Insurance

Balboa Insurance Group Inc. needed to integrate its legacy-based customer data with an enterprisewide CRM system. Executives considered a costly systems conversion project, but opted for a middleware solution instead.Balboa Insurance Group Inc. faced a modern-day information technology conundrum. It had critical customer information locked away in its siloed host applications and couldn't get it out to support new Web-enabled business processes.

The Hartford's affinity program with the AARP is a direct-marketing success story. However, the technology supporting the program is the secret to the carrier's achievement.In 1984, the American Association of Retired Persons (AARP) approached The Hartford for a third-party affinity relationship that would enable AARP members to purchase auto and home insurance from the carrier.

When insurers examine business intelligence systems, industry observers say, data warehousing capabilities sit at the forefront of the effort."When it came to data warehousing, most insurers saw it as massive projects driven by IT and not business," says Matthew Josefowicz, senior analyst at Celent Communications Inc., Boston.

The task of turning data into an operational asset rather than a liability can be a complicated process. Sometimes it's the simple and common themes that resonate best in times of uncertainty.The concept "less is more" is regarded as a driving principle to developing a data warehouse for the purpose of enhancing a business intelligence strategy. "Building a huge data warehouse does not work if the idea is to obtain an enterprise-wide, 360-degree view of customers," says Bill Sinn, vice president, insurance healthcare marketing for Dayton, Ohio-based Teradata Corp., a provider of enterprise data warehouse solutions. "The question of 'how do you eat an elephant' certainly applies in this instance. The way you eat an elephant is, of course, one bite at a time."

An increasing number of carriers are taking advantage of the cost savings of software development using geographically disparate teams, including those located offshore. And with good reason: the economic benefits of doing so can be exceptional.Most approaches to outsourced development are best-suited for traditional maintenance and system evolution projects in which requirements are static and well-documented. From my experience, these projects can run largely on autopilot and don't require a lot of structure and management time.

We are living in interesting times. The U.S. insurance industry is in a state of transformation as the competitive landscape changes. This transformation presents a significant upside market opportunity for insurance companies.The industry is very mature, has rich customer information, established distribution channels, favorable product positioning, and years of sound business practices and solid investment reputation.

Let's face it. During an economic downturn, every dollar earned, spent or saved seems to carry more weight than it does when the economy is growing. With more financial pressure on carriers these days, IT departments are under more scrutiny to rationalize projects and expenditures.Rationalization translates into greater discipline in measuring and managing the costs of IT hardware, software and projects-and the desire to get a more comprehensive, enterprisewide picture of those assets.

The potential savings for agents and carriers using real-time interfaces amounts to thousands of hours-and dollars-each day.A billing inquiry initiated through an agency management system takes two minutes, whereas the same inquiry takes eight minutes by phone, and nine minutes by carrier Web site. Those are the results of an agency workflow study conducted last year by Applied Systems Client Network (ASCnet), the user group for Applied Systems Inc., University Park, Ill.

In response to how Allstate Insurance Co. handled its employee-agents during its reorganization in 1999 and 2000-and to prevent other employers from repeating that action-the Employee Benefits Protection Act of 2003 was introduced in Congress in March.The Northbrook, Ill.-based carrier reorganized the company to reduce expenses by $600 million annually, to bring its agents under one program, and to integrate its agency force, direct response call centers, and the Internet. As part of that plan, Allstate terminated 6,400 employee-agents in June 2000, and offered them the option to convert to independent contractor status.

Most insurance e-business solutions providers have long considered investments in Web-based insurance distribution outlets as bold and risk-taking strategies to enhance their corporate fortunes.This belief didn't deter Brookfield, Wis.-based Fiserv Inc., an information management systems and services provider, from acquiring Falls Church, Va.-based ReliaQuote Inc., an Internet-based insurance agency and brokerage that dabbles in term insurance. Consummated in April, the terms of the deal were not disclosed.

Before the passage of the landmark Gramm-Leach-Bliley legislation in 1999, several insurers received clearance from the federal government to operate online thrift institutions. Executives with Principal Bank of Des Moines, which opened for business in February 1998, say the brand-name backing of its parent and a growing acceptance of online banking will help it grow to $5 billion of assets by 2005.Principal Bank, owned by Des Moines, Iowa-based Principal Financial Group, had $1.5 billion of assets at the end 2002-compared with $100 million in January 2000. "We had expected, when the initial strategic plan was put together, to be about $100 million at year four," says Barrie Christman, Principal Bank's president and CEO.

Speed is an important call center objective for American National Insurance Co. because "shaving a minute here or 30 seconds there makes a big difference in costs when you're running a call center," explains Gary Kirkham, vice president and director of planning and support for the Galveston, Texas-based insurer.Yet, flexibility is at the core of the steps that guide customer service representatives (CSRs) through conversations with callers. A key to managing call center conversations resides in workflow-helping the CSR pace the conservation and guide it in the desired direction.

Everyone knows the numbers by heart: Insurance fraud costs property/casualty carriers an estimated $27 billion each year, or roughly 10% of premiums collected.The tricky part is detecting fraud so that some of those losses can be redirected to the bottom line. In the world of auto repair, fraud rears its head higher during dicey economic times like now when folks are hurting for money.

Fraud can be subtle and complex. It can be hidden among voluminous amounts of data. New schemes are always emerging. Insurers understand the impact of fraud and consider it a serious problem.Fraud management technology that uses predictive modeling to identify suspicious claims can accurately cull out high-risk claims and label them at the earliest possible moment. It not only makes it practical for insurers to process and close the vast majority of claims faster, it focuses the adjusters review on claims that require the most attention. Lastly, it provides higher quality referrals to investigative units.

Supporting its more than 12,000 exclusive agents is at the heart of Farmers Insurance Group's CRM initiatives. The centerpiece of this strategy is a branded program called Agency Dashboard, which enables agents to obtain ongoing insights on policyholders' needs.When Farmers agents log onto the secure intranet site, located at www.eagantfarmersinsurance.com, they must key in a user name and password and then are connected to a personalized Web portal that provides real-time data and policy activity of their entire book of business.

Weak carrier marketing is one reason agents have not flocked to real-time agency-carrier transactions, according to industry sources. "Only a handful of carriers have actually told their agencies these services are up and running," says one source who wishes to remain anonymous. "I get phone calls every day from agencies saying, 'A field rep was just at my office and he didn't know anything about this.'"Carriers haven't publicized their capabilities widely, in part, because they view them as a competitive advantage, says Rick Gilman, vice president for ACORD, Pearl River, N.Y. Although ACORD is making efforts to track carrier initiatives, a comprehensive list of all carriers and the types of real-time transactions they provide does not exist.

The quiet catastrophe of insurance fraud is gaining more attention as insurance executives continue to look to operational efficiencies-rather than investment income-to protect their bottom lines.With the Coalition Against Insurance Fraud (CAIF) estimating an annual fraud cost of $80 billion dollars, the industry has realized that the harmless fudging of a million here and a million there is adding up to real money.

As a direct writer of homeowners and automobile insurance, Electric Insurance Co. doesn't rely on a network of independent agents to regularly interact with policyholders.Instead, Electric's call center agents interact with customers for everything from delinquent premium payments to claims-related inquiries. While this arrangement often suffices, CSRs typically lack the customer relationship skills that local agents have.

At Cincinnati Equitable, Web services have opened up new avenues of connectivity. Agents can now access rating applications housed within the Cincinnati-based carrier's Windows-based servers to look up territory and verify policy status.This is not remarkable news, since agent portal Web sites have been around for years. What is remarkable is the fact that this new application took two hours to set up and deploy-a process that usually took several weeks, according to Terry Brown, vice president of information systems for Cincinnati Equitable Insurance Co.

In an effort to reduce internal IT costs, more insurers are considering buying packaged software-as opposed to building customized applications.However, many executives in the industry-those evaluating packaged software solutions-may not be familiar with vendors and products that are available. Therefore, they may have difficulty assessing them.