As insurance CEOs mull over their IT teams' plans to purchase new technologies, inevitably the decision boils down to this: What's the financial upside? It's an important question to ask, although a clear quantifiable answer is often hard to come by. However, two articles in this issue-fraud detection and financial reporting-offer clear-cut reasons for why insurers should consider implementing these business-supporting technologies.Fighting fraud is a multi-billion-dollar challenge for the insurance industry. Some estimates calculate the total annual cost of fraud across health, life and property/casualty lines is between $85 billion and $120 billion.

The cost of employing the number of professional fraud investigators necessary to tackle a $100 billion a year problem is obviously prohibitive. Indeed, an executive at one of the largest property/casualty insurers recently told me that her company doesn't consider fighting minor incidents of fraud worth the effort. But that's exactly why fraud technology can be so beneficial: It identifies the low-hanging fraud cases--which when added up can amount to big bucks for major insurers--and it enables SIU staffers to concentrate their professional skills on cracking the big fraud cases, such as the $100 million case in New York that involved Nationwide and Allstate last November.

Several insurance executives have told me that their companies are not actively fighting fraud and consider fraud a cost of doing business. But those "costs" can add up quickly, and fraud detection tools are one way carriers can eliminate those "costs" from their balance sheets.

This issue's article on financial reporting mentions how the threat of financial and criminal penalties under Sarbanes-Oxley is an incentive for insurers to upgrade many of their back-office systems. Financial reporting draws upon transactional data from accounting, underwriting, policy administration, claims, and risk and capital management. Experts say that upgrades to enterprise resource planning, business process management, business rules management systems, and enterprise content management not only can enable carriers to meet SOX compliance, these same investments can enhance risk management across the enterprise, improve IT architecture and data quality, and reduce costs through automating time-consuming, manual processes.

The ROI cases for fighting fraud and improving financial reporting are very different, but in the end, they can both contribute directly to improving carriers' balance sheets.

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