Insurance

Despite the growth of online self-service, call centers remain the most common way for customers to interact with companies. New technologies promise ROI by focusing on the performance of the people who deliver service to the customer-call center agents.Driving customers to the Internet for self-service is an effective way for insurers to reduce the high costs of providing information and processing transactions off-line. The fact is, most customers still prefer to call and talk to a human being-the most expensive customer-service channel.

To many insurance carriers, back-end processing of small-business insurance through accurate underwriting has long been a source of frustration.On the front end, providing thorough servicing for demanding business policy owners can represent another challenge. In the middle, furnishing independent agents with automated tools to build small-business volume has seen its share of tribulations.

Technology upgrades are often characterized by cautious experimentation and taking relative baby steps-especially among insurers.National Grange Mutual Insurance Co. (also known as Main Street America Group) has certainly weathered its fair share of technology trends. Founded in 1923, the Keene, N.H.-based company has established a portfolio worth more than $500 million in premium through its network of 1,100 independent agents. The property and casualty insurer serves the East Coast from Maine to Florida.

Despite the economic slow down and the many challenges faced by the insurance industry, carriers increased their total IT budgets in 2002 by an average of 7%. On average, 35% of this spending is devoted to new projects and strategic initiatives, according to a study by Celent Communications, Boston.Many insurance companies cannot afford to not update their existing systems. In a mature and highly competitive marketplace like the U.S. insurance industry, operational efficiency and flexibility is key to profitability. To achieve these goals, insurance companies must take advantage of new technological capabilities in every step of the insurance business process or risk falling behind their competitors.

Depending on the specific application, electronic networking hubs have experienced a checkered history within the insurance industry. Hubs devoted to the claims side of insurance, for example, have met with a great deal of success in that they've enabled affiliates in the claims value chain to communicate quickly and effectively in settling claims.In launching what is touted as the first electronic networking hub to serve the life reinsurance segment, Washington, D.C.-based American Council of Life Insurers (ACLI) is hoping to "revolutionize the reinsurance business process," the association states.

At a hearing in June before a subcommittee of the U.S. House of Representatives, Joseph J. Gasper, president and COO of Nationwide Financial Services Inc., gave a telling example of the regulatory hurdles insurers face when trying to launch new products.It went like this: Nationwide had developed a new annuity last year for contract owners interested in market timing. The Columbus, Ohio-based insurer filed countrywide for product approval, but seven months later, approval was still pending in five states-four of which were major markets for the new product.

Most insurers and reinsurers espouse a belief that new business doesn't always equal good business. To most insurance providers, the honeymoon period with a new customer ends as soon as claims activity intensifies.

Technology budgets traditionally have been an easy target for firms looking to lob off expenses and improve their bottom lines. And, while carriers-especially property/casualty insurers-are experiencing tough financial times, they are not slashing their IT budgets, according to the findings of an exclusive Insurance Networking survey of 82 carriers, agents, brokers and services firms.Nevertheless, carriers and agencies are taking distinctly different paths this year, with carriers ratcheting up spending on internal development, while agencies are cutting back on custom software and increasing packaged installations.

Despite many advances in agency automation over the last few years, insurance agents are frustrated with many aspects of the technology designed to make their lives easier. This is a conclusion of a survey conducted early this year by the ACORD User Groups Information Exchange (AUGIE).Nearly 9,000 agents and customer service representatives participated in the survey. And, according to the results, not only are agencies burdened by keeping their agency management systems updated, agents also are irritated by the chore of duplicate data entry and the costs and training issues associated dealing with carriers' proprietary systems.

Individuals who have experienced an auto accident or incurred damage to their vehicle often discover that the road to swift claims settlement is a bumpy, winding and volatile one.

Claims processing capabilities within the automobile insurance segment is not unlike a car itself-hitting on all cylinders is essential to ensure high performance.In 1999, Mayfield Village, Ohio-based Progressive Insurance Co. debuted TotalPro, a Web-based claims processing application that can be activated by both internal affiliates and Progressive policyholders.

Over the last 18 months, State Auto Insurance Co. has been using an intranet application that provides its independent agents with Web-based access to the company's mainframe for policy rates and applications.

The Internet standards-based approach to software distribution-called Web Services-promises to greatly simplify IT integration of legacy applications. Described as a "Leggo" approach for assembling different "services" from back-office systems-such as rating a policy and submitting a claim-Web services are based on open standards, including XML (extensible markup language), SOAP (simple object access protocol), WSDL (Web services description language) and UDDI (universal description, discovery and integration). As a result, customized integration is greatly reduced.But a battle is brewing between Web services platform vendors vying for market share-in particular, between IBM Corp.'s WebSphere-which is based on the Java 2 Platform, Enterprise Edition (J2EE) platform-and Microsoft Corp.'s .NET. The classic capitalistic struggle between these two camps may make Web services more complicated than promised.

Most insurance agents will admit that flood insurance isn't an easy sell. Property owners, both individual and commercial, are often aware that their policy covers fire damage, but most don't realize that it doesn't cover flood or mudslide damage.Rarely do these parties investigate the prospects of securing a flood insurance policy, which can cause disastrous ramifications because most floods don't qualify for federal disaster aid. Only floods declared national disasters by the president qualify for federal assistance, which comes in the form of a grant or a federal loan that must be paid back with interest.

Today's insurance marketplace is anything but "business as usual." Competition from new market entrants, deregulation, and fast-changing consumer expectations are challenging insurers' historically risk-averse corporate cultures.Traditional strategies and processes will not be successful in this market. To succeed, insurers must develop new business strategies and apply new technologies that will support business transformation.

As insurers' expectations for e-commerce revenue tumbled over the past couple years, e-business spending has focused on self-service initiatives such as enterprise portals and agent extranets. But most insurers lack the infrastructure and customer understanding to maximize the return on these and other technology investments, such as customer relationship management.Therefore, insurers need to create financial services hubs: technology platforms for delivering services that span multiple systems.

With the insurance industry, one moment of impact-whether it's two vans, two workers or two ships-can initiate a lengthy reporting trail weighed down by paper handling and delays. The first notice of loss, which carriers receive from agents by phone, fax, or Internet, starts the trail.

Some senior insurance executives have a hard time understanding how a seemingly esoteric technology such as artificial intelligence (A.I.) could possibly be used by the insurance industry.This mental juxtaposition is ironic because the potential applications are manifold. And more importantly, the insurance industry was one of the first to widely adopt artificial intelligence technology in the form of expert underwriting systems.

Despite the slow economy and overall reductions in IT spending since 2000, U.S. insurance companies are continuing to increase their technology spending. That's according to a June report from Celent Communications, a Boston-based research and consulting firm.Budgets for 2002 are an average of 7% higher this year than last year-totaling $18 billion industrywide, according to the report, titled "IT Spending in U.S. Insurance."

Mark Guthrie is flying high-personally and professionally. In April, he completed his first solo flight on a small airplane, and he was selected to replace Hussein Enan as CEO of InsWeb Corp., effective July 1, 2002.Transforming the Gold River, Calif.-based online insurance distributor into a profitable enterprise will require all the skill and determination Guthrie can muster.