Policy adminstration

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.

With a $900 million annual IT budget spread across 14 business units, Nationwide Financial Services cannot afford a lot of duplication and misguided spending. However, the Columbus, Ohio-based insurance giant also needs to encourage and fund cutting-edge technology deployments to maintain its market leadership.Over the years, insurance companies have made many attempts to rein in the growth of their information systems. To promote standardized architectures, IT executives have attempted to centralize purchasing, restrict hardware purchases, or prevent "rogue" software purchases and installations that don't fit in with the master plan.

The concept of adaptive enterprise architecture is being extended outside of Nationwide Financial's vast IT structure. As part of the process, IT executives at Columbus, Ohio-based Nationwide are involved in corporate merger and acquisition decisions."We don't play a deal-breaking role in acquisitions, but we're a significant voice at the table," explains Srinivas Koushik, vice president and chief technology officer for Nationwide Financial Services. "We'll report on whether we can integrate the other company's systems."

"No more easy money for criminals, just hard time." With those words, President George Bush signed into law the most sweeping corporate reform legislation since the New Deal of the 1930s.Under the new law, the stakes for white-collar crime have increased dramatically, with the CEOs and CFOs of America's corporations now required to attest under oath to the accuracy of their financial statements under the threat of million-dollar fines and prison sentences.

After the technology exuberance of the late 1990s, the current conservative approach to IT spending seems like a hangover after a big party. But IT spending by carriers in the coming year isn't all that bleak.Depending on whom you ask, carriers on average are expected to increase their IT spending by up to 8% each year over the next few years, including this year. Last year, property/casualty and life/health carriers together spent approximately $18 billion on information technology, and they will spend $19.3 billion this year, according to Celent Communications, a Boston-based research and advisory firm.

The shortest distance between two points is a straight line. And in processing their business, insurers have found that progressing from point A to point B typically involves a straight-line approach.But there's a hitch: While the line might be straight, there's a great deal of manual redundancy and human error that lurk in the middle. By identifying technology that supports automated-or straight-through-processing (STP), carriers and their affiliates are ferreting out inefficiency and embracing a simpler method to execute transactions, billing and claims settlement.

Last February, PwC Consulting unveiled an intriguing concept known as the Virtual Insurance Community (VIC), an end-to-end component-based e-business solution designed for property and casualty insurance carriers.One major distinction that set VIC apart was its vast array of services, including Web portal development, application hosting and front- and back-office components.

Still in its infancy, knowledge management technology has the potential to help carriers deliver a consistent brand image and high-impact advertising to target audiences.Advocates of knowledge management systems have long pointed to the many benefits insurance carriers could derive from the technology, but one area frequently overlooked is brand image.

Joining Guardian as a CIO with a blank slate for improvement, Dennis Callahan has reduced IT costs, formed a collaborative partnership with the business units, and established a consistent technology direction.Dennis Callahan was content as CIO for global financial services at American International Group (AIG) when he was approached almost two years ago by The Guardian Life Insurance Company of America to be its new CIO. He was lured into joining Guardian because of the sheer challenge of "filling in a blank slate," he says.

As a result of switching to document scanning, and eventually upgrading its equipment, Blue Cross Blue Shield of Georgia has seen what its describes as a significant increase in efficiency and cost savings.The paperless office could be compared to the Loch Ness monster: People swear it exists, but no one has ever seen it. Blue Cross Blue Shield of Georgia, however, is one of the few companies that can say it has achieved this elusive goal, with the results to prove it.

Throughout much of the 1990s, the road to auto insurance accountability and compliance in the state of New York was in disarray. That's because throughout the decade, New York state officials and auto insurers watched with helpless dismay as a growing number of New York motorists circumvented a mandatory auto insurance law. They did this by carrying fraudulent insurance identification cards.In many instances, using a fake ID will only take the illegal user so far. But in New York, the inability of state databases to crack down on the activity enabled card carriers to run amok. With detection difficult, motorists saw an opportunity to create their own proof-of-insurance cards.