Policy adminstration

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.

This year, the U.S. insurance industry will spend an estimated $6.3 billion on new information technology projects. Of that amount, the industry could save $250 million or 23% of the $1.45 billion portion it spends on staff and consultants to integrate internal and external information technology systems.The magic bullet to these dramatic savings is ACORD XML, according to a report by Boston-based Celent Communications Inc. Carriers surveyed by Celent either expected to or had actually achieved integration efficiencies of 20% to 30% when using ACORD XML standards. A few reported efficiencies on some projects of as much as 80%.

When John Kellington joined the Ohio Casualty Group in May 2001, he knew exactly what challenges awaited him. That's because Kellington had worked for Ohio Casualty previously as a consultant for IBM Global Services to help transform the carrier's legacy systems."I knew that Ohio Casualty Group had excellent operating systems capabilities," says Kellington, chief technology officer of the Fairfield, Ohio-based carrier. "The major issue was that the IT department was having a difficult time delivering new business applications and functionality in the appropriate timeframes."

Web services, the Internet standards-based approach to software distribution, promises to greatly simplify enterprise integration for insurance carriers and their business partners. To take advantage of this new technology, companies are faced with choosing a Web services platform-namely Microsoft's .NET or J2EE, which is based on Sun Microsystems' Java programming language.Some industry observers predict that large carriers with multiple back-end legacy systems will migrate toward J2EE, while small carriers, typically entrenched in Microsoft's operating system for their business applications, will choose .NET. Mid-sized carriers are up for grabs, they say.

Ask most financial services distributors their sentiments about selling and servicing annuities, and a good number of them might reveal their own personal horror stories about a promising selling opportunity gone bad.Many producers face an uphill climb to precisely crafting annuities for both personal and institutional customers. Influenced both by state regulation issues and corporate strategy decisions, annuities often undergo a myriad of permutations in their design. With a product line that's often a moving target, brokers have found it tough to pinpoint products for customers' needs.

The dot-com crash certainly has extinguished the e-commerce hype, but it hasn't dampened carriers' desire to implement Internet technologies.For the second consecutive year, four Internet categories ranked at the top of Insurance Networking News' "Best of the Newest" survey, a poll of 19 technologies rated by industry experts. The executive panel rated each technology based on its impact on carriers' operations and its level of innovation.

In law enforcement, the most egregious acts of theft are often solved more quickly than cases of simple theft. That's because law enforcement officials often devote vast resources to bringing high-profile crimes to justice.High-profile insurance fraud also is often solved expeditiously for the same reason-the resources committed to the big-dollar cases are significant. But when it comes to common fraud, insurers have found that the jury's out on their overall ability to identify and curb it.

In many ways, insurance companies have become embroiled in a sticky Catch-22 regarding their ability to use, manage and deploy information technology internally.The catch: Carriers have a good shot at becoming proficient at internally managing IT if they devote only the necessary resources and apply the proper approach to making it happen. But they won't commit to either of these until they are certain that success is in the offing.

Before 1996, The St. Paul Cos. was a paper-pushing insurance company like any other. Unlike most of its counterparts, St. Paul took the technology plunge in the mid-1990s and has been floating with the currents of change ever since.It was in 1995 that the nearly 150-year-old commercial property/liability insurer began the mammoth task of creating a more efficient, automated means of delivering policy information to its army of independent agents.

For Royal & SunAlliance, processing auto claims went from being a royal pain to a royal gain-thanks to an outsourced solution that's firing on all cylinders.Insurers that strive hard to improve their claims processing abilities within auto insurance lines sometimes watch the entire effort come crashing down due to one crucial deficiency: poor auto repair experiences.

What is your organization's IT fitness level? Is your team out of breath on short distances? Or is it ready for long-distance hauling? Final performance depends on the workout, and if standards adoption isn't part of your IT team's fitness regimen, your team may be doomed to under-achieve, despite any obvious talent in the lineup.Standards use can be likened to gym membership: Everybody agrees that it's a good idea, but its only as good as the number of times you actually go and workout.