Insurance

For anyone who has ever owned a car, it's an inevitable question: Continue pouring money into the old jalopy, or cut your losses and buy a shiny new model complete with six-cylinder engine, alloy wheels and keyless entry?

Unlike many insurance companies that reach a point of pain with old technology, Berkley Risk Administrators Co. LLC (BRAC) was not under duress when it decided to migrate to a new platform.

By implementing a next-generation new business process, a typical life insurer that issues 40,000 policies a year could save more than $1.3 million annually.This was one dramatic finding of a report entitled "The Evolution of Rule-Based Life Insurance Underwriting Systems," recently released by Boston-based consulting and advisory firm Celent Communications Inc.

Great-West Healthcare began using computer-based training to teach new sales reps about its products and services. The company is now using online training for its claims examiners, call center reps and HIPAA compliance across the organization.Spending on employee training has not been felled by budget axe wielders. That's according to the American Society of Training & Development (ASTD), Alexandria, Va., which also found the percentage of total training dollars spent on e-learning jumped from 8.8% in 2000 to 10.5% in 2001-the largest increase in four years.

For years, insurance executives have been striving to introduce more streamlined procedures and technologies to improve their financial management and analysis capabilities. One of the primary end goals of these efforts has been to deliver more accurate and timely reporting.From an enterprise resource planning (ERP) perspective, this goal has eluded carriers due to the massive amounts of widely dispersed source data, which often is housed in stand-alone legacy systems that lack flexibility, consistency and transparency.

Why would a company's separate business units buy goods and services independently if centralizing procurement can produce volume savings that go directly to the bottom line? Why would a company route paper requisitions for approvals when they can be automatically distributed over the Internet in seconds? Why would a company keep service contracts in file cabinets across the organization when they can be archived electronically with a complete history of all the negotiations that took place? And, what insurance executive wouldn't want to know more details about the company's spending activities?Volume discounts. Shorter procurement cycle times. Less paper. More informed purchasing decisions. These are the main reasons electronic procurement and sourcing have gained popularity in the past few years across many industries, including insurance (see "Procurement And Sourcing Software Gains Popularity," page 30).

When executive recruiters at Los Angeles-based Farmers Insurance Group need to fill a vacant position, posting a print version of a job opening to attract prime candidates is regarded as an option-albeit an increasingly obsolete one.Call it an evolution from a "dinosaur" methodology to a "monster" opportunity. That's because at Farmers, a host of job-recruitment Web sites-from Monster.com to Insurance-pros.net-are bringing the lion's share of new claims executives. With such a success rate, it's no surprise that the Web has stepped forward to become the predominant tool of choice to fill staffing.

When John W. Hayden went off to the Massachusetts Institute of Technology for a president's symposium on technology in 1999, a professional epiphany wasn't on his personal radar screen.The president, chairman and CEO of American Modern Insurance Group Inc., Amelia, Ohio, already had a game plan on how to retool the specialty carrier's business strategy and its information technology strategy. It called for the technology strategy to run in parallel with the business strategy.

One of the consequences of merger and acquisition activity is that insurers inherit a variety of legacy systems. And, in the case of IT systems, more isn't necessarily better. Duplicate maintenance and system support, disjointed business processes, and increased overhead expenses are just a few of the challenges compounded by multiple systems.Consequently, many insurers are searching for ways to minimize operational complexity, integrate and consolidate systems, and reduce associated costs.

After a prolonged lull in activity, consolidation in the insurance industry--marked by a new wave of proposed mergers and divestitures--appears to be gathering newfound momentum, with two major developments illustrating the potential changes that loom ahead.In late September, the board of directors of Boston-based John Hancock Financial Services Inc. and Manulife Financial Co., based in Toronto, unanimously approved a tax-free, stock-for-stock merger of the two financial services giants.

Insurance agents and carriers both know that capturing new business centers around offering fair and competitive prices. Most understand that pulling in customers also hinges on the ability to issue coverage swiftly and accurately.Paul Bouwers, principal of Pella, Iowa-based Pella Insurance Agency, never had difficulty finding competitive quotes for auto or homeowners insurance through his many insurer affiliates. But when it came to maximizing the service behind new or existing business, Bouwers had a burning desire to get policies in the hands of Pella's customers much faster.

Information technology strategy plays a critical role in the success of American Modern Insurance Group Inc. (AMIG), a wholly owned subsidiary of The Midland Co., Amelia, Ohio.The provider of specialty personal lines insurance products has an average annual premium of just $450 across its book of business. So having information technology in place "so that the business can flow relatively untouched by human hands is critically important to us. There's not enough money in a $450 premium for us to have to fondle each file," says John Hayden, CEO and president of The Midland Co., and president, CEO and chairman of AMIG.

Boston-based John Hancock Financial Services Inc. was an early adopter of e-procurement and e-sourcing technologies.In 1998, the company implemented an e-procurement solution from iPlanet, which was acquired in 2002 by Santa Clara, Calif.-based Sun Microsystems Inc. Then, in 2001, John Hancock deployed e-sourcing software from Frictionless Commerce Inc., Cambridge, Mass.

"Garbage in, garbage everywhere." That's a twist on the old adage, "garbage in, garbage out," courtesy of Firstlogic Corp., a La Crosse, Wis.-based data quality software provider. "We say, 'garbage in, garbage everywhere' because so many systems share data that bad data in one spot can easily propagate across the entire organization," says Chris Colbert, industry marketing director, at Firstlogic.Bad data can also spread across organizations, as David Jokinen discovered when J.P. Morgan Chase & Co. identified him as deceased in its systems-instead of his mother, who passed away in April 2001.

When the call arrived at PMA Insurance Group's customer contact center in Allentown, Pa., it was unlike most of the in-bound inquiries normally fielded at the sprawling facility."The agents at our contact center assist injured workers seeking claims-related indemnity or medical payment status," explains Meg Schumer, assistant vice president of call centers for the Blue Bell, Pa.-based mid-size property/casualty insurer. "But in the midst of a call, an individual informed one of our agents that he was contemplating ending his life. Our agent began to talk the individual through the crisis-basically got him to calm down-and then sought intervention from crisis counselors, who took it from there."

Acordia Inc., the insurance agency arm of Wells Fargo & Co., sent a clear message in September that its integration with Wells Fargo is complete and it is once again an active buyer of agencies.Last month, Acordia announced three deals for agencies in Texas, Nebraska, and Pennsylvania. These purchases came on the heels of the purchase of a fourth agency, in Omaha, Neb., in August.

The Providence Insurance Co. inaugurated the insurance agency system in the United States back in 1803. That's when the vessel and cargo insurer-one of the first insurance companies established in this country-decided to expand, and appointed the nation's first independent agent.

Historically, data management and data quality have been internal issues within an organization. But the world has changed with so much electronic data interchange occurring between business partners, says Mele Fuller, interface architect at Seattle-based Safeco Corp. "The scope of data management and data quality is much broader now than it was 20 or 30 years ago."As a result, the industry needs data standards to share data more efficiently. And ACORD XML is fast becoming the standard. "There's no question that ACORD standards are the way to share data in insurance industry," says Fuller, who sits on the P&C steering committee and serves as co-chair of the commercial lines working group for ACORD, the Pearl River, N.Y.-based nonprofit insurance standards developer.

INN: Explain why technology is a core emphasis at Countrywide Financial.

Few U.S. companies will escape the fallout from the recent financial scandals in corporate America. One outcome of the well-publicized corporate debacles is the Sarbanes-Oxley Act of 2002, requiring CEOs and CFOs of public companies to attest to the integrity of the company's financial statements.In a heavily regulated industry, such as insurance, this increased scrutiny just adds to the already daunting financial reporting burden.