With so much business conducted via the Internet, executives at Winged Keel Group Inc. decided the staff had to save each-and-every e-mail message, simply to keep the boutique life insurance and long-term disability firm on the right track."We are a technologically advanced company, so a lot of our business was being conducted via e-mail," says Pramod Navani, managing director of operations at the New York-based insurer. "A few years ago, our company instituted a rule that no one was allowed to delete e-mails."
In what seemed like less than an Internet minute, the new policy-while deemed necessary in the increasingly virtual environment-resulted in a couple of real-world headaches.
First off, Winged Keel trusted that its employees would adhere to the rule but had no automated means of ensuring compliance. So, in essence, employees could-advertently or inadvertently-erase or alter e-mail communications.
Second, and perhaps even more troubling, e-mail inboxes and outboxes were growing at an extraordinary rate, and the burgeoning storage requirements were slowing down the company's IT system considerably. And the lost time meant an increase in the cost of doing business, Navani says.
As a result, Winged Keel executives decided the company would have to invest in a system that helps manage and archive e-mail communications. After a review of systems the company chose e-mail archiving from Fortiva Inc., Norwalk, Conn.
While Winged Keel may have been ahead of the pack, other insurance companies are beginning to find themselves in similar situations.
To reap the benefits of electronic communication, carriers have to address e-mail management issues, particularly archiving. At the same time they face regulatory compliance concerns and legal discovery issues.
Certainly, the rapidly growing use of e-mail communications is leading-some might saying forcing-organizations, including many insurance companies, to assess automated e-mail management options.
Consider the following: Approximately 541 million workers worldwide rely on e-mail communications to conduct business.
Corporate users send and receive an average of 133 messages per day, and that number is expected to reach 160 messages by 2009, according to "Taming the Growth of E-Mail: An ROI Analysis," a white paper published by The Radicati Group Inc., Palo Alto, Calif.
With the average size of a single message currently around 0.11 MB, the daily e-mail storage requirement for a single user is 14.7 MB. Do the math and that translates to 294 MB per user, per 20-day month of five-day work weeks for companies that maintain a standard 30-day e-mail retention period. Based on those figures, enterprise e-mail costs corporations an average of $435.85 per user per year.
Legal and regulatory issues, however, are prompting insurance companies to hold on to e-mail for much longer periods-and, subsequently, driving up storage costs even more.
To meet legal electronic discovery requirements some insurance companies now need to store e-mails for months or even years. Electronic discovery refers to the retrieval of data from a computer to meet a legal request. The term sometimes applies to data retrieval required for regulatory compliance, human resources concerns, validation of client correspondence or other corporate needs.
Although it may seem costly to hold onto all e-mail communications, failing to do so can prove even more expensive.
Last year, the inability to produce subpoenaed e-mail resulted in million-dollar lawsuits. In fact, 24% of all organizations have had employee e-mail subpoenaed, and 15% of companies have gone to court to battle lawsuits triggered by employees' e-mail, according to the "2006 Workplace E-mail, Instant Messaging & Blog Survey" from the New York-based American Management Association.
Some 75% of all organizations were required to search through backup tapes to retrieve one or more e-mail messages to respond to legal or human resources requests during the past three years, according to New York-based Osterman Research Inc.
"In the past two or three years, there have been lots of discovery requests from private litigants and public agencies," says Donald Light, a senior analyst in the insurance group at the Boston-based research and consulting company Celent LLC.
Indeed, according to the "spoliation of evidence" doctrine, the courts are allowed to enter a monetary judgment, based on the presumption that the electronic communication was not preserved because it was not favorable to the party's position, according to a paper published by Glasser Legal Works Inc., New York.
The Federal Rules of Civil Procedure, which went into effect Dec. 1, 2006, requires that when two companies are involved in civil litigation, they must meet within 30 days of filing the lawsuit to decide how to handle electronic data. The parties must agree on what records to share and what electronic format to use, as well as on a definition for "accessible data."
As courts make decisions under the new rules and punish businesses for failing to identify where e-mail evidence is stored, insurance companies will become more aware of the legal and financial risks associated with corporate e-mail storage, says Chris Tebo, Fortiva chief technology officer.
What's really capturing the attention of insurance industry leaders, however, is the "ferocious" penalties imposed upon companies that don't comply with e-discovery requests, says Celent's Light. For example, in 2004, Bank of America Corp. was fined $10 million for failing to produce e-mail and other documents in a timely manner.
Even privately held insurance companies, which in many cases might not be subject to e-mail archiving regulations, need to consider archiving as a means to meet discovery requirements, says Light.
"It really becomes a business judgment for any company," Light says. "Leaders have to ask if it will be worth it to have the archiving to more cost effectively respond to discovery requests."
Meanwhile, regulatory compliance has become a major concern for insurance carriers. Certainly, most businesses, including insurance companies, are subject to e-mail archiving rules, with more than 10,000 regulations on data and record retention currently on the books in North America.
Numerous federal and state regulations, including Sarbanes-Oxley, Sec 17a 3-4; the Health Insurance and Portability Act of 1996; and NASD Inc. include e-mail archiving provisions.
THE RIGHT SOLUTION
With those legal and regulatory requirements in place, insurance companies are rushing to implement e-mail archiving software.
Carriers are seeking solutions that will help them cost-effectively store e-mail records; search e-mail databases to find required documents and dispose of e-mail messages no longer needed for business, legal or regulatory purposes.
Companies need to consider present and future needs, advises Brian Brockway, senior director of product management at CommVault, an Ocean, N.J.-based data management company.
"As some companies tried to comply with regulatory requirements, they made fast, reactionary decisions and acquired products that had scaling problems and couldn't grow to meet the overall needs of the company," Brockway says.
While storage requirements are a key concern, insurance decision-makers also should consider the search capabilities of an e-mail archiving system, observers say. Robust searches not only help companies comply with legal and regulatory discovery requests but also make it possible perform that task cost-effectively.
Brockway emphasizes that archiving systems should accommodate a company's growing e-mail storage requirements and allow companies to transfer stored e-mail to new technologies as they become available.
Look for features that help reduce storage needs, advises Winged Keel's Navani. He notes, for example, that e-mail archiving software saves only one copy of e-mail messages sent to multiple staff members.
"For instance, if I send an e-mail to every person in the company, the system will just save one copy of that correspondence, instead of saving 45 separate e-mails," Navani says.
Besides meeting storage requirements, e-mail archiving technology helps companies search efficiently for needed e-mail messages.
For example, Winged Keel staff members enter one keyword and the company's entire e-mail database is searched.
"Without this functionality, staff members would have to go from computer to computer, and from e-mail storage box to storage box and then from subfolder to subfolder to find the necessary e-mail," Navani says. "There's more than 4,500 subfolders on the system. So, it's a huge time savings when you can just type in a keyword."
E-mail archiving systems can also help companies dispose of e-mail records. With an advanced e-mail archiving system, a specified event or the lapse of a specified amount of time prompts the system to dispose of individual records or transfer them to inactive storage.
John McCormick is a freelance writer based in Riverside, Ill.
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