has been slow in pursuing the benefits of the online business model. A variety of reasons are responsible for this, including the perception of insurance as an individual product (Insurance Finance and Investment, 1999), complexity of the product (Lysiak, 2001), lack of a clear e-business strategy (Kim, 2001), and an ongoing concern about the ability of e-business applications to handle the back-office (Kumar & Hillegersberg, 2004; Silver, 2001).

WEB-BASED APPLICATION ADOPTION DECISION AND RESEARCH HYPOTHESES Innovation and adoption of IT have been extensively discussed in MIS research. The Technological Innovation Model (TIM) proposed by Tornatzky and Fleischer (1990) is used in this study as the framework that best allows identification of factors that impact the decision for online insurance. This framework, shown in Figure 1, has been used by a number of researchers to investigate adoption of various technologies. Adoption of technologies such as EDI (Chwelos et al., 2001), client-server (Chengular-Smith & Duchessi, 1999), and Internet (Mehrtens et al., 2001; Premkumar & Ramamurthy, 1995) are influenced by the external, internal, and/or technical factors.

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FIGURE 1. Context of Technological Innovation (Adapted from Tornatzky & Fleischer, 1990)
Organizational Context

Technological Context

Environmental Context

Technological Innovation Decision Making

The decision to establish a presence on the Internet depends on the organizations strategy. The organizations strategy may be to create long-term relationships with its customers and build loyalty and brand identity. The first step to implement this strategy would be by creating an informative and pleasing website. If an insurance firm wants to use the Internet as a sales vehicle, it can create a transactional website and generate new revenues by selling online. Other organizations may have dual intentions, developing websites to inform and create relations with the customers, as well as to sell products/services (King & Gribbins, 2002). Independent Variables Many factors are identified in this study as potential determinants for a successful implementation of the web-based applications for an insurance firm. A discussion of those factors and respective references follow by grouping them in three main contexts suggested by Tornatzky and Fleischer (1990). All hypotheses presented in this section are in regard to the insurance industry. Technological Context Successful implementation of a new technology in an organization depends not only on the technology that is being adopted, but also on the

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readiness of the organization to support the new IT application. Successful adoption of a new technology is a complicated process often spanning multiple levels. In the case of e-commerce, the process involves (1) the individual user level and the degree of users expertise with IT, (2) the organization level and issues of integrating a new technology with current business process capabilities and other unique organizational characteristics, and (3) the industry level with corresponding issues of integrating a new technology with existing systems, or technologies that are complementary with the new technology. In the context of e-commerce, the most important technological issues are those related to IT infrastructure and public network security and availability. The most complicated factor is IT infrastructure. IT Infrastructure Flexibility. IT infrastructure is defined as a set of shared IT resources that include physical infrastructure consisting of platform technology (hardware and operating systems), network and telecommunication technologies, key data and core data-processing applications (Armstrong & Sambamurthy, 1999) and the human infrastructure consisting of knowledge and the capabilities of IT staff (Byrd & Turner, 2000). The discussion in the information systems (IS) community on this topic has focused mainly on the means by which IT flexibility brings strategic advantage to an organization. Duncan (1995) considers the flexibility of infrastructure to be a resource that allows an organization to apply new strategic options and new business processes, yielding competitive advantage that competitors find difficult to match. Recently, research on this topic has confirmed that IT flexibility affects the strategic business alignment and the ability that the organization has to adapt to the dynamic environment (Chung et al., 2003). Therefore, we propose the following: H1: Flexibility of an organizations existing IT infrastructure is positively related to the decision to adopt the web-based technology. IT Staff Knowledge. Research on IT infrastructure has identified the skills and capabilities of IT staff as the second component of IT infrastructure in an organization (Broadbent & Weill, 1997; Chung et al., 2003). Byrd and Turner (2000) refer to human infrastructure as the knowledge and capabilities required for effectively managing the IT resources within the organization. As a consequence of rapid changes in technology, organizations and IT departments must create and sustain

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flexible human infrastructure capable of supporting the organization in its strategic decisions. Henderson and Venkatraman (1994) noted that firms need flexible and skillful IT employees capable of handling the horizontal integration of IT rather than the earlier vertical integration. Horizontal IT integration implies that IT is intensively integrated into business processes across organizational functions, thus enabling the organization to respond quickly to change (Chung et al., 2003). Recent research shows a trend that emphasizes more business, interpersonal skills of IT staff (Byrd & Turner, 2001), and a friendly attitude with customers (Murnan, 2003), which enables the IT staff to adapt to changing environments and have the desired skills to communicate with other personnel within the organization and with e-customers via e-mails, chat, or phone. H2: The flexibility of IT staff skills is positively related to the decision to adopt the web-based technology. Website Availability. Website availability provides the ability to respond to customer requests at any time, or 24/7. Lack of website availability and network downtime are significant factors for web-based activities (Awad, 2000) that have a direct impact on website revenues, customer satisfaction and loyalty, company image, etc. The main concern of practitioners regarding website availability is evaluating the trade-off between significant investments in technology needed to maintain a high level of website availability or accepting a reduction in sales and revenues as a result of downtime. Different industries resolve the trade-off differently based on industry characteristics. The financial industry perceives high availability as crucial to maintaining a close relationship with its customers. H3: Website availability is positively related to the decision to adopt the web-based technology. Website Security. Security issues are critical to e-commerce. Research shows that e-commerce sites are very vulnerable to cyber attacks. E-commerce companies face risks on many fronts, beginning with the simple technical risks (viruses and attacks) and continuing to more advanced risks such as economic risks (sales, value, image loss) and societal risks (industrial espionage and cyber terrorism) (Grzebiela, 2002). Different industries have different perceptions of both risks and

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threats. The financial industry perceives all types of risk as very important (Jung et al., 2001), with legal risk, perceived as the most threatening (Schoder & Yin, 2000). Recent security threats in this industry have included an increased volume of virus attacks, identity fraud, and an overall increase in the sophistication of attacks (Slewe & Hoogenboom, 2004) which has made financial institutions incur great expenses in preventing and stopping these attacks. H4: The organizations website security capability is positively related to the decision to adopt the web-based technology. Organizational Context. Organizations are complex entities that possess many resources such as financial, human, values, beliefs, reputation, etc. This study explores resources related to organizational support toward application of a new technology, such as organizational structure, having an e-business plan, and the degree of e-business application to the internal business processes. Organizational Support. Successful innovations in technology, new products, and services are usually accomplished in organizations that consider continuous innovation a top priority within their overall strategy (Amabile, 1998). Innovation and creativity are fostered and motivated not only by organizational leaders, but also by the entire organization. Managers may use different methods to encourage their employees to innovate and bring new ideas to their companies. Amabile (1998) suggests that motivation is one of the levers managers should apply in order to increase creativity and innovativeness cheaply and quickly. Other tools and methods that organizations are using include supporting innovative employees with the latest technology available in order to improve their collaboration, productivity, and knowledge management (Daud & Kamsin, 2004). H5: Organizational support is positively related to the decision to adopt the web-based technology. Integration Level. Extensive IT research has been conducted on the relationship between organizational structure and IT. Lucas and Baroudi (1994) believe that the design of IT is shaping the design of organizations. IT creates opportunities for new communication forms within and across organizations. In the context of financial industry, IT has created new business opportunities unforeseen before for financial and non-financial institutions (Kumar & Hillegersberg, 2004). Adop-

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tion of communication and telecommunication technologies have made it possible for financial companies to expand their financial service portfolios, access a larger customer base, and allow a variety of non-financial institutions to participate in the financial service market. H6: Organizational integration is positively related to the decision to adopt the web-based technology. Having a Business Plan. Porter (2001) states that the main issue in adoption of an Internet-based activity is not whether to deploy it, but how to deploy it. Companies should adopt Internet technology to add value to their activities, to increase their competence, and to sustain their competitive advantage. Ignoring or improperly applying business strategy (Dandapani, 2004) has driven many dot-coms and established companies away from the leading edge of their industry, decreased their competence, hastened convergence between rivals, and increased bankruptcies (Porter, 2001). Investigation of e-commerce adoptions suggests that companies that consider the e-business activity as a business process (Grant, 2003) or part of their corporate strategy (Chang et al., 2003), rather than a technical one, have been more successful in this activity. H7: Established strategic plans for e-commerce are positively related to the decision to adopt the web-based technology. Integration to Business Processes. New technologies should be integrated and complement the existing technology and infrastructure of an organization, as well as be integrated with existing work practices, values and beliefs, bureaucratic structure, authority, etc. If an innovation is considered compatible with existing values, beliefs, and work practices, an organization will be inclined to adopt it (Lee & Baek, 2002; Tornatzky & Fleischer, 1990). In the context of Internet adoption by financial services, the real-time integration of data and applications is considered one of the major challenges these institutions face today (Kumar & Hillegersberg, 2004; Pan & Vina, 2004). Internet applications need smooth integration with internal information related to back-office and proprietary information with external data such as products from competitors, news and reports, and other worldwide information. H8: The ease of integration of online activities to existing procedures is positively related to the decision to adopt the web-based technology.

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Environmental Context Environmental context refers to external pressure that influences an organizations decision to adopt a new technology. This influence might be caused by continuous changes that competitors, suppliers, and customers experience. All these actors and their respective behaviors push and influence companies to adjust to new market conditions and requirements. In this study, we focus on the pressure that customers exert on online business. Todays customers are demanding greater value, more customized products and services, lower cost, and increased efficiency in customer service. Successful organizations must not only be effective and efficient, but also deliver their services and products on time and across the geographic distance (Riggins, 1999) in the manner and time of customers choosing (Fleisch & Powell, 1999). This has forced many organizations to reflect the customer perspective in their corporate strategy. Transformation towards e-service will allow companies to focus better on customers and increase the level of product personalization and customization (Rust & Kannan, 2003). Extensive research shows that financial customers are becoming more knowledgeable about available products/services and careful with their financial decisions. Customers are looking for a broader range of products and services, better customer service, customization, and new communications with their financial institutions (Papathanassiou, 2004). To remain competitive, financial institutions are trying to increase the digital content of their products. Creation of virtual communities has been a new business model applied by insurance companies in order to allow their customers to interact with each other and learn more about the product/services they need. At the same time, it allows the companies to pay close attention to the customer needs and strengthen the relationship with them (Kardaras et al., 2003). The my extension is one way that financial institutions are expanding customization according to particular needs of the customer (Wind, 2001). Personalization of products/services is the extent to which a website adjusts information to the individual user (Awad, 2000). H9: Customer pressure to access existing products online is positively related to the decision to adopt the web-based technology.

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METHODOLOGY Research Process The research process was developed in two main steps: Step One: Identification of Factors. A careful examination of previous studies and research helped identify factors, issues, and problems that affected adoption of other, earlier technologies. Those factors were selected from both academic and practitioner studies such as conceptual frameworks, case studies, empirical studies, and practitioner literature. All the recognized factors were classified and grouped according to their characteristics into Tornatzky and Fleischers (1990) contexts. Using unstructured interviews, insurance managers and industry experts were invited to help define industry characteristics and provide feedback on what happens in this sector. This feedback was especially significant in this step, where the comments from experts were integrated with the literature review process in order to recognize additional factors that were not previously considered. Thirty-five factors were initially identified from literature and insurance industry experts in this step. The number of factors was reduced through a three-round Delphi study involving insurance industry experts. The results of Delphi study suggested nine factors as the most important factors that impact the insurance companys decisionwhether or not to adopt a web-based technology. Step Two: Survey Study. After the Delphi study was completed, a survey was undertaken. The first issue at this stage was to identify the firms that would be invited to participate in this study. Companies that offered two types of insurance, automobile and life, were selected to be included in this study. These two types of insurance are considered as the most appropriate products for e-business (Bests Review, 2003). Survey Instrument Some questionnaire items used in this study had been validated by previous research, with the remainder created for this study. The survey questionnaire had two parts. The first part was designed to obtain data about the factors that were identified through the Delphi study. It consisted of twenty-nine questions related to those nine factors. The response for each item was based on a five-point Likert-type scale with the following choices: (1) not important; (2) low importance; (3) moderate importance; (4) high importance; and (5) critical importance. Seven

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factors had three questions each, while the factors customer pressure and website security were measured by four items. The items were tested by factor analysis to distinguish the independent variables that will be tested by statistical methods. Factor analysis helped identify the independent variables and the items for each variable. Factor analysis was run separately for technical variables and organizational variables. The second part of the questionnaire was designed to obtain information about the respondents and their organizations: their job title, company characteristics (age, size, insurance types served), website characteristics (age, proportion of web-based activity, level of web integration, the web development), and Internet adoption. The Sample A total of 953 questionnaires were sent to all insurance firms listed with positive ratings (above F) by the AM Best Rating Guide (2002): 568 via e-mail and 385 by regular mail. The companies identified operate in almost every state in the US. Twenty-three postal questionnaires were returned undelivered because of address change, and thirty-seven e-mails were undeliverable. A total of 109 questionnaires were completed and returned, 53 via e-mail and 56 via the postal service. Two questionnaires were partially completed and could not be used for statistical analysis and hypothesis testing. Fifteen of respondents were engaged in auto insurance, sixtythree in life insurance, and twenty-nine were providing both types of insurance. Results of independent t-test analysis between the questionnaires received through e-mail and the regular mail showed no significant difference between the independent variables. Therefore, all the questionnaires obtained were aggregated and used for statistical analysis. Table 1 summarizes the responses obtained. RESULTS AND DISCUSSION Information About Participants Company and Website Age Insurance organizations that participated in this study had a broad range of maturity and size. Website age ranged from one to ten years. The mean website age was 5.25 years. Both small and large companies

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JOURNAL OF INTERNET COMMERCE TABLE 1. Summary of Survey Responses

Type of Distribution Electronic (e-mail) Number of questionnaires distributed Number of questionnaires undelivered Number of companies responded Number of responses discarded Number of responses included in statistical analysis Responses according to insurance types: Life Auto Life and Auto 24 (47%) 15 (29.4%) 12 (23.6%) 568 37 (6.5%) 53 (10%) 2 (0.3%) 51 (9.6)

Mail Regular 385 23 (5.9%) 56 (15.4%) 0 (0%) 56 (15.45) 39 (69.6%) 0 (0%) 17 (30.4%)

participated in this study. The smallest company reported 11 employees and the largest employed 80,000 employees, with the mean of 4507 employees. Website Development In terms of website development (Table 2), all firms responding to this survey had an established website, with 65% offering online quotes through their websites. This survey found that 100% of responding insurance firms used their website as an information tool. Ninetyone percent of the firms communicate with their e-customers via e-mail, and ninety-seven percent use the Internet as a communication tool within the organization to exchange e-mails among employees. Fifty-one percent of the responding firms use the Internet to communicate with agents or external parties. Communication with agents via Internet is lower than other communication tool usage rates because some firms participating in this study are totally online firms (six firms or 5.6%), or perform the majority (eleven firms or 10.3%) of their sales through the Internet. Another reason may be the organization size. About thirty percent of the firms participating in this study have less than 100 employees, which suggest that those firms are relatively small and local, and may find other ways to communicate with their sales agents.

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Descriptive Statistics Table 3 summarizes the mean values and standard deviations of the nine factors used in this study. On the five-point Likert scale that respondents used to evaluate the importance, the mean values of all nine factors were above 3.0, i.e., more than average importance. In particular, the two factors that reflect the most technical aspects of the e-business activity, i.e., website security and website availability, hold the highest mean values (above 4.0). Organizational context factors all yielded similar importance ratings, indicating respondents see them as clustering together. Their mean values ranged between 3.82 and 4.09. The external context variable, customer pressure, holds the lowest mean value (3.47) in this study.
TABLE 2. Profile of Website Development of Insurance Firms
Website Development Criteria Homepage E-mail to customers E-mail among employees Online quote Agents Have Established 107 (100%) 97 (90.7%) 104 (97.2%) 70 (65.4 %) 55 (51.4%) Have Not Established 0 (0%) 10 (9.3%) 3 (2.8%) 37 (34.6%) 52 (48.6%)

TABLE 3. Results of the Descriptive Statistics

Measurement Criteria Technological Context Website Security Website Availability IT Staff Knowledge IT Flexibility Organizational Context Organizational Support E-business Plan Integration Level Business Integration External Context Customer Pressure 3.47 .73 3.86 3.82 3.83 4.09 .60 .72 .66 .70 4.50 4.24 3.86 3.60 .46 .62 .61 .57 Mean S.D.

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Logistic Regression Analysis Results Logistic regression is used to identify factors that impact the organizational decision as to whether or not to adopt the Internet technology. Binomial logistic regression is a statistical method used to predict a dependent variable on the basis of multiple independent variables, where the dependent variable is dichotomous (Tabachnick & Fidell, 1996). The dependent variable Decision is binary: (1) Yes or (2) No. The coding is assigned as follows: an organization is assigned code 1 (Yes) if the organization has a homepage, offers an online quote, communicates by e-mail with its customers, and uses e-mail as a communication tool among employees and/or agents. The classification table obtained through logistic regression analysis shows that 70 out of 107 firms can be considered as firms that conduct their business partly or totally online. Thirty-seven firms do not satisfy at least one of the four conditions of the e-business definition in the context of this study. Results of logistic regression are shown in Table 4. The method of variable entry was backward: LR, which allows all variables to enter the regression equation in the initial step, and classifies them in terms of power to predict the dependent variable based on the significance of their associated Wald statistic. Logistic regression analysis in this study completed eight iterations. One variable was dropped in each iteration, in the following order: Website Age, Business Integration, IT Staff Skills, Website Security, Organization Support, Having e-Business Plan, and Customer Pressure. A test of the full model with all the predictors was statistically reliable with 2 (12, N = 107) = 27.913, p < .001, indicating that the predictors, as a set, reliably distinguished between firms that adopt the web-based business or not. According to Wald criterion, the predictors that explain the likelihood to adopt the web-based business are IT Flexibility, Company Age, Degree of Integration, and Website Availability. Although it remains in the final iteration, the predictor Employee has a Wald statistic equal to 2.263, which is not significant at the level p > .132. Adoption Decision Factors Interestingly, this study found that all the participating firms have established their company homepages on the Internet, which is considered the initial or information stage of website development. In the context of this study, we were interested in identifying firms that not only inform, but also communicate and sell through their websites, and

Teuta Cata and Sang M. Lee TABLE 4. Results of Logistic Regression

Variables Variables in equation Website Availability Infrastructure flexibility Degree of Integration Organization Size Company Age Constant Variables not in the equation Website Security IT Staff Skills Having e-Business Plan Organization Support Customer Pressure Business Integration Website Age .141 .012 .816 .003 1.093 .001 .020 .708 .911 .366 .958 .296 .971 .887 .921 1.665 1.155 .000 .011 .942 .457 .577 .469 .000 .005 1.875 4.061 8.331 6.079 2.263 6.193 .252 1 1 1 1 1 1 .044 .004 .014 .132 .013 .615 B S.E. Wald df Score Sig.

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the factors that pushed those firms in their decision. Logistic regression results suggested that website availability, flexibility of existing hardware and software, the level of organizational integration, and the company age affected the decision of insurance firms to conduct their business online (See Table 5). Results of logistic regression support Hypothesis H1 and show that the most significant factor is Infrastructure Flexibility (Wald = 8.331, p < .01). Results obtained for the significant effect of infrastructure flexibility support Duncans (1995) findings that infrastructure flexibility can be considered a strategic resource that organizations should leverage and use it in new strategic decisions that will yield competitive advantage. Website availability (H3) is the second technological factor identified as significant in the decision of adopting or not adopting web-based applications (Wald = 4.061, p < .05). These results support the discussion in the IS community that website availability has a strong positive effect on the online benefits that firms obtain such as revenues, customer satisfaction and loyalty, and company image (Awad, 2000). Interestingly, website security is not considered as a significant factor that impacts the web-based adoption decision; therefore H4 is

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Internet Adoption Factors Technological Factors Flexibility and adaptability of HW, SW, and networking technologies IT staff knowledge Website availability Website security Organizational Factors Organizational support Integration level in the organization Strategic plans for e-commerce Integration with business processes External Factors Customer pressure for existing products

Hypotheses H1 H2 H3 H4 H5 H6 H7 H8 H9

Results Supported Rejected Supported Rejected Rejected Supported Rejected Rejected Rejected

rejected. Companies seem to understand the importance of online security and appropriate measures have already been implemented. Another important technical variable, IT Staff Skills (H2) fails to explain the adoption decision, and as a result should not be considered as an important variable to adopt new technology. These results may be related to the recent outsourcing trends where companies are trying to delegate some of the IT functions offshore and they can outsource the IT expertise that may be needed. The degree of business integration within the organization (H6) had a negative relationship to the likelihood to adopt the web-based technology (B = 1.155, p < .05), which suggests that insurance firms that do not communicate intensively via other communication channels are more likely to adopt the web-based technology, because it facilitates communication via their website. These results support what Lucas and Baroudi (1994) suggest that new technology is shaping the design of organizations. Company age has a positive regression coefficient value, which suggests that mature companies are more likely to adopt web-based activities. These companies are trying to combine the traditional paper-based transaction and web-based business to a multi-channel approach.

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Younger firms are more aggressive in conducting their business online rather than in the traditional, paper-based way. The other variables including in this study were shown as not important to affect the adoption decision. Organizational variables such as Organizational Support (H5), Having a Strategic e-Business Plan (H7), Integration with Business Processes (H8) and the external variable Customer Pressure for Existing Products (H9) are not significant enough to explain the decision whether or not to adopt web-based applications. It appears that many insurance firms are adopting web-based applications mainly because it is the industry trend rather than based on organizational strategies. CONCLUSION Insurance firms are making progress toward the concept of paperless insurance. Previous polls and surveys showed that customers like to shop online for insurance, especially auto and life coverage. However, insurance firms were not responding to customer pressure, because the insurance product in its own nature is complicated and paper based, and thus online sale was not perceived as appropriate. Results of the present study show that today insurance firms are considering new ways of doing business in the Internet era, and most are currently utilizing online technology totally or partly in their business processes, not only as an information and communication channel but also as a sales channel. The primary contribution of this study is identifying the adoption decision factors of online activities of service industries, specifically the insurance industry. The results of this study make positive contributions to both the academic community and the practitioners. First, this study contributes to the Technological Innovation Model literature by augmenting the Technology Innovation Framework with networking factors as significant elements that impact adoption of the Internet technology. Second, it helps practitioners, particularly managers of insurance firms, by identifying the factors where their energies and resources should be focused to ensure successful implementation of their online activities. Third, this study is one of the first attempts to investigate technology issues in the insurance industry. Banking and online banking have been the focus of many studies and research, while online insurance is almost unexplored. The findings of this study helps clear the mist on what is happening in the insurance industry, and will

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support future research in this particular sector of the financial services industry. The major limitation of this study is the sample size. As mentioned previously, the population of auto and life insurance firms is limited, and the possibilities to secure a larger sample size were very restricted. Insurance firms were contacted by e-mail and by traditional (paper-based) mail to increase the studys response rate. Another limitation is generalizing the study to other countries. Data collected for this study are entirely from American insurance firms, so the decision factors identified in this study may not apply to insurance firms in Europe, Asia, and other continents. REFERENCES
Alter, S., Scott, J., Ein-Dor, P., Vessey, I., and Markus, M. L. (2001). Does the trend toward e-business call for changes in the fundamental concepts of Information Systems? A debate. Communications of the Association for Information Systems, 5, pp. 1-59. Amabile, T.M. How to kill creativity, Harvard Business Review, Vol. 76, No. 5, 1998, pp. 76-87. Armstrong, C. and Sambamurthy, V. Information technology assimilation in firms: the influence of senior leadership and it infrastructures, Information Systems Research, Vol. 10, No. 4, 1999, pp. 304-327. Awad, E. The structure of e-commerce in the banking industry: an empirical investigation. In Proceedings of the 2000 ACM SIGCPR Conference on Computer Personnel Research, Chicago, Illinois, 2000, pp.144-150. Bests Key Rating Guide, Life-Health United States, AM Best, Insurance Information Source, Oldwick, New Jersey 08858-0700, 2002. Broadbent, M. and Weill, P. Management by maxim: How business and IT managers can create IT infrastructures, Sloan Management Review, Vol.38, No. 3, 1997, pp. 77-92. Byrd, T. A. and Turner, D. E. An exploratory analysis of the value of the skills of IT personnel: their relationship to IS infrastructure and competitive advantage, Decision Science, Vol. 32, 2001, pp. 21-54. Byrd, T. A. and Turner, D. E. Measuring the flexibility of information technology infrastructure: Exploratory analysis of a construct, Journal of Management Information Systems, Vol.17, No. 1, 2000, pp. 167-208. Chang, K., Jackson, J. and Grover, V. E-commerce and corporate strategy: An executive perspective, Information & Management, Vol. 40, No. 7, 2003, pp. 663-675. Chengalur-Smith, I. and Duchessi, P. The initiation and adoption of client-server technology in organizations, Information & Management, Vol.35, No. 2, 1999, pp. 77-88.

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