Policy adminstration

Over the years, financial services providers have emphasized that one key to prosperity is conducting business both faster and cheaper.But in their zeal to implement a strategy based on speed and cost-containment, many financial services providers-including insurers-watched it backfire. Rather than generating positive results, they created a series of nonintegrated applications that support separate business lines and products-a silo mentality.

Michael Keller's mission is to create a collaborative IT environment, maximize ROI on technology investments and deliver value-added services.With the rapid increase in the number of companies under the Nationwide Financial Services Inc. umbrella, Michael Keller had a formidable mission in his first year: create a cohesive, collaborative IT community within Nationwide to leverage capabilities, maximize return on IT investment and deliver more value-added services.

When insurance companies explore implementation of top-of-the-line mobile computing solutions, many concede that laptop is technology no longer on their short list for consideration.Once regarded as a viable option for conducting business remotely, laptops lost ground to other hand-held options, such as Web-enabled wireless phones, two-way pagers and Personal Digital Assistants (PDA).

To many insurance carriers, back-end processing of small-business insurance through accurate underwriting has long been a source of frustration.On the front end, providing thorough servicing for demanding business policy owners can represent another challenge. In the middle, furnishing independent agents with automated tools to build small-business volume has seen its share of tribulations.

Despite the economic slow down and the many challenges faced by the insurance industry, carriers increased their total IT budgets in 2002 by an average of 7%. On average, 35% of this spending is devoted to new projects and strategic initiatives, according to a study by Celent Communications, Boston.Many insurance companies cannot afford to not update their existing systems. In a mature and highly competitive marketplace like the U.S. insurance industry, operational efficiency and flexibility is key to profitability. To achieve these goals, insurance companies must take advantage of new technological capabilities in every step of the insurance business process or risk falling behind their competitors.

Depending on the specific application, electronic networking hubs have experienced a checkered history within the insurance industry. Hubs devoted to the claims side of insurance, for example, have met with a great deal of success in that they've enabled affiliates in the claims value chain to communicate quickly and effectively in settling claims.In launching what is touted as the first electronic networking hub to serve the life reinsurance segment, Washington, D.C.-based American Council of Life Insurers (ACLI) is hoping to "revolutionize the reinsurance business process," the association states.

At a hearing in June before a subcommittee of the U.S. House of Representatives, Joseph J. Gasper, president and COO of Nationwide Financial Services Inc., gave a telling example of the regulatory hurdles insurers face when trying to launch new products.It went like this: Nationwide had developed a new annuity last year for contract owners interested in market timing. The Columbus, Ohio-based insurer filed countrywide for product approval, but seven months later, approval was still pending in five states-four of which were major markets for the new product.

Technology budgets traditionally have been an easy target for firms looking to lob off expenses and improve their bottom lines. And, while carriers-especially property/casualty insurers-are experiencing tough financial times, they are not slashing their IT budgets, according to the findings of an exclusive Insurance Networking survey of 82 carriers, agents, brokers and services firms.Nevertheless, carriers and agencies are taking distinctly different paths this year, with carriers ratcheting up spending on internal development, while agencies are cutting back on custom software and increasing packaged installations.

Individuals who have experienced an auto accident or incurred damage to their vehicle often discover that the road to swift claims settlement is a bumpy, winding and volatile one.

Claims processing capabilities within the automobile insurance segment is not unlike a car itself-hitting on all cylinders is essential to ensure high performance.In 1999, Mayfield Village, Ohio-based Progressive Insurance Co. debuted TotalPro, a Web-based claims processing application that can be activated by both internal affiliates and Progressive policyholders.

Over the last 18 months, State Auto Insurance Co. has been using an intranet application that provides its independent agents with Web-based access to the company's mainframe for policy rates and applications.

The Internet standards-based approach to software distribution-called Web Services-promises to greatly simplify IT integration of legacy applications. Described as a "Leggo" approach for assembling different "services" from back-office systems-such as rating a policy and submitting a claim-Web services are based on open standards, including XML (extensible markup language), SOAP (simple object access protocol), WSDL (Web services description language) and UDDI (universal description, discovery and integration). As a result, customized integration is greatly reduced.But a battle is brewing between Web services platform vendors vying for market share-in particular, between IBM Corp.'s WebSphere-which is based on the Java 2 Platform, Enterprise Edition (J2EE) platform-and Microsoft Corp.'s .NET. The classic capitalistic struggle between these two camps may make Web services more complicated than promised.

Today's insurance marketplace is anything but "business as usual." Competition from new market entrants, deregulation, and fast-changing consumer expectations are challenging insurers' historically risk-averse corporate cultures.Traditional strategies and processes will not be successful in this market. To succeed, insurers must develop new business strategies and apply new technologies that will support business transformation.

As insurers' expectations for e-commerce revenue tumbled over the past couple years, e-business spending has focused on self-service initiatives such as enterprise portals and agent extranets. But most insurers lack the infrastructure and customer understanding to maximize the return on these and other technology investments, such as customer relationship management.Therefore, insurers need to create financial services hubs: technology platforms for delivering services that span multiple systems.

With the insurance industry, one moment of impact-whether it's two vans, two workers or two ships-can initiate a lengthy reporting trail weighed down by paper handling and delays. The first notice of loss, which carriers receive from agents by phone, fax, or Internet, starts the trail.

Despite the slow economy and overall reductions in IT spending since 2000, U.S. insurance companies are continuing to increase their technology spending. That's according to a June report from Celent Communications, a Boston-based research and consulting firm.Budgets for 2002 are an average of 7% higher this year than last year-totaling $18 billion industrywide, according to the report, titled "IT Spending in U.S. Insurance."

Most IT purchasing decisions made by insurance companies put careers on the line. Don't start a project until the costs and payback can be reasonably defined.The insurance industry has been exposed to much hype about new technologies. I believe executives should avoid this urge to jump on the next technology bandwagon.

Even though claims service provided by property/casualty insurance carriers represents a major factor in their ability to retain customers and attract new ones, insurers are not providing the level of service that is considered acceptable to corporate customers and consumers, two new studies conclude.Moreover, even well-capitalized carriers that possess the financial stability to support quality claims service appear to be dropping the ball.

Over the past few years, many financial services providers have struggled to automate their operations across the enterprise. For most, the task of extracting data that resides in antiquated legacy systems and seamlessly linking these systems across various business units has proved to be nothing short of rocket science.

After spending the past several years sitting on the sidelines, mid-size insurance companies are poised to break out of their IT spending inertia.In a report titled "Technology Market Snapshot: Mid-Size Insurance Companies," Boston-based Celent Communications Inc. estimates that mid-size insurers-those with direct written premiums between $100 million and $1 billion-will spend $1.1 billion on new technology projects over the next three to five years, primarily on Web-enabled policy administration systems and agent extranets.