Digital distribution

Alexandria, Va. - The Independent Insurance Agents & Brokers of America (the Big "I") disagrees with, and is disappointed by, New York Attorney General Eliot Spitzer's decision that four leading companies can no longer offer incentive compensation to agents and brokers selling their products. Spitzer announced on Nov. 30 that he has notified ACE, AIG, St. Paul Travelers and Zurich that, under agreements reached with his office earlier this year, they may no longer offer this form of compensation because they have crossed the 65% "tipping point" in those agreements as to homeowners', personal auto, boiler and machinery and financial guaranty insurance. Those agreements bar carriers from paying incentive compensation to their sales forces when more than 65% of that line of insurance is sold by companies that do not pay incentive compensation. "The independent agent and broker community is greatly distressed by this development," says Big "I" CEO Robert Rusbuldt. "These carriers are now unable to use what otherwise is a perfectly legal way to compensate their sales forces, just as is done in virtually all industries across America. It is ironic that the illegal activities uncovered by Mr. Spitzer occurred in commercial lines, not personal lines, and yet, it is largely in personal lines that the fallout is being felt today. The solution imposed on carriers and agents of banning incentive compensation is totally misplaced and directed at business that was never a problem to begin with." The Big "I" continues to defend incentive compensation as a legal, legitimate form of compensation that is employed in all sales-based industries. Any compensation system can be abused, but the problem lies with those few who abuse it, not the system itself. "There is no doubt that a few bad actors in the commercial lines area abused the system, and we have always agreed that those who break the law should be punished to the fullest extent possible," Rusbuldt says. "But it is absolutely wrong and indefensible to penalize the innocent majority for the misdeeds of a handful of people. This decision will impact thousands of agencies across the country as they face reductions in compensation that will hamper their ability to create jobs in their communities, train staff, invest in their agencies, and provide consumers access to insurance. On behalf of the hundreds of thousands of agents and brokers across America who had no part in the dishonest activity of a few, we will continue to fight to preserve the right of companies to pay legal incentive compensation." Founded in 1896, IIABA (the Big "I") claims to be the nation's oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance-property, casualty, life, and health-as well as employee benefit plans and retirement products. Source: The Independent Insurance Agents & Brokers of America

Property and casualty insurance fraud cost carriers about $29 billion last year, according to the New York-based Insurance Information Institute. The trouble is that's just part of the picture. It's safe to say the number would increase when you count fraud from life and health.It's also safe to say insurance fraud has been with us for a long, long time. Has detection improved? Does detection even matter if the perpetrators aren't prosecuted? Are insurers benefiting from fraud detection and prevention? And, how are they going about it?

Its negative connotation is deserved. For insurance companies, a data breach spells instant trouble-the least of which is potential loss of reputation, brand and revenue. If a court of law rules the insurance company is negligent, a data breach has the potential of ultimately shutting the carrier's doors.Recent research by the Chief Marketing Officer Council, Palo Alto, Calif., revealed that a company loses, on average, from 0.63% to 2.10% value in stock price when a breach is reported-equivalent to a loss in market capitalization of $860 million to $1.65 billion per incident.

By early 2004, it was obvious to everyone at the New Mexico Mutual Casualty Co., also known as New Mexico Mutual Group, that the company's green-screen legacy claims system had outlived its usefulness. The company was bringing in a new Web-based policy administration system, and the contrast between it and the tottering claims system was glaring.Navigational and functional problems with the legacy system had cut into claims department productivity at the Albuquerque, N.M.-based carrier. Only one user could work on a claim at a time.

According to a survey conducted by Fierce-Wireless-Bluefire Wireless Security this year, more than 80% of financial services respondents say their organization's use of handheld devices had increased over the past two years. Meanwhile, 87% say they are concerned about the security of e-mail access to corporate server-based accounts and of remote access to corporate networks, and 85% say that access to Web-based e-mail had become a significant security concern.

What do Carriers Need to Increase Market Share?

TOOL HELPS EMPLOYEES MANAGE THEIR BENEFITSPlanAdvisor, a benefits management tool from Milwaukee-based Zywave Inc., features a Plan Selector module to enable employees to review their own health costs. PlanAdvisor generates management reports without carrier data feeds, analyzes the effects of changes in the plan design and calculates projected plan costs, based on trend and claims information. It also offers benchmarking, modeling, and analysis to allow brokers to deliver information based on industry comparison data and actuarial factors, which can help clients make informed decisions.

Chinese insurance companies were bracing for an onslaught by global competitors last month when a commitment to the World Trade Organization dictated opening the borders to foreign competition."Almost all insurance business is opening to foreign insurers," says Xiaolin Li, a dean at Beijing-based Central University of Finance and Economics. "The exceptions are group insurance and life insurance, which requires a foreign insurance company to set up a joint venture with a local partner."

CAPITOL SELECTS STG BILLING SYSTEMMiddleton, Wis.-based Capitol Insurance Cos. chose Renaissance Billing Solution from New York-based Systems Task Group International Ltd.'s (STG) to support billing and accounts receivable operations. The system will replace Capitol's existing billing systems and will enable the consolidation, centralization and the streamlining of Capitol's cash management and accounting operations. It will provide Capitol with advanced technology support, flexibility and configurability.

Boston - As helpful as technology can be, insurers are not immune to technology glitches. One such case, as reported by The Boston Globe, hit Blue Cross Blue Shield of Massachusetts. The Boston-based insurer found itself sending out automated phone calls to Massachusetts senior citizens with Medicare drug benefits, asking them to repay up to $1,400 because the monthly premium automatic deduction from their Social Security checks failed to work.In March, The Tampa Tribune reported that hundreds of thousands of seniors received inaccurate Social Security payments because of problems with Medicare Part D drug coverage premiums, according to The Boston Globe. Most were overpaid because the premiums were not being deducted. Others received accidental refunds that averaged $215 and were asked to return the money.

Needham, Mass. - In 2007 and beyond, the global financial services industry will increasingly grapple with three major strategic shifts: reinventing financial services at its core; repurposing financial services relative to the global diversity of a changing customer base; and helping restore confidence in an uncertain world, according to a series of research reports from Needham, Mass.-based TowerGroup.The reports examine the top business drivers, strategic responses and technology priorities that will fuel core sectors of the global financial service industry in 2007.

Philadelphia - With a focus on customer service, Philadelphia Insurance Companies launched a new corporate Internet site, www.phly.com. The Philadelphia company, which designs, markets and underwrites specialty commercial and personal property and casualty insurance products for select target industries or niches including nonprofit organizations; the health, fitness and wellness industry; select classes of professional liability; the rental car industry and more, says the new Web site will provide self-service functionality to all agents and policyholders. The project quickly evolved into an Internet "program," reports the company. The creation of a program provides the framework to efficiently and strategically prioritize and bundle enhancements that will ensure alignment with business goals. The new Philadelphia Insurance Web site is designed to make doing business easier for a select group of "preferred agents" and a broader network of independent agents, which consists of 38 regional and field offices across the United States. The new site includes enhanced menu navigation, and updated search functionality. Also enhanced is the site's login authentication, now featuring one login per agent or customer. Visitors to the site can browse policies, view claims, invoices, active lists, quotes, and auto ID cards. The carrier also added an online payments feature. The project goals included an aggressive timeline, and the carrier's IT department and automated services division (project management/business requirements group) collaborated using in-house tools to manage information. The ultimate goal, says a company representative, is to provide feedback capabilities that enable a two-day response to any incoming question. Source: Philadelphia Insurance Companies

Cincinnati - A technology overhaul is continuing at Cincinnati-based Great American Insurance Co. with the decision to replace the company’s policy and customer system of record.

Sydney, Australia - Insurance Australia Group Ltd. (IAG), announced its intention to make its global operations carbon neutral within five years."As an insurance company we have been very concerned about the risks and impact of climate change on our community for a number of years," says Mike Hawker, IAG's CEO. "We have been working on ways to reduce our own CO2 emission footprint, alerting the community about the risks of climate change, and researching opportunities for our customers to benefit from CO2 reducing activities. We are furthering our efforts, by announcing our intention to be carbon neutral within the next five years."

El Segundo, Calif., - Insurers feel the need to develop original approaches to attracting and retaining customer in various market segments. During a two-day conference hosted by Computer Sciences Corp. (CSC), a few insurers gave examples of these approaches.Panelists at the conference noted that insurance marketing programs must appeal to three distinct generational groups: Generation Y (ages 18-29), Generation X (ages 30-40) and baby boomers (ages 41-59). Each group has distinct demands for service; therefore, insurers must offer different Web-based services that address their consumers' varying levels of comfort with technology.

Hartford, Conn. - Aetna Inc. is offering an interactive voice response (IVR) system called Voice2Form to enable members with both Aetna disability and medical insurance to provide consent to participate in the insurer's Integrated Health and Disability (IHD) program. Aetna's integrated informatics studies show that the IHD program may reduce short-term disability durations by as much as 10.7% or 5.6 days per claim.

Fed up with the life of an insurance agent, many aging baby boomers are retiring or choosing something spicier for their lives. Some principals are seizing the opportunity to sell their agencies to banks or another entities. While they may make big dollars or find cool waves, sticky problems remain in their wake. Too often, principals are struggling to attract new agents they can groom to take over the helm. At the same time, many of the country's brightest young business minds are looking askance at the prospect of being insurance agents; they've been spooked into thinking such positions will ultimately be filled by non-humans.The outlook seems so bleak that agents might someday vanish, and will it be technology that metes out the coup de grace? Or do most agents actually view technology as their savior?

Why is using technology to improve service to the agent distribution network so important? Our readers tell us that one of their chief concerns is agency attrition. One source quoted in this month's cover story talks about an 80% agent attrition rate within three years - that's a powerful number. Is it a question of insurance companies not understanding what agents need? Or is it a question of producers being unwilling or ill-equipped to adopt the technology necessary to compete in today's marketplace?Jeff Yates, executive director of the Agents Council for Technology at the Independent Insurance Agents & Brokers of America, suggests carriers can improve channel management by first seeking to understand the channel's challenges. To succeed, producers-especially those working with multiple carriers-must automate their processes while moving to a paperless environment and taking advantage of real-time rating systems. In the process, they can boost efficiency and productivity.

When it employees at Cincinnati-based Great American Insurance Co. got wind late last year that their new CIO would be Piyush Sing, former CIO of the Peoria, Ill., multi-line P&C carrier RLI Systems, they probably took a deep breath-rightly assuming that big changes would be coming in how the company uses technology to conduct its specialty commercial lines business. Sing's reputation for building front-end technology to match his previous company's unique requirements (RLI's motto was to provide "Fundamentally Sound Innovation" to the insurance industry) preceded him.As expected, Sing came to Great American Insurance with a similar plan, and a vision to overhaul the 130-year-old company's front-end applications for insurance processing with a service-oriented architecture (SOA) and Web services approach. Especially critical to Sing's vision: the ability to manage the appointments, interactions and state-by-state compliance requirements of a U.S. distribution network comprised of 8,000 active agents.

HARTFORD TEAMS WITH TECH GROUPThe Hartford Financial Services Group Inc., Hartford, Conn., is working with the largest technology trade association in Washington State to offer policies designed for the technology industry. The insurer will market the insurance to members of the Seattle-based WSA (formerly the Washington Software Association) through brokers and independent agents. Nationwide, the Hartford insures more than 50,000 technology companies.