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Over the last 20 years, the advances enabled by financial modeling are impressive. Insurers have made improvements in risk management, capital optimization, product development and other important aspects of their business with the help of financial models. The critical importance of financial models has never been more evident.Products today are increasingly complex, and the pressure to manage, measure and report risk continues to grow. As a result, models viewed as highly sophisticated just a few years ago are now inadequate to meet today's needs. However, keeping pace with these demands is becoming increasingly difficult.

How can carriers capitalize on the convergence of service-oriented architecture (SOA) and business intelligence (BI)? Insurance Networking News asked Mark Gorman, strategic research advisor, insurance, and David West, research area director, insurance, for TowerGroup Inc., Needham, Mass.INN: More and more carriers are seeing the value of SOA for BI (i.e. business intelligence services). Why? What are the drivers?

Outsourcing in financial services is increasing year over year, according to results from two surveys. The surveys also indicate that offshoring is increasing due to cost savings and quality of work.Offshoring is saving the financial services industry an estimated $9 billion each year. This number is up from an estimated $5 billion a year ago, propelled by a 1,800% increase in headcount in lower-cost countries over the last four years, according Deloitte Touche Tohmatsu's fourth "Deloitte Global Financial Services Offshoring Report."

Among insurers of all sizes, everything is a process. Evaluating whether a process is efficient and cost-effective is oftentimes painful, because it means that workers need to rethink how they are going to work and, ultimately, change the way they function. Insurers that implement business process management (BPM) face challenges-and certain successes-associated with that change. In June, Boston-based research firm Celent LLC invited representatives from a small, medium and large insurance company to a meeting in Chicago where they shared their implementation stories.Celent Senior Analyst Donald Light, and insurance practice group Managing Director Matthew Josefowicz led the group in its discussion of what it takes to manage through the numerous challenges associated with continuous improvement and successful BPM implementation.

In many circles, codependency is frowned upon. But when it comes to IT implementations at insurance companies, codependency may be a good thing.That's the philosophy behind the IT success at Selective Insurance Group Inc., a Branchville, N.J.-based holding company for seven property/casualty insurance companies.

VALUATION SOLUTION REDUCED CLAIMS SETTLEMENT CYCLEPlymouth Rock Assurance Corp., Boston, selected San Diego-based Mitchell International Inc.'s, Total Logic Valuation as the company's total loss valuation solution to deliver a customer-centric loss claims process.

Most companies today understand that customer communications are integral to successful customer relationship management programs. Many of these communications are initiated from field organizations. Letters, proposals, quotations and marketing materials are often created, assembled and delivered to customers from branch offices.Historically, technological limitations have prevented companies from effectively controlling the content and integration of these communications with mainstream fulfillment processes. This has led to higher costs, poorer communications and reduced customer satisfaction.

In June, Boston-based research firm Celent LLC invited representatives from a small, medium and large insurance company to a meeting in Chicago where they shared their business process management (BPM) implementation stories. Celent senior analyst Donald Light, and insurance practice group managing director Matthew Josefowicz led the group in its discussion of what it takes to manage through the numerous challenges associated with continuous improvement and successful BPM implementation. The Panelists:Monique McKeon (MM), assistant vice president, Chubb Commercial Insurance - CPSS, Warren, N.J. Chubb's net written premiums increased 1% in Q2 2007 to $1.3 billion. BPM target area: commercial underwriting. Number of initial users affected: 150; two years into the project: 900. Vendor of choice: Metastorm. Kimberly McGregor (KM), director, imaging and process analysis, Ohio National Financial Services, Cincinnati. The company has total assets under management of $22.5 billion. BPM target area: as part of a larger legacy replacement strategy, the company focused on individual annuities; underwriting, policy administration and claims legacy systems. Number of users affected: 500. Vendor of choice: CSC. Chris Spring (CS), senior vice president, Meadowbrook Insurance Group, Southfield, Mich. The company manages in excess of $700M in premiums under management. BPM target area: company-wide rate-book-issue processes. Number of users affected: 650. Vendor of choice: Adeptia. The Celent team posed one last question to the panelists—what is the most important piece of advice you can offer other insurance carriers currently considering a major BPM project? MM: Make sure BPM is positioned correctly within the enterprise. From a technical perspective, make sure BPM is positioned in the right place in the enterprise architecture. Know what BPM is (is it a one-size-fits-all program or one that enables you to pick and choose capabilities as you go? Is it just the human workflow or does it also include SOA and integration, business rules, etc.?) Then set up a centralized support model that includes governance. KM: Get the users involved, right up front, and help them become comfortable with the change. When change comes, it's because they have brought that change to us. They know that when a change is required they need to take ownership of it and we just help them because is makes all of us more efficient. Build momentum in your commitment and make sure business owners have a key role. Build the skill sets. Manage human issues. Be flexible. Get senior and line management buy-in. CS: Realize your power and be ready to make the investment. BPM should be deployed across the organization, not siloed. Look for a cheerleader. Who is on top of the process? Over-communicate if you have to. Do the t-shirt and road shows. For those that have implemented BPM, rethink what you did. Look at the processes already in place. Then reevaluate your strategy and design to ensure maximum usability and efficiency.

Carriers implementing BPM strategies are bridging from the hard-coded world of today to an easily configurable world of tomorrow. And getting out of a legacy environment and into the world of thinking in configurable terms will always be a work in progress. “You need to be able to achieve change when it’s required,” says Donald Light, senior analyst with Boston-based Celent. To successfully address these challenges, Light recommends insurers ask the following four questions: 1) Do you have the staff resources necessary to deepen and extend use of BPM solutions beyond initial deployment?2) Are you in the early days of replacing inflexible core legacy systems or well along in that process?3) Is your primary need to make processes uniform and compliant within and across business units?4) Is there a clear SOA roadmap in place or is the enterprise infrastructure just now being addressed? On the technology solution provider side, says Light, a BPM vendor must also conduct due diligence. Light recommends vendors begin the process by including the following four elements:1) A strong set of functionality and tools that will facilitate carrier implementation of its SOA strategy.2) An emphasis on ease of use. This is especially important for IT developers as they create the code and/or integration processes that their peers on the business side created.3) Strong modeling, analytics, and optimization capabilities.4) Include a set of insurance-specific features.

Westlake Village, Calif. - Policy retention is critical to the financial success of auto insurance carriers, and a customer's experience with their provider is the most important element—outweighing brand image—in generating policy renewals, according to the "J.D. Power and Associates 2007 National Auto Insurance Study."The study measures customer satisfaction with auto insurance carriers across five factors. In order of importance, they are: interaction, policy offerings, billing and payment, price and claims.

Boulder, Colo. — IT risk management is no longer strictly about mitigating the negative threats surrounding IT, a new study finds. The study was published by Boulder, Colo.-based independent IT management research and consulting firm Enterprise Management Associates (EMA).

New York – Two life insurers recently appointed a number of executives. ACE Life Insurance Co., a business of Bermuda-based ACE Ltd., named Jim Gibbs as vice president and chief underwriting officer and Bruce Horton as vice president and chief marketing officer. Gibbs joins ACE from Optimum Reinsurance Co., Dallas, where he was senior vice president, underwriting. His previous experience includes positions at SCOR Life US Re, Dallas, and Munich American Reinsurance, Atlanta. He is a past president of the Southeastern Home Office Underwriters Association, and he has been a speaker at many industry gatherings, addressing both underwriting and actuarial groups on various topics.

Chicago – A new study evaluates the home pages and usability of 14 major auto insurance providers’ Web sites to examine customer expectations and discover where companies succeed or fail in attracting and retaining customers.

Armonk, N.Y. - U.S. consumers want insurance companies to more effectively communicate new products and services available to them, provide customized policies to better meet their needs and bring their customer experience up to par with other industries, according to an IBM study of more than 3,000 P&C insurance policyholders. Yet, despite boasting one of the largest demographics of loyal and satisfied customers of any industry, few insurance companies are looking for new and innovative ways to connect with their customers to enhance their experience and drive organic growth.

Boston – Liberty Mutual Group has made its acquisition of Ohio Casualty Corp. official. Liberty first announced its intention to purchase the Fairfield, Ohio-based carrier for $44 per share in cash in May.

Washington – The heads of two insurance industry associations have issued a joint letter urging the National Governor’s Association to drop their opposition to the National Insurance Act.

Silver Spring, Md. – AIIM, the Enterprise Content Management Association, is expanding its certificate training program to include two new programs for business process management and information organization and access. The new programs are designed to provide organizations with the skills and knowledge to improve their business processes and optimize enterprise search and findability. Online courses will be available starting September 10 by going to www.aiim.org/training. More than 4,200 participants attended the Silver Spring, Md., organization’s first two certificate programs—on electronic records and enterprise content management, reports John Mancini, AIIM president. “This led us to look at related certificate programs that would help end-users make smart information management decisions," he said. Each AIIM certificate training program consists of three designation levels (practitioner, specialist and master level) across four programs (enterprise content management, electronic records management, business process management and information organization and access. Source: AIIM

Stamford, Conn. – A rapidly shifting, increasingly consumer-centric insurance market is no safe harbor for health insurers, a new research note from Gartner, Inc. contends.

Stamford, Conn. – Nearly 90% of CFOs believe that the cost of compliance with Sarbanes-Oxley (SOX) outweighs the benefits, according to the latest survey from the Tillinghast business of Towers Perrin.

Novato, Calif. and Armonk, N.Y. – Allianz of America (AZOA), parent company of Allianz Life Insurance Company of North America, has signed a $330 million-, 7-1/2-year outsourcing agreement with IBM to handle information technology (IT) operations of the life insurer.