Policy adminstration

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.