Data security

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.

In today's tough economic climate, insurers are striving to increase productivity and efficiency while keeping expenses in check. And, due to escalating competition, they are also doing more to retain existing customers.As a result, many employees are overwhelmed by the challenges of finding and delivering the right information to customers when, where and how it is needed.

No one would argue against the fact that the insurance industry has been engulfed in a perfect storm over the past few years. Consolidations, monumental loss experiences, economic turmoil and investment declines have conspired together as never before.Faced with a hard market, staff and training reductions, and stagnant capital and IT budgets, insurers are under greater pressure than ever to work smarter, faster and more efficiently.

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.

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."

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.

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.

We are living in interesting times. The U.S. insurance industry is in a state of transformation as the competitive landscape changes. This transformation presents a significant upside market opportunity for insurance companies.The industry is very mature, has rich customer information, established distribution channels, favorable product positioning, and years of sound business practices and solid investment reputation.

Let's face it. During an economic downturn, every dollar earned, spent or saved seems to carry more weight than it does when the economy is growing. With more financial pressure on carriers these days, IT departments are under more scrutiny to rationalize projects and expenditures.Rationalization translates into greater discipline in measuring and managing the costs of IT hardware, software and projects-and the desire to get a more comprehensive, enterprisewide picture of those assets.

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.

Everyone knows the numbers by heart: Insurance fraud costs property/casualty carriers an estimated $27 billion each year, or roughly 10% of premiums collected.The tricky part is detecting fraud so that some of those losses can be redirected to the bottom line. In the world of auto repair, fraud rears its head higher during dicey economic times like now when folks are hurting for money.

Fraud can be subtle and complex. It can be hidden among voluminous amounts of data. New schemes are always emerging. Insurers understand the impact of fraud and consider it a serious problem.Fraud management technology that uses predictive modeling to identify suspicious claims can accurately cull out high-risk claims and label them at the earliest possible moment. It not only makes it practical for insurers to process and close the vast majority of claims faster, it focuses the adjusters review on claims that require the most attention. Lastly, it provides higher quality referrals to investigative units.

The quiet catastrophe of insurance fraud is gaining more attention as insurance executives continue to look to operational efficiencies-rather than investment income-to protect their bottom lines.With the Coalition Against Insurance Fraud (CAIF) estimating an annual fraud cost of $80 billion dollars, the industry has realized that the harmless fudging of a million here and a million there is adding up to real money.

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.

The most important aspect of getting the back-office policy administration system up and running in eight months-without delays, excuses and empty promises-was a project protocol that Security Benefit Group followed."The piece that made it successful was project management guidelines that we followed," stresses David Keith, senior vice president and CIO for Security Benefit Group, Topeka, Kan.