Insurance

Insurers have invested significant amounts of capital on technology based on the belief that those investments will improve their top- and bottom-line performance. However, new research indicates that carriers are experiencing mixed results to date and they're seeking refined metrics to measure how technology is impacting their operations.Those are some of the conclusions of a recent survey of 248 North American financial services firms conducted by Tillinghast-Towers Perrin. The survey is the second in a series of industry studies conducted by the management and actuarial consulting firm intended to learn how new technologies are impacting carriers' performance, and how carriers are measuring the success of IT implementations.

When Philip Swift responded to a classified ad for Fireman's Fund Insurance Co., little did he know how that decision would change his life.Swift, living at the time in Liverpool, England, accepted the offer to work for the Novato, Calif.-based carrier, but in the back of his mind he believed his stay in the United States would be short.

It's easy to define what manufacturers produce and sell. Toy makers make toys. Auto manufacturers make cars. Pharmaceutical companies make drugs. But what do insurance companies do?

When Florida Combined Life decided to become a primary player in the dental PPO and fee-for-service business in that state, it had two major challenges: an aggressive timeline and an inflexible claims system.The Jacksonville, Fla.-based subsidiary of Blue Cross Blue Shield of Florida had been offering dental coverage as an ancillary product to its health insurance offerings, and it had been paying dental claims through its health claims system. But that system was inflexible, and would not meet the company's future needs, says Charles Brody, dental division vice president at Florida Combined Life.

Five years ago, Security Insurance Co. was suffocating under the weight of paper files. The company's file room was packed to the point where the company had to place file racks in hallways, consuming office space that cost $20 per square foot.Space constraints weren't the only problems that the Alpharetta, Ga.-based carrier's paper filing system created. Call center representatives had to put customers on hold and ask a file room clerk to retrieve the caller's file just to answer routine questions. Moreover, only one person at a time could work on a customer's file during the underwriting process, a situation that didn't foster high worker productivity.

The expression "the sum of the parts is greater than the whole" has many tried-and-true applications. PwC Consulting is contributing its own technology-driven version of this axiom, and insurance carriers are in line to benefit.Last year, PwC Consulting, a business unit of New York-based PricewaterhouseCoopers LLP, unveiled an e-business solution for property/casualty insurers that the global management and consulting firm believes will alter how carriers invest in technology.

As it faced the unenviable task of selecting and then implementing a systems integration solution across its various business components, Cincinnati-based American Modern Insurance Group discovered a modern approach to an age-old problem.In late 2001, AMIG adopted a program known as the Virtual Insurance Community (VIC), the brainchild of PwC Consulting, a business unit of New York-based PricewaterhouseCoopers LLP. VIC is a pre-integrated, component-based e-business solution designed for processing insurance transactions.

In 1999, when PwC Consulting formulated the blueprint for its Virtual Insurance Community (VIC), one dynamic that drove the initiative was its ability to provide insurance carriers with a pre-integrated best-in-class technology solution.The global management and consulting firm, a business unit of New York-based PricewaterhouseCoopers LLP, developed VIC as a component-based e-business solution for property/casualty insurers-eventually to be offered to life, annuity and group health carriers. And while the Virtual Insurance Community offers best-of-breed solutions spanning a myriad of technology applications, carriers that adopt the program-via licensing or via an application service hosting model-will still be able to deploy various applications that they previously have built and mapped within their IT infrastructure.

More than nine months after it was created, Wilmington, Del.-based Fusura Inc., a Web-based personal lines insurance agency formed by global insurance giants AIG, Kemper and Prudential, is finally preparing to go live.As it prepares to launch-expected to be no later than March 31-the consortium capitalizing the venture can't be accused of rolling out the program too hastily. Since its celebrated formation was revealed, Fusura has witnessed its share of tweaks and modifications-from putting a permanent executive team in place to choosing its technology platform.

With more than 20 years of IT experience in the insurance industry, June Drewry has a vast knowledge of technology. Nevertheless, she insists she is not a high-tech wizard.In fact, when she talks about her responsibilities as executive vice president and CIO for Chicago-based Aon Corp., she peppers her conversation more with relaxed chuckles than with dry techno-speak.

Millions of potential buyers are using the Web to shop for insurance.That's why carriers are reassessing how to use the Internet to build their brand.

Until recently, insurance companies have developed many Web sites for various products and business units, with little attention paid to consistency in branding, according to Kimberly Harris, senior research analyst at Gartner Financial Services, a unit of Gartner Inc., a Stamford, Conn.-based research and consulting firm."But insurers are beginning to realize they need to focus on an enterprise brand and roll that down to the different channels," she says.

In 2000, insurers rode an information technology investment wave that was largely fueled by ambitious dot-com providers eager to plant their flag in the online insurance market.A year later, insurers jumped off the wave. The dot-com shakeout that intensified in 2001 meant that more than $15 billion in technology demand had suddenly evaporated. Moreover, a sliding economy contributed to a significant IT spending spiral-reducing healthy double-digit growth in 2000 to a less-than-stellar 3% growth rate last year.

When it comes to information technology investments in the insurance industry, there is a clear delineation of priorities predicated on the sector of business in which a carrier operates.Underwriting, pricing and products are the most important IT priorities for property/casualty insurers, while distribution reigns supreme for life insurers, states Tillinghast-Towers Perrin's e-Track report on insurance technology investments, which polled 248 large and mid-size carriers across North America.

Louisiana State University Health Sciences Center thought it had an efficient claims submission system. Half the claims from the nine-hospital integrated delivery system in Baton Rouge go to Medicare or Medicaid. Staff used to load the claims on magnetic tape each week and ship them to the government payers.

In March 2000, seven major health care payers started earnest negotiations to create a joint company to enable providers to communicate with the payers via the Internet.By July 2000, MedUnite was formed with a goal of offering services within a year. MedUnite launched its services last September, only six weeks behind its original schedule. However, it's a different company from what was originally envisioned.

Imagine how difficult it must be for an independent agent to locate a carrier that covers beekeepers or acupuncturists. Or, from a carrier's perspective, finding agents who will sell employee dishonesty or bailee coverages.MarketScout, a Dallas-based venture that was launched in June 2000, is using the Internet to help retail insurance agents get quotes and bind polices for more than 700 classes of business, primarily specialty insurance. Since it's inception, the company has registered more than 13,000 agents who have free access to information and quotes provided by 67 carriers, including such heavyweights as American International Group Inc. (AIG), Travelers Insurance The St. Paul Cos., Safeco, Cigna and Fireman's Fund.

As world of insurance grows more complex due to competition from within the industry and from banks and other financial services providers, Allied Insurance has a simple business strategy: attract and retain quality independent agents."Agents are our primary focus. Everything we do is aimed at how we can help the independent agent do business better," says Nate Beyene, IT officer for e-commerce at the Des Moines, Iowa-based carrier. "If our automation is not good, our agents can go next door."

Electronic bill payment and presentment (EBPP) has experienced a mixed bag of interest among consumers, with payments of insurance premiums ranking low on their online bill-payment priority list.In fact, insurance carriers, along with utilities, telecommunications and mortgage companies, are among the businesses that are lagging behind in the expansion of EBPP, according to a recent report by Stamford, Conn.-based consulting firm Gartner Inc.

Insurers can't understand the benefits of wireless technologies unless they experiment with it, as Progressive Insurance has done for the past year. At the same time, the lack of industry standards, coupled with current limits on how much data can be transmitted and received by mobile devices, limits the types of services that wireless devices can support."This is a technology that consumers are dying to use, except for claims and servicing," says Jamie Bisker, a senior insurance analyst with TowerGroup, Needham, Mass., and author of the recent report "Wireless Realities In Insurance."