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With almost 60% of its homeowners insurance business consisting of coverage for homes valued at $1 million and up, Novato, Calif.-based Fireman's Fund Insurance Co. understands that appraising affluent homes is an extremely tall order.Expensive dwellings don't come equipped with run-of-the-mill furnishings. Often, such homes feature rare and exotic items ranging from Pella French doors, Italian granite countertops, premium carpeting and elaborate building materials.

If you ask a group of independent agents to name the technologies on the top of their wish lists, you likely will hear a different answer from each.Some agents want carriers to improve their Web portals, making it easier for agents to obtain quotes and make inquiries and endorsements on carrier sites. Others want carriers to provide real-time transactions through their agency management systems-via so-called "bridges." This way, they never have to leave their agency systems to conduct their business.

Although the federal government granted the healthcare industry an extra year to comply with the transactions and code set rules mandated under the Health Insurance Portability and Accountability Act (HIPAA), experts say a procedural mess is set to occur on Oct. 16.That's the date for the HIPAA deadline-which originally was set for Oct. 16, 2002-for health plans, providers and clearinghouses to cease processing proprietary transactions and use only standardized transactions that comply with the 1996 law.

AnnuityNet Inc., the top-selling Web-based annuity distribution provider, has worked diligently over the past two years to distance itself from its nearest competitor-Info-One/VARDS.Deploying a dynamic front-end Internet distribution platform emphasizing "paperless accuracy," Herndon, Va.-based AnnuityNet has leveraged its technology to enable it to increase its sales of both fixed and variable annuities from 164,500 by the end of 2002 to 243,000 by the end of July.

Insurers are becoming insular with information technology maintenance and investment priorities. Referring to it as internal "housecleaning," Cary, N.C.-based Sapiens International Corp. states that U.S. insurers are shifting gears to emphasize internally-driven IT efficiencies as a better way to control costs.Findings from a recent survey conducted by Sapiens, a global IT solutions provider, reveal that externally focused activities, such as business process outsourcing (BPO), customer relationship management (CRM), and standards implementation-such as ACORD XML, now rank significantly lower on the IT priority scale than internal initiatives.

The economy has tempered IT spending within the insurance industry in recent years, as many carriers reigned in their project development to concentrate on essential projects. This year, spending appears to be bouncing back somewhat, according to the findings of Insurance Networking News' recent survey of 95 carriers, agents, brokers and services firms.For starters, insurers' spending on packaged applications and software development appears to be on the upswing for the remainder of 2003. Carriers have budgeted an average of $1.4 million for packaged software for 2003, up by more than 14% from what they spent in 2002, the survey reveals (See chart, page 19).

Project management software won't increase a carrier's market share or revenue streams, and it won't improve system integration. But the impact it can have on an IT department's bottom line can be as significant as the ROI claimed by some of the more trendy technology tools carriers are implementing.

Ten years ago, telecommunications costs were typically the 14th or 15th line item for insurance companies, says Johnny Podrovitz, CEO of MSS Group Inc., Castle Rock, Colo. "Now, they're the third or fourth."

Harvard Pilgrim Health Care serves more than 765,000 members, 22,000 medical providers, 2,000 employees and a community of independent brokers. With so many disparate constituents to accommodate, the Wellesley, Mass.-based provider decided in 2002 that it was time to deploy Internet applications that could offer a higher level of Web customization-not standardization.Developing Web portals proved to be the answer.

In today's tough economic climate, insurers are striving to increase productivity and efficiency while keeping expenses in check. And, due to escalating competition, they are also doing more to retain existing customers.As a result, many employees are overwhelmed by the challenges of finding and delivering the right information to customers when, where and how it is needed.

No one would argue against the fact that the insurance industry has been engulfed in a perfect storm over the past few years. Consolidations, monumental loss experiences, economic turmoil and investment declines have conspired together as never before.Faced with a hard market, staff and training reductions, and stagnant capital and IT budgets, insurers are under greater pressure than ever to work smarter, faster and more efficiently.

When Farmers Insurance Group conducted testing on a Web-based customer self-service program, the Los Angeles- based property/casualty insurer considered implementing a capability that would enable customers to make changes to their policies.Farmers executives recognized the value of self-service capabilities. After all, enabling a customer to instantaneously make a change to their auto or homeowners policy represents the spirit of customer self-service. But earlier this year, as Farmers executives examined the concept further, they uncovered a flaw with the concept: Giving customer unfettered access to make changes was considered an affront to Farmers' agents.

With their backs against the wall to stimulate profits and revenues in the face of poor economic times, senior-level executives in insurance companies are turning to their chief information officers to breathe new life into their static operations.As IT spending begins to inch upward-industrywide expenditures are projected to increase gradually each year, peaking at about 7% by 2007-industry experts believe it's incumbent upon CIOs to capitalize on the additional dollars they'll have at their disposal. Having learned from experience, CIOs indicate they are poised to reach a higher level of IT spending stewardship, with many pledging to convert IT from what is now regarded as an art into a science.

Most insurers rely on external guidance to help them map out information technology strategies. Over the years, they've derived such support from vendors, consultants, analysts and even state and national associations-all of whom possess a unique role in the grand scheme of IT strategizing.But a fledgling group that's touting itself as an "IT advisory and research firm" for property/casualty insurers is providing yet another alternative. The question is: Will P&C carriers embrace the concept widely enough to enable it to succeed?

The nation's largest insurers together received a mediocre score for online customer respect. But the good news is: The banking and securities sector, as well as Fortune 100 firms overall, didn't ace the test either.This assessment comes from The Customer Respect Group Inc., a Bellevue, Wash.-based research company that studies the Web sites of Fortune 100 and Fortune 1000 companies. The group gave insurers among the Fortune 1000 a 6.8 overall customer respect index (CRI) for their Web sites, while financial services firms scored 6.7 and Fortune 100 firms scored 7.0.

With trading volume reportedly far below management's expectations, Web-based reinsurance risk-trading hub inreon was terminated in early May, leaving two players to service the global online reinsurance risk-trading market.London-based inreon was launched in December 2000 as a partnership between global reinsurers Munich Re, its U.S. subsidiary American Re, and Swiss Re. But according to industry sources, the decision to close inreon down came when the reinsurance giants concluded that the service would have a difficult time turning a profit-both short- and long-term.

Although the Sarbanes-Oxley Act of 2002 is focused primarily on financial reporting and accounting processes, the law is forcing publicly traded companies to assess their IT systems too.Thanks to the transgressions at Enron, WorldCom and other now notorious corporations, all publicly traded companies in the United States-including insurers-are in the throes of trying to determine how to comply with the law that was passed to deter such corporate malfeasance in the future.

A study released in June by Giga Research, an operating unit of Cambridge, Mass.-based Forrester Research Inc., provides insights into specific spending areas that CIOs presently value.The study, "Improving Business and IT Efficiency," culled insights from 10 CIOs across the United States and Canada in the property-casualty, life/health and specialty insurance industries.

Since writing its first insurance policies in January 1993, AmFed Companies LLC has been an aggressive pursuer of new business-always on the lookout for niche market opportunities.As a result, AmFed recently went on the hunt for "best-of-breed" software products. It sought to create an affordable, modern-day policy administration system that it could use to pursue new business.

When Mike Natan came on board as CIO of OneBeacon Insurance Group two years ago, he inherited a large, failing IT project intended to support a new commercial P&C package. "At that time, I looked at the project, and basically killed it," he says. "It was clearly runaway. It wasn't going to deliver."In May, the Boston-based regional insurance company rolled out a new Web-based policy administration system, which will not only support the company's new commercial package product, but all of its commercial and personal lines as well.