When executive recruiters at Los Angeles-based Farmers Insurance Group need to fill a vacant position, posting a print version of a job opening to attract prime candidates is regarded as an option-albeit an increasingly obsolete one.Call it an evolution from a "dinosaur" methodology to a "monster" opportunity. That's because at Farmers, a host of job-recruitment Web sites-from Monster.com to Insurance-pros.net-are bringing the lion's share of new claims executives. With such a success rate, it's no surprise that the Web has stepped forward to become the predominant tool of choice to fill staffing.

"Recruiting to fill positions offline is 'old school,'" states Jason Keller, a national claims executive recruiter for Farmers Insurance. "We still place print ads, but it's really being phased out. We conduct 95% of our recruiting online, with Monster.com giving us good exposure to support-level positions, while a site like Insurance-pros.net provides us with a smaller but select group of adjusters, subrogation specialists, SIU (special investigation unit) experts and claims center managers.

"We can fill a specialized position in about two weeks on a niche Web site that serves this industry, where before the search would take months."

Untapped opportunity

At a time when insurers are unable to rely on cash reserves and investment income to cover losses, many believe they must identify every untapped opportunity to contain costs and stimulate revenues. Already, many insurers have engaged in better underwriting and claims management to make an impact.

While that's a good start, using Web-based business-to-business methods is becoming a priority-particularly if a Web program can wring costs out of an operation where offline methods can't.

"More and more, insurers are finding themselves in the position of being buyers in a Web-based environment rather than sellers," says Michael LaPorta, senior partner for insurance, Braxton (formerly Deloitte Consulting). "E-procurement to improve supply chain management and better manage inventory is an example.

"In the insurance industry, sales and marketing materials are a core part of businesses, but insurers have a tendency to over-order. They don't do themselves a service with supply chain management when they get locked into six-month contracts with print vendors and then discover that they ordered too much-perhaps a marketing campaign shifted gears or was pulled. They're left with unused inventory."

LaPorta says other niche Web-based sites that can drive internal operations-carried out in the spirit of e-procurement-are starting to emerge. The question is whether insurers will recognize their potential to deliver. Some that are being explored include:

* Buying and selling reinsurance.

* Procuring print materials.

* Selling salvage in an auction format to obtain fair-market value.

* Recruiting a variety of employees, which widens the net on candidates to consider, as well as securing employees for the long-term.

Migrating various operational activities to the Web is viewed as a compelling strategy for several reasons.

One is the ability to phase out paper processing, and the manual errors that accompany it.

The Web also fosters accountability, providing a better audit trail and overall tracking of activities. The Web also provides scale-the ability to reach a greater number of potential, and even more compatible, business partners that ever could be engaged offline.

Many insurers have been deliberate to embrace unproven Web-enabled initiatives. So it's no surprise that many are proceeding with caution until they determine the degree of efficacy.

For instance, buying and selling risk in a Web environment endured growing pains several years ago when questions arose about both security and data-exchange compatibility aspects among trading partners. But over time, trading reinsurance online has won over a good many insurers, reinsurers and brokers as the optimal method for placing risk.

A centralized process

"In buying and selling risk, the process has always been fax-driven with multiple hard copies of a contract," says Paul Henriod, president of New York-based eReinsure.com and a former executive with Aon Risk Services. "In the past, an insurer, reinsurer or broker might have three different versions of a pending contract. Audit trails have never been in good shape, and it's a very costly and cumbersome process.

"But done online, there's one centralized version of the contract and the management of purchases is greatly increased. Currently, we pass via XML 50,000 messages between trading partners," Henriod adds. Selling salvage

Several fledgling Web-based platforms aspire to become what reinsurance hubs are today. Many of these platforms remain untested, but possess a world of potential. Buying and selling salvage online is among them.

Historically, salvage auctions are conducted at the local level, which yields for insurers a limited number of buyers to participate in any sale. This often leaves a seller with only a fraction of a salvage item's fair market value.

Established in 2000 to serve various industries, including insurance, Houston-based SalvageSale connects sellers-insurers, transportation companies, retailers and corporate asset managers-with domestic and international buyers. While the program has been received well by participating insurers, SalvageSale is still seeking to expand its participation levels.

"Our biggest competitor is tradition," says Dan Parsley, CEO of SalvageSale. "We have to contend with the old ways of doing business that insurers rely on. Insurers realize they must exhibit fiduciary responsibility in mitigating losses.

"In an auction, we are able to offer proof of fair market value. Our model has a transparency that provides an auditable trail of activity throughout the process."

When it was first launched, SalvageSale generated 15 to 20 bids per auction; it now averages 80 to 90 bids for every auction held. Not only has volume increased, but cycle time efficiencies have been greatly enhanced. Several years ago, closing a salvage transaction took 30 to 40 days, but cycle time has been reduced to about 20 days.Beyond the sale

To attract skeptical insurers to a Web environment, third-party providers need to prove that their models are better than traditional ways of doing business.

Exclusive auctions

eReinsure has tried to position itself as a "workflow tool," while SalvageSale executives believe their value-added competencies will help make a difference in drawing participation. For example, SalvageSale in the past performed non-exclusive auctions-parties dealing with SalvageSale could also engage other third parties.

Now, SalvageSale auctions are exclusive. Items sold through its BidXchange platform can only be sold there.

Insurers also want to know that an operation such as SalvageSale-which serves far more industries than insurance-understands the dynamics of their business.

"We have worked to speak the language of our clients. So if it's an insurance company we're dealing with, we place an emphasis on areas like claim value, claims resolution, claims tracking," Parsley explains. "We have made thousands of modifications to the model so that it's customized for an insurer." SalvageSale has affiliations with about 75 insurers.

"It's not only about getting fair market value, but we can provide a host of services within the auction, such as summary reports that capture all the metrics around the auction-how many buyers were presented, how many unique bids," he explains. "The report tracks all the changes of status throughout the auction. We've added more rules and disciplines than we had when we began."

Insurers agree that in a time of fiscal strife, exploring more Web-based opportunities for business and operational functions can no longer be ignored. "Our main challenge with commercial salvage was finding a market," says John Anderson, assistant vice president, property claims, at Cedar Rapids, Iowa-based United Fire Group.

With net premiums of about $200 million, United Fire, which specializes in commercial coverage for large-sized retailers such as restaurants, considered placing salvage items for auction on eBay's platform. But it settled on SalvageSale because, despite eBay's solid reputation, SalvageSale had a higher degree of specialization.

"Our adjusters could only rely on local networking on salvage. But with a Web-based alternative for selling salvage, we've been able to greatly improve our salvage, and even our subrogation position," explains Anderson.

"For instance, in paying out $1 million in claims, we only recovered about 2% of overall claims payments. In the one year that we've been affiliated with the BidXchange, we've increased salvage recovery to 3% to 5%, and now we believe that we're on track to get back 10% because we're getting fair market value and we're exposed to a greater number of buyer prospects."Point of need

Undoubtedly, insurers who search for new Web-based strategies to streamline their operations all seem to crave the same thing: reduction of paper processing. So too is the desire to achieve better accountability through a more efficient audit trail. Scale is yet another demand, such as the ability to reach a greater number of potential business partners globally.

The recent demise of inreon, a Web-based reinsurance trading platform that was hampered by poor participation of reinsurers, insurers and brokers, serves as a constant reminder of how even the best laid plans can fail.

Inreon's failure raises the issue of whether the Web is the most conducive method for buying and selling risk.

Henriod of eReinsure.com offers an argument for why it is: "There's a common thread that connects the trading partners that come to the Web to conduct business with us. They are similar in that they all understand system-to-system connections and straight-through processing. They also know that, in the past, when they conducted trading offline, many weren't sure if they were buying or selling too much risk or not enough. The pattern analysis of buying habits had never been established before."

What eReinsure has set out to do is create a consistent process for negotiating reinsurance, provide consolidated information, establish straight-through processing and improve rates of return on capital, Henriod says.

"The platform provides a familiar workflow which eliminates inaccuracy and uncertainty by providing a complete audit trail of the placing transaction," he adds.

The vision appears to be paying off: eReinsure.com currently has about 20 trading partners, which is double the number in its fold a year ago. Reflective of the growing trend of using the Web to acquire and sell risk, eReinsure is generating eight times the premium volume compared with a year ago. Its main competitor in the segment, London-based ri3k, has about 30 trading partners and is also considered a successful risk-trading model.

"There's a compelling argument to conducting business in a Web environment, but like anything else you have early adopters and late adopters," Henriod concludes.

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