Core systems

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.

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.

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 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.

Last year, for the first time, more than 50% of banks in the United States produced some sort of insurance revenue.According to a "Bank Insurance Fee Income Report" from Michael White Associates, 4,359, or 52%, of all commercial banks or federally insured savings banks in the United States generated revenues through insurance sales.

In response to how Allstate Insurance Co. handled its employee-agents during its reorganization in 1999 and 2000-and to prevent other employers from repeating that action-the Employee Benefits Protection Act of 2003 was introduced in Congress in March.The Northbrook, Ill.-based carrier reorganized the company to reduce expenses by $600 million annually, to bring its agents under one program, and to integrate its agency force, direct response call centers, and the Internet. As part of that plan, Allstate terminated 6,400 employee-agents in June 2000, and offered them the option to convert to independent contractor status.

Most insurance e-business solutions providers have long considered investments in Web-based insurance distribution outlets as bold and risk-taking strategies to enhance their corporate fortunes.This belief didn't deter Brookfield, Wis.-based Fiserv Inc., an information management systems and services provider, from acquiring Falls Church, Va.-based ReliaQuote Inc., an Internet-based insurance agency and brokerage that dabbles in term insurance. Consummated in April, the terms of the deal were not disclosed.

Life insurers are seeking quick and painless solutions for compliance with the USA PATRIOT Act, which requires insurers to develop and implement anti-money laundering (AML) compliance programs intended to disrupt financial networks that support terrorist groups.How they plan to achieve it is the next hurdle: will life insurers decide that it's more prudent to develop a compliance program in-house or seek third-party support? A survey released in February by Gartner Inc., Stamford, Conn., focused on how enterprises choose their anti-money laundering software, whether they were pleased with their choices and whether they were able to remain within their budgets.

The insurance industry could learn as early as this week the broad outlines and ballpark costs of the so-called third wave of asbestos litigation.That's the timeline Sen. Orin Hatch, R-Utah, chairman of the Senate Judiciary Committee, has established for drafting proposed asbestos litigation legislation as he has woven his way between industry, insurer and labor interests in an effort to forge consensus legislation that will pass the Congress.

Facing a mandate to reduce their loss exposures for a variety of reasons-from the threat of terrorism to the need to secure better insurance coverage terms-risk managers are upping the ante on loss control spending.A survey of nearly 400 risk managers conducted by Warren, N.J.-based Chubb Group of Insurance Cos. revealed that nearly 50% of respondents increased their loss control spending over the past year; 34% held their budgets constant; and 5% decreased their loss control spending.

Before the passage of the landmark Gramm-Leach-Bliley legislation in 1999, several insurers received clearance from the federal government to operate online thrift institutions. Executives with Principal Bank of Des Moines, which opened for business in February 1998, say the brand-name backing of its parent and a growing acceptance of online banking will help it grow to $5 billion of assets by 2005.Principal Bank, owned by Des Moines, Iowa-based Principal Financial Group, had $1.5 billion of assets at the end 2002-compared with $100 million in January 2000. "We had expected, when the initial strategic plan was put together, to be about $100 million at year four," says Barrie Christman, Principal Bank's president and CEO.