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Rules-based underwriting systems are designed to reflect the logic of the best and most experienced underwriters. In this way, they can provide agents and customer service representatives with the appropriate questions to ask applicants, and enable the company to more accurately and efficiently assess risk. But what if the data the applicant provides is wrong?"The problem with technologies such as rules-based systems or efforts to streamline information flow to agents is the matter of the quality of the information," says Daniel Finnegan, Ph.D., and president and founder of Quality Planning Corp. (QPC), San Francisco. "You can make all the rules you want, but if you don't get the data right, the outcome is wrong."

Blue Cross Blue Shield of South Carolina (BCBSSC) in January introduced a new program that many believe could revolutionize the Web-based self-service model.The program, known as Blue-By-Design, is a consumer- driven health plan (CDHP) that gives members the power to make their own healthcare decisions, says Terry Povey, director of Web business development, market research and statistics, for the Columbia, S.C.-based health insurer.

The self-service economy isn't a new phenomenon. It started with ATMs to avoid teller lines at banks. Then, it expanded to pay-at-the-pump gas station service, and now can even be found at department store check-outs and airline ticket counters. The era of self-service has arrived, and the benefits are clear. Self-service is fast, convenient and economical.Customer self-service is also being embraced via the Internet, which today provides companies with an information infrastructure that continues to grow in functionality and bandwidth.

If the laws of physics hold that for every action there is an equal and opposite reaction, then the laws of business hold that for every reaction, there can be unexpected consequences.An unexpected consequence of the recent spate of insurance company demutualizations is the renewed interest by state governments in newly revealed unclaimed property. At first blush, states would seem to have limited interest in how a mutual insurance company chooses to structure its capitalization.

Humana needed to replace its outdated billing system that relied mostly on paper and snail mail. Today Humana offers its employer-group customers an easy-to-use e-billing alternative that's available in real-time on the Internet.Back in 1999, Humana Inc. began to implement a wide-ranging e-business strategy that would include customer self-service features across its spectrum of business lines.

When the economy cools down as it has in the last few years, small businesses typically are the first commercial entities to reduce costs, with many scaling back expenses such as comprehensive business owners insurance.These tactics might help foster cost-containment, but it's a negative development for insurers, agents and third-party providers of small-business insurance that want to build new business. But low demand isn't the only challenge that they're encountering in the small-business market. One chronic dilemma has been an inability to precisely pinpoint insurance needs of small businesses, many of whom are fitted with either too much or too little coverage.

In an effort to become comprehensive financial service providers, some large insurers have taken an aggressive approach by forming their own banks.Banks, on the other hand, have carried out insurance expansion more conservatively-mainly through the acquisition of large agencies to drive insurance-product distribution through the bank branch.

At the recent ACORD technology conference, keynote speaker Larry Downes offered a theory that information technology spending shouldn't be curtailed just because operating conditions are poor.Downes, a technology strategist, noted that technology should not be perceived "as an obstacle within a business," adding that insurers "can't save their way to success" by scaling back on IT investments.

For many consumer-goods providers, one-stop shopping has long been regarded as the pinnacle of customer relationship management (CRM). But some have learned that offering one-stop shopping-as all encompassing as it can be-comes equipped with complications.In their zeal to become all things to all people, a host of consumer-goods providers lost their overall focus, and in turn alienated customers. Insurance companies that have established a bank over the past four years have found this dilemma to be more imagined than real.

Although insurers may be tempted to offer the full gamut of banking products and services, there are a finite number of products and services that consumers will acquire-with confidence-from insurance companies, industry observers say."A certificate of deposit (CD) with a locally available rate is very attractive," says Mark Walker, group vice president, financial services business team leader, at Walker Information Inc., an Indianapolis-based firm specializing in customer loyalty.

If Lee Gaudette, a third-generation independent agent based in Worcester, Mass., had a nickel for all the good reasons he doesn't sell banking products to his customers, he could probably open his own bank.Gaudette's sentiments are motivated by several factors, among them tradition, geography and competition. That's why Gaudette uses Insurebanc, a Farmington, Conn.-based federal savings bank established jointly by the Independent Insurance Agents & Brokers of America (IIABA) and W.R. Berkley Corp., for his own cash management purposes and for various loan products.

Although many insurers are taking the necessary steps internally to grow their books of business, many realize that they need to look outward and align with third-party distribution channels that have developed their own internal IT competencies.The impetus to raise the stakes on small-business insurance marketing is significant because no single carrier has more than 3%-4% share of market, says Ed Gillman, president and CEO of AgentSecure, an Atlanta-based insurance agency serving the small-business market.

In May 2001, eWausau.com, the Web property serving small-business customers developed by Wausau, Wis.-based Wausau Insurance, was shut down after executives at the company realized that small-business owners were reluctant to use the Web to research and shop for insurance.The company shut down on the heels of consummating a strategic alliance with Atlanta-based InsureZone, a partnership that would expose eWausau to even greater distribution opportunities than it could muster alone. But eWausau is now gone, and InsureZone-a startup provider at the time-carries on the legacy.

As legacy applications move through their life cycle, they frequently evolve from assets that manage key processes and information to liabilities that drain time and resources. As a result, these applications become increasingly more difficult to maintain.At the point when an organization's legacy assets no longer serve its goals for financial management, customer intimacy, regulatory compliance, and operational effectiveness, management must decide whether to rebuild key systems, replace them with third-party applications, or modernize aging applications to extend their useful life.

Michael Galvin knows more about disaster recovery and business continuity than most of us care to know. That's because the vice president and chief infrastructure officer of Empire Blue Cross and Blue Shield has first-hand experience with the worst catastrophe this country has ever endured: September 11, 2001.The New York-based health insurance company occupied 10 floors and 480,000 square feet in the North Tower of the World Trade Center. And, although the company tragically lost 11 people that day and several employees were injured, most of the 1,900 employees and consultants escaped from the building unharmed.

The mere mention of a data warehouse has often caused even the most unflappable insurance carrier executive to break out into a cold sweat.In recent years, the failure rate of data warehousing projects in the insurance industry has been a dubious distinction, owed in no small part to insurers' inability to effectively plan and execute such projects. Considered "data rich yet information poor," insurers have struggled to create data warehouses that can truly tap into the power of their customer data.

For years, Hispanic consumers have had to settle for "Americanized" versions of a wide variety of consumer goods-financial services products included. But as the Hispanic population in the U.S. rapidly ascends, industry experts insist that insurers must adopt new selling strategies to fully capitalize on a ripe opportunity.By the year 2025, Latinos are expected to represent the largest minority group in the United States. And, as this growth emerges, some insurers have begun to customize products to meet the needs of this burgeoning ethnic demographic group.

Using Global Positioning Satellite (GPS) and cellular communications technology to gather information about when and where a motorist is driving, United Kingdom-based insurer Norwich Union is launching a pilot study this summer that could play a role in transforming the way auto insurers underwrite policies.Called "Pay As You Drive," the two-year study will involve retrofitting the cars of 5,000 Norwich Union policyholders with a "black box" that will gather and transmit vehicle and driving data to the insurer's back-end systems. Norwich Union statisticians will then analyze the data to determine which variables affect risk and claims, and those results will be used to calculate usage-based premiums.

At this time of economic and operational uncertainty, many global insurers are scurrying to identify-and then rectify-vulnerable components of their operations.In April, executives at Boston-based John Hancock Financial Services Inc. believe they made a key decision to help restore stability to the operation when the carrier inked a multi-year agreement to implement IBM Corp.'s e-business on-demand solution.

Already on the defensive about the use of credit scores for underwriting, property/casualty insurers now face another assault on one of their prime data tools in the nation's largest market for homeowners insurance.In late April, California Insurance Commissioner John Garamendi all but banned carriers' use of the main data source to underwrite and rate homeowners insurance policy. For 11 years, the Comprehensive Loss Underwriting Exchange (CLUE) has tracked claims on properties and property owners supplied by carriers of the nation's homeowners insurance policies.