Core systems

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.

In an effort to reduce internal IT costs, more insurers are considering buying packaged software-as opposed to building customized applications.However, many executives in the industry-those evaluating packaged software solutions-may not be familiar with vendors and products that are available. Therefore, they may have difficulty assessing them.

The typical profile of a perpetrator of fraud has been that of trained con artist who plans his or her scheme in a calculated fashion. But a new study depicts insurance fraud not only as a sophisticated ring carried out by professionals but as an act often executed by mainstream insurance customers.The study, by Bermuda-based consulting and technology solutions provider Accenture, found that nearly one in four U.S. adults say that overstating the value of claims to insurance companies is acceptable, and more than one in 10 say they approve of submitting insurance claims for items that were never lost or damaged or for treatments that were not provided.

As concerns over asbestos liability continue to mount, industry observers say carriers need to find solutions to manage the risk-other than just throwing money at it.Insurance Services Office Inc. (ISO) estimates that newly incurred asbestos loss and loss-adjustment expenses rose from $1.4 billion in 2000 to $3.7 billion in 2001. Based on partial data, Jersey City, N.J.-based ISO estimates newly incurred asbestos losses more than doubled in 2002, rising to about $8 billion.

With technology playing an increasingly important role in the modernization and standardization of the 50-state system of insurance regulation, officials from the National Association of Insurance Commissioners have decided the time is ripe for development of standards that can make the process more seamless.The National Technical Architecture working group started work early this year on standards that will be mandatory for information projects developed directly for the Kansas City, Mo.-based NAIC, and serve as a guide for state and industry efforts that target national regulatory interoperability.

Allstate Insurance Co. is in the process of negotiating a settlement with the California Department of Motor Vehicles to restore the carrier's access to electronic driving records in the state.In January, California DMV officials indefinitely suspended the Northbrook, Ill.-based carrier's access to electronic driving records.

As if a ghost from the past has reawakened, property/casualty insurers are again confronting a huge potential wave of asbestos claims.Indeed, the recent moves by Ace Ltd. to boost its asbestos reserves by $1.9 billion, following Travelers Property Casualty Corp.'s decision to add almost $2.5 billion to its asbestos reserves, has caught both credit agencies and financial analysts off guard.

The insurance industry is taking aim at a survey sponsored by the Washington Office of the Insurance Commissioner which raises the issue of whether credit scoring can adversely impact the ability of low-income and minority consumers to obtain affordable insurance.The latest controversy over the use of credit scoring comes as the industry braces for another round of legislative efforts to either curb the practice or ban it altogether. As many as 40 states are expected to tackle the issue this year, industry groups say.

Understanding how and when consumers want to receive financial advice is an important aspect in gaining the upper hand in the competitive field of financial planning.By implementing automated systems to expand advice delivery channels, life and annuity insurers can remain competitive with other financial services institutions.

Since buying Acordia Inc. in 2001 and creating the nation's largest bank-owned insurance agency, Wells Fargo & Co. has not been a big player on the agency acquisition scene-but that should change, thanks to the deal-minded focus of the agency's new head.Acordia intends to further tie itself to its San Francisco bank parent through continued cross-selling and acquisitions in the bank's West Coast stronghold, according to the agency's new chief executive officer, Kevin W. Conboy.

To most insurance companies, knowing the identities of their customers has always been motivated by commission-that is, the more insurers know about them increases the rate at which they can market additional services.Following the passage of the USA PATRIOT Act in late 2001, carriers are gleaning details about their customer base motivated by omission-that is, how to eliminate unsavory customers whose sole objective is setting up insurance accounts to break the law.