Data and information management

When disaster strikes, insurance companies immediately mobilize their catastrophic ("cat") teams to deal with the accompanying sudden increase in claims.The aim is to provide expedient customer service to policyholders who have been injured or who have lost property or loved ones-and rightfully deserve compensation from their insurance company.

What if you could determine when policyholders were considering switching to another carrier and then identify which of those customers were profitable enough to justify trying to keep them? And what if you could determine the effectiveness of a marketing campaign while it was in progress, changing your strategy before investing a lot of money?

In its attempt to create an enterprisewide view of its customers, the numbers were stacked heavily against New York City-based MetLife Inc.: a customer base amassing 100 million customer records stored in more than 30 disparate back-office systems.Furthermore, MetLife has three vastly diverse organizations-a retail bank, a mutual fund company and a newly-acquired property/casualty insurer. Data is spread across five different lines of business-property/casualty insurance, banking, institutional, brokerage and mutual funds.

Web-to-host is a relatively simple approach that insurers often overlook as they scramble to build a Web presence for internal, business-to-business, and public-facing applications.However, many companies now realize that by adding browser access to existing back-end applications, they can quickly and adequately Web-enable mainframe and midrange applications.

While recently examining data stored within one of its auto policy databases, executives with New York City-based Metropolitan Insurance Co. uncovered a troubling glitch. It was an irregularity that any seasoned IT troubleshooter would certainly have appreciated.

Allstate Insurance Co. has received nothing but kudos from analysts for the boldness and vision of its Good Hands Network-the name the Northbrook, Ill.-based carrier gave its integrated call center, Internet and agent sales strategy.But some agents don't like Allstate's multichannel strategy-especially the part that cost them their jobs. On August 1, 27 current and former agents filed a class-action lawsuit in federal district court in Philadelphia, charging Allstate with nine violations, including breach of contract, breach of fiduciary duty, intentional age discrimination and retaliation in violation of federal laws.

The myriad complexities that comprise reinsurance lines often make it difficult to conduct business via the Web, industry observers say. However, buying and selling reinsurance offline is plagued by its own deficiencies- notably excess paper processing and other accountability issues surrounding the process.Providers of independent Web-based reinsurance exchanges believe they have a more efficient process of exchanging risk globally.

Although asset management is a relatively new focus for carriers, they're on a steady course for targeting affluent customers with a wave of products and services.As the U.S. economy caught wind during the past decade, more consumers joined the ranks of the affluent population. Recognizing this socioeconomic shift, insurance carriers began steering their business strategies toward asset management services.

Following in the footsteps of the American Bankers Asso-ciation Insurance Association (ABAIA), which proposed an optional federal charter for insurers, Washington, D.C.-based American Council of Life Insurers (ACLI) has released its own draft proposal-this one geared to the life insurance industry.The draft-which was assembled by about 30 working groups involving more than 200 ACLI member companies-calls for the creation of the National Insurer Act, the National Insurer Solvency Act and an Office of National Insurers in the Department of the Treasury.

On November 13, 1999-the day after the passage of The Financial Services Modernization Act-insurance companies formed steering committees, project teams and task groups to determine what work needed to be done to comply with Title V of the Gramm-Leach-Bliley (GLB) legislation. Title V requires financial services institutions to establish privacy policies and deliver notices by July 1, 2001 to their customers informing them of how the company uses and shares nonpublic personal information. If a company shares that information with nonaffiliated third parties for marketing purposes, customers must be able to "opt-out" of such sharing. Thereafter, companies must distribute an annual privacy notice to their customers.

As the July 1 deadline nears, insurers have developed and begun to distribute their privacy policies to customers, but most companies in general haven't thought about privacy as a component of customer relationship management (CRM), industry observers say."No one is looking at privacy from the perspective of how can we establish a value proposition in which the customers will say, 'yes, please share my information,'" says Peter Reid, privacy director at Fiderus, a Research Triangle, N.C.-based security and privacy consulting firm. Privacy can be good for business-as opposed to something that is being legislated, he says.

Extensible Markup Language, or XML, has received a whirlwind of hype since its creation in 1998, promising the ultimate universal format for all exchanges of company data.But to seasoned technology experts, this promise was initially made more than a decade ago with EDI, which also portended massive efficiencies and savings in business-to-business transactions.

After several years of sitting on the sidelines, insurance carriers are now getting up to speed in selling products over the Internet. However, dealing with the state-based regulatory system, which requires carriers to jump through multiple hoops to engage in e-commerce on a national basis, threatens to slow their efforts to a crawl.

Despite huge corporate investments in personal computers, electronic mail and document scanners, the paperless workplace is still a pipe dream. Indeed, the insurance industry in particular is drowning in a white sea of computer-generated documents, customer correspondence and faxes.

The insurance industry was one of the last to open its private gates to the Internet. Apprehension about exposing confidential customer information and other proprietary data to the outside world prevented insurance companies from jumping too quickly on the e-business bandwagon.

The financial success or failure of a property & casualty carrier largely depends on the company's ability to manage risk. Based on sophisticated actuarial models, carriers can formulate a risk model for virtually every type of physical risk exposure, and through these assumptions decide whether the risk is worth bearing.

Like many other technology initiatives, insurance carriers took their cue for data warehousing from financial institutions. Several years ago, banks began to dabble in warehousing campaigns geared to enhance strategy.As many carriers now begin to explore the marketing of bank products and services, they too are faced with the task of improving their cross-selling abilities via warehousing. But if history serves as an indication, they have their work cut out for them.

In preparation for a corporate strategy meeting, a claims executive for Cleveland-based Ohio Bureau of Workers' Compensation (BWC) recently embarked on a data-finding mission. The objective: generate specific detail on all company-wide workers' compensation claims associated with railroad-related back injuries filed in Cleveland over a two-year period.Drilling down this deep for information would enable the executive to pinpoint and correct some of the inefficiencies associated with these types of claims. Once exposed, BWC could use the data to reduce its policy loss ratio and pass the savings along to policyholders.

To the casual observer, data warehousing may appear to be strictly a technology initiative. In reality, it's an undertaking that demands a close synergy between a company's business and IT leaders.The inability to realize this has doomed many warehousing ventures to obsolescence in the insurance industry. "Business leaders must define the data needs of the organization," says Jack Gohsler, senior vice president for Hartford, Conn.-based Conning & Co. "The fact that IT and business leaders have very different skill sets and points of view has made such partnerships very challenging for many companies."

Three years ago, when Jim Klotz became senior vice president and CIO of The PMA Insurance Group, the carrier's IT assets were purchased and managed in a decentralized environment. Consequently, some of the company's PCs were nearly 10 years old, seven or eight versions of operating systems were installed across the company, and technology assets were accounted for manually.