Policy adminstration

The task of turning data into an operational asset rather than a liability can be a complicated process. Sometimes it's the simple and common themes that resonate best in times of uncertainty.The concept "less is more" is regarded as a driving principle to developing a data warehouse for the purpose of enhancing a business intelligence strategy. "Building a huge data warehouse does not work if the idea is to obtain an enterprise-wide, 360-degree view of customers," says Bill Sinn, vice president, insurance healthcare marketing for Dayton, Ohio-based Teradata Corp., a provider of enterprise data warehouse solutions. "The question of 'how do you eat an elephant' certainly applies in this instance. The way you eat an elephant is, of course, one bite at a time."

An increasing number of carriers are taking advantage of the cost savings of software development using geographically disparate teams, including those located offshore. And with good reason: the economic benefits of doing so can be exceptional.Most approaches to outsourced development are best-suited for traditional maintenance and system evolution projects in which requirements are static and well-documented. From my experience, these projects can run largely on autopilot and don't require a lot of structure and management time.

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.

The potential savings for agents and carriers using real-time interfaces amounts to thousands of hours-and dollars-each day.A billing inquiry initiated through an agency management system takes two minutes, whereas the same inquiry takes eight minutes by phone, and nine minutes by carrier Web site. Those are the results of an agency workflow study conducted last year by Applied Systems Client Network (ASCnet), the user group for Applied Systems Inc., University Park, Ill.

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.

As a direct writer of homeowners and automobile insurance, Electric Insurance Co. doesn't rely on a network of independent agents to regularly interact with policyholders.Instead, Electric's call center agents interact with customers for everything from delinquent premium payments to claims-related inquiries. While this arrangement often suffices, CSRs typically lack the customer relationship skills that local agents have.

At Cincinnati Equitable, Web services have opened up new avenues of connectivity. Agents can now access rating applications housed within the Cincinnati-based carrier's Windows-based servers to look up territory and verify policy status.This is not remarkable news, since agent portal Web sites have been around for years. What is remarkable is the fact that this new application took two hours to set up and deploy-a process that usually took several weeks, according to Terry Brown, vice president of information systems for Cincinnati Equitable Insurance Co.

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.

When GE Capital announced to the world that it had saved $400 million in 1999 by applying six sigma principles throughout its organization, Marla Friedman listened.Then, as senior vice president of operations at Allstate Financial, she shared this impressive news with her boss Tom Wilson, the firm's president at the time.

When it mapped out a "scorecard" listing of requirements for a new annuity administration system in early 2000, Security Benefit Group Inc. was living in the green eye-shade era of COBOL, two mainframes and "bolt-on" systems.To make matters worse, the carrier's IT department was trapped beneath a mountain of application changes.

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.

The term "insurance card" is often equated with health insurance coverage, but a small and growing legion of insurers are issuing plastic to policyholders for more than just a doctor visit.Property and casualty insurers are finding advantages in dispensing branded stored-value debit and credit cards to customers for bigger ticket claims, particularly catastrophic homeowners claims.

The insurance industry is facing a seemingly insurmountable challenge: The leading companies need to invest in new technology simply to keep pace with escalating customer claims.But the cost of replacing policy administration, claims, product management, billing, producer management and customer/account information systems is more than any one company can bear. More importantly, it is a cost that the insurer's own customers will not fund.

When it mapped out a test-pilot strategy to use e-signature software and digitize its Medicare supplement insurance forms, Banker's Life and Casualty Co. set some very lofty goals."We wanted to reduce non-value added activities, increase productivity, improve service to our policyholders, decrease unit costs, reduce cycle time and improve both compliance and suitability," says project manager Jason Uyder, a black belt in process excellence for Banker's Life and Casualty Co.

If you build it, they will come. But, if you want to make sure they flock to it, ask them to design it for themselves. Essentially, that's what Zurich North America did when it began developing its state-of-the-art underwriting workstation-an integrated online platform that the Schaumburg, Ill.-based commercial insurer began rolling out last year.Currently, approximately 250 large-account property underwriters are using the workstation, which houses the company's best underwriting practices, provides underwriters access to data they need from internal and external sources, and enables collaboration and knowledge-sharing between risk engineering, claims and field offices.

Yom Senegor believes information technology is not some business department that you keep locked up in the basement of an organization and manage solely as a cost center."IT plays an extremely critical role in the long-term success of an insurance company and is an integral part of the business," says Senegor, senior vice president, CIO and chief corporate strategist of Seattle-based Safeco Corp., a $7-billion insurance and financial services company.