The insurance industry is facing a seemingly insurmountable challenge: The leading companies need to invest in new technology simply to keep pace with escalating customer claims.But the cost of replacing policy administration, claims, product management, billing, producer management and customer/account information systems is more than any one company can bear. More importantly, it is a cost that the insurer's own customers will not fund.

The concept of adaptive enterprise architecture is being extended outside of Nationwide Financial's vast IT structure. As part of the process, IT executives at Columbus, Ohio-based Nationwide are involved in corporate merger and acquisition decisions."We don't play a deal-breaking role in acquisitions, but we're a significant voice at the table," explains Srinivas Koushik, vice president and chief technology officer for Nationwide Financial Services. "We'll report on whether we can integrate the other company's systems."

Recent outsourcing deals have caused a resounding buzz within the executive suites of many insurers. Prominent vendors are proposing seductive deals with no up-front cost, immediate and dramatic savings, and most recently, computing on demand. Some executives see it as a silver bullet that will drive substantial and sustainable cost reduction along with measurable improvements in performance.Far from a new idea, this is a rocky road that many companies have been traveling down for decades. History has shown that for every raging success, there is a bone-crushing failure and most deals fall in between these extremes.

After the technology exuberance of the late 1990s, the current conservative approach to IT spending seems like a hangover after a big party. But IT spending by carriers in the coming year isn't all that bleak.Depending on whom you ask, carriers on average are expected to increase their IT spending by up to 8% each year over the next few years, including this year. Last year, property/casualty and life/health carriers together spent approximately $18 billion on information technology, and they will spend $19.3 billion this year, according to Celent Communications, a Boston-based research and advisory firm.

Joining Guardian as a CIO with a blank slate for improvement, Dennis Callahan has reduced IT costs, formed a collaborative partnership with the business units, and established a consistent technology direction.Dennis Callahan was content as CIO for global financial services at American International Group (AIG) when he was approached almost two years ago by The Guardian Life Insurance Company of America to be its new CIO. He was lured into joining Guardian because of the sheer challenge of "filling in a blank slate," he says.

As a result of switching to document scanning, and eventually upgrading its equipment, Blue Cross Blue Shield of Georgia has seen what its describes as a significant increase in efficiency and cost savings.The paperless office could be compared to the Loch Ness monster: People swear it exists, but no one has ever seen it. Blue Cross Blue Shield of Georgia, however, is one of the few companies that can say it has achieved this elusive goal, with the results to prove it.

When John Kellington joined the Ohio Casualty Group in May 2001, he knew exactly what challenges awaited him. That's because Kellington had worked for Ohio Casualty previously as a consultant for IBM Global Services to help transform the carrier's legacy systems."I knew that Ohio Casualty Group had excellent operating systems capabilities," says Kellington, chief technology officer of the Fairfield, Ohio-based carrier. "The major issue was that the IT department was having a difficult time delivering new business applications and functionality in the appropriate timeframes."

The dot-com crash certainly has extinguished the e-commerce hype, but it hasn't dampened carriers' desire to implement Internet technologies.For the second consecutive year, four Internet categories ranked at the top of Insurance Networking News' "Best of the Newest" survey, a poll of 19 technologies rated by industry experts. The executive panel rated each technology based on its impact on carriers' operations and its level of innovation.

In many ways, insurance companies have become embroiled in a sticky Catch-22 regarding their ability to use, manage and deploy information technology internally.The catch: Carriers have a good shot at becoming proficient at internally managing IT if they devote only the necessary resources and apply the proper approach to making it happen. But they won't commit to either of these until they are certain that success is in the offing.

For Royal & SunAlliance, processing auto claims went from being a royal pain to a royal gain-thanks to an outsourced solution that's firing on all cylinders.Insurers that strive hard to improve their claims processing abilities within auto insurance lines sometimes watch the entire effort come crashing down due to one crucial deficiency: poor auto repair experiences.

The numbers are too compelling to ignore. The average salary for a call center agent in India is one-tenth that of a U.S. agent's-or roughly $300 a month. In a 500-seat operation, that amounts to $16.2 million a year in payroll savings alone.In addition, India's young, educated and highly motivated workforce, views working in a call center as a prestigious job, unlike their American counterparts who typically view it as a temporary step toward a "real" career.

Insurance companies that outsource customer care to third parties within the United States are apprehensive about people finding out customer service calls aren't handled within their own walls.As a result, these insurers typically require vendors to keep their relationships confidential, and they refuse to be interviewed.

What is your organization's IT fitness level? Is your team out of breath on short distances? Or is it ready for long-distance hauling? Final performance depends on the workout, and if standards adoption isn't part of your IT team's fitness regimen, your team may be doomed to under-achieve, despite any obvious talent in the lineup.Standards use can be likened to gym membership: Everybody agrees that it's a good idea, but its only as good as the number of times you actually go and workout.

Michael Keller's mission is to create a collaborative IT environment, maximize ROI on technology investments and deliver value-added services.With the rapid increase in the number of companies under the Nationwide Financial Services Inc. umbrella, Michael Keller had a formidable mission in his first year: create a cohesive, collaborative IT community within Nationwide to leverage capabilities, maximize return on IT investment and deliver more value-added services.

When insurance companies explore implementation of top-of-the-line mobile computing solutions, many concede that laptop is technology no longer on their short list for consideration.Once regarded as a viable option for conducting business remotely, laptops lost ground to other hand-held options, such as Web-enabled wireless phones, two-way pagers and Personal Digital Assistants (PDA).

Despite the growth of online self-service, call centers remain the most common way for customers to interact with companies. New technologies promise ROI by focusing on the performance of the people who deliver service to the customer-call center agents.Driving customers to the Internet for self-service is an effective way for insurers to reduce the high costs of providing information and processing transactions off-line. The fact is, most customers still prefer to call and talk to a human being-the most expensive customer-service channel.

There's no question about it: A contact center is an expensive operation. Not only has the technology become more complex and costly over the past few years, but training and licensing agents-who leave at a clip of 25% to 40% annually-impact a carrier's bottom line.It's no wonder many insurers decide to farm out some or all of their customer care functions-to the tune of $1 billion per year, according to research from IDC, Framingham, Mass.

Despite the economic slow down and the many challenges faced by the insurance industry, carriers increased their total IT budgets in 2002 by an average of 7%. On average, 35% of this spending is devoted to new projects and strategic initiatives, according to a study by Celent Communications, Boston.Many insurance companies cannot afford to not update their existing systems. In a mature and highly competitive marketplace like the U.S. insurance industry, operational efficiency and flexibility is key to profitability. To achieve these goals, insurance companies must take advantage of new technological capabilities in every step of the insurance business process or risk falling behind their competitors.

Technology budgets traditionally have been an easy target for firms looking to lob off expenses and improve their bottom lines. And, while carriers-especially property/casualty insurers-are experiencing tough financial times, they are not slashing their IT budgets, according to the findings of an exclusive Insurance Networking survey of 82 carriers, agents, brokers and services firms.Nevertheless, carriers and agencies are taking distinctly different paths this year, with carriers ratcheting up spending on internal development, while agencies are cutting back on custom software and increasing packaged installations.

Individuals who have experienced an auto accident or incurred damage to their vehicle often discover that the road to swift claims settlement is a bumpy, winding and volatile one.