Philosophers often debate whether civilization has learned the lessons of history. Likewise, for business executives, the advent of a new year is a time to reflect on events and issues that shaped the previous 12 months and ponder what lies ahead for the new year.Insurance had its share of major headlines in 2004. For some of these events, the ramifications will likely carry over into 2005 and beyond. Front and center is the ongoing investigation by New York Attorney General Eliot Spitzer. In this month's issue, various industry experts note that the unknown outcome of Hurricane Eliot has impacted carriers' plans on IT spending and project implementation for 2005.

More importantly, however, is how the ongoing investigations will affect state legislation and potential federal regulation of the insurance industry. In recent years, there have been increasing calls on Capitol Hill for some form of federal oversight of insurers, and Spitzer's widening probe of insurance business practices is fueling the fire for federal regulation. Senior insurance executives undoubtedly will be keeping one eye on internal operations and the other-warily-on Washington.

The financial strength of the industry-and its ability to successfully spread risk through reinsurance and other risk management techniques-were displayed in two separate noteworthy events: the devastating hurricane season that rocked the Southeast, and a federal jury's December ruling that the Sept. 11 attack on the World Trade Center was in fact two separate events.

The four hurricanes that slammed the Southeast-including three that made landfall in Florida-resulted in some 2.2 million claims exceeding $20 billion in damages. Several large carriers including Allstate and State Farm were hit by a massive amount of claims, but they and other carriers have reassured policyholders and Wall Street that they will weather the storm.

Likewise, nine insurers were on the losing end of the Manhattan jury's verdict, which will double the amount that they now must pay developer Larry Silverman. Insurers say the estimated $1 billion in additional payouts will not cause financial stress.

One other trend worth noting is how outsourcing deals continue to be struck, despite the negative publicity that outsourcing received during the 2004 presidential campaign. Industry experts correctly predicted that the momentum of IT and BPO outsourcing would not be slowed by political rhetoric, and it's likely that a surge of insurance outsourcing deals will occur in 2005.

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