Policy adminstration

If you want a tip on selecting technologies that will enable your company to achieve its business goals, here's a good one from Stephen Wiggins, CIO of Blue Cross Blue Shield of South Carolina: Don't chase it. Let the business tell you what to do."We do not develop technology for technology's sake here," Wiggins says. "Our basic philosophy is leverage what you have. As long as what you have is flexible enough to meet your business needs, then build on it-because it retains knowledge from the past."

Insurance companies have lagged behind Corporate America in adopting the Internet as a distribution channel. But over the last two years, carriers have directed IT and advertising resources toward developing the technology and promoting their Internet sales strategies.

Insurance executives apparently are unfazed by the dot-com meltdown of 2001. Business-to-business e-commerce clearly dominates the IT efforts of insurance carriers as they seek to increase online product delivery and data exchange with business partners, according to the findings of a recent survey of 73 carriers, agents and brokers conducted by Insurance Networking.

When colleagues describe Robert V. James, there's no mistaking him for the tradition-bound stereotype of an insurance executive. Instead, they use such adjectives as progressive, creative and charismatic.Co-workers credit his high energy for rapid changes at Chicago-based CNA Insurance Cos. As executive vice president of CNA's Technology Solutions Group, James has attracted top talent to his team, launched an eBusiness initiative from scratch and revolutionized the way the insurer communicates with its agents.

Extensible Markup Language, or XML, has received a whirlwind of hype since its creation in 1998, promising the ultimate universal format for all exchanges of company data.But to seasoned technology experts, this promise was initially made more than a decade ago with EDI, which also portended massive efficiencies and savings in business-to-business transactions.

During MetLife Inc.'s arduous process last year of converting to a public company, CEO Robert Benmosche told Wall Street investors that the New York-based company would increase its use of technology to reduce expenses and its non-agent workforce by 5%.

When Allstate made its bold move to direct sales, the Northbrook, Ill.-based carrier handed responsibility for the endeavor to one of its most-experienced executives. Steven Groot, an actuary and a lawyer, has been rising through the ranks of Allstate for more than three decades.

Despite huge corporate investments in personal computers, electronic mail and document scanners, the paperless workplace is still a pipe dream. Indeed, the insurance industry in particular is drowning in a white sea of computer-generated documents, customer correspondence and faxes.

Centralizing IT by creating a separate company is a strategy that USAA, Prudential and Kemper have pursued to bring greater financial accountability to their IT operations.When USAA created its technology subsidiary in January 1998, the primary objective for the standalone, for-profit company was to introduce financial discipline to the San Antonio-based organization's procurement of information technology.

Like many other technology initiatives, insurance carriers took their cue for data warehousing from financial institutions. Several years ago, banks began to dabble in warehousing campaigns geared to enhance strategy.As many carriers now begin to explore the marketing of bank products and services, they too are faced with the task of improving their cross-selling abilities via warehousing. But if history serves as an indication, they have their work cut out for them.

Losses and loss adjustment expenses account for 75% of automobile insurers' total costs. Yet carriers invested only $2.5 billion in claims-related technologies in 1999-less than 1% of industrywide premiums.

In preparation for a corporate strategy meeting, a claims executive for Cleveland-based Ohio Bureau of Workers' Compensation (BWC) recently embarked on a data-finding mission. The objective: generate specific detail on all company-wide workers' compensation claims associated with railroad-related back injuries filed in Cleveland over a two-year period.Drilling down this deep for information would enable the executive to pinpoint and correct some of the inefficiencies associated with these types of claims. Once exposed, BWC could use the data to reduce its policy loss ratio and pass the savings along to policyholders.

To the casual observer, data warehousing may appear to be strictly a technology initiative. In reality, it's an undertaking that demands a close synergy between a company's business and IT leaders.The inability to realize this has doomed many warehousing ventures to obsolescence in the insurance industry. "Business leaders must define the data needs of the organization," says Jack Gohsler, senior vice president for Hartford, Conn.-based Conning & Co. "The fact that IT and business leaders have very different skill sets and points of view has made such partnerships very challenging for many companies."

Three years ago, when Jim Klotz became senior vice president and CIO of The PMA Insurance Group, the carrier's IT assets were purchased and managed in a decentralized environment. Consequently, some of the company's PCs were nearly 10 years old, seven or eight versions of operating systems were installed across the company, and technology assets were accounted for manually.

Techniques that foster thinking outside the box will go a long way toward attracting small-business owners to the Web to research insurance needs, many industry observers believe.For example, Chicago-based InsuranceNoodle.com has begun to augment its small-business insurance product line with personal insurance products. "We are exploring the personal lines side of the equation," says Donald Urbanciz, CEO of InsuranceNoodle.com, an e-broker that provides coverage from multiple carriers. "It's a business-to-consumer play because the companies we sell to have indicated they want a chance to buy coverage for their home or auto. We want to give business owners a chance to buy a workers' compensation policy one day, an annuity another and an auto policy a third day."

Advances in catastrophe modeling technology are enabling carriers to take a more microscopic approach to assessing underwriting risks and predicting losses.History does repeat itself. Between 1989 and 1999, insured losses from hurricanes that struck the United States, when adjusted for inflation, totaled $45.7 billion, according to Insurance Services Office Inc. (ISO), New York.

Whether she is implementing corporate policies to attract and retain skilled technical employees or conceiving better ways to use technology to deliver service to customers, Andrea Anania believes that a business-first approach serves her well.

Can the insurance industry learn lessons from the rise and fall of the Roman Empire?

Integrate systems. Simplify the business process. Improve the profit. That's what commercial agents need from their insurers.But they aren't getting that kind of support, particularly for small commercial coverages that generate 10% or less in commission, says Donald E. Martin, founder and former chief executive officer of Cal- Surance in Orange, Calif., one of the nation's 50 largest agents and brokers and now founder of EPolicy.com.

Insurers that haven't started to integrate their diverse internal systems yet are facing what may be a slow and expensive process, says Brad Murphy, chief executive officer of DigitalEsp, an electronic commerce consulting company based in Raleigh, N.C."The insurance industry has not been an early adopter of new technology. Insurers have been early or late followers, acquiring technology slowly, only where needs are clearly documented," he says. As a result, insurers are filled with old, large systems that can be expensive to replace with integrated technology.