Security risk

A few years ago, when senior executives took to the podium to report their companies' earnings, no one really questioned if they were telling the truth. Today, because Enron, WorldCom and other companies have so blatantly duped investors, the federal government is hovering over them, saying "Prove it."With the threat of criminal penalties, the Sarbanes-Oxley Act of 2002 (SOX) holds senior executives personally accountable for the accuracy of their companies' financial statements. The law also requires publicly traded firms, including insurers, to document and test their internal financial controls, and report within 48 hours any "material" events or weaknesses that may affect their earnings.

For most insurers, there's a natural inclination to settle claims swiftly, particularly to satisfy customers who might take their business elsewhere. But as insurers improve claims processing time, ironically, many are paying a high price.To their chagrin, efficiencies surrounding claims settlement can actually produce negative results. Ultimately, many carriers find themselves dispersing dollars that shouldn't have been paid in the first place, due to claims fraud.

As insurance CEOs mull over their IT teams' plans to purchase new technologies, inevitably the decision boils down to this: What's the financial upside? It's an important question to ask, although a clear quantifiable answer is often hard to come by. However, two articles in this issue-fraud detection and financial reporting-offer clear-cut reasons for why insurers should consider implementing these business-supporting technologies.Fighting fraud is a multi-billion-dollar challenge for the insurance industry. Some estimates calculate the total annual cost of fraud across health, life and property/casualty lines is between $85 billion and $120 billion.

With public concern about credits scores far from extinguished, 11 state insurance departments-dubbed "the coalition of the willing"-are planning to conduct their own multi-state study of the effects of credit-based insurance scoring on consumers.The 11 states-Alabama, Indiana, Louisiana, Maryland, Michigan, Missouri, Montana, Nevada, Oregon, Washington and West Virginia-have issued calls to insurance companies for individual policyholder data in order to conduct their research on the effects of scores, which insurers use to price auto and homeowners policies.

When it considered the various ways to comply with the security rule included within the Health Insurance Portability and Accountability Act (HIPAA), Chattanooga, Tenn.-based BlueCross BlueShield of Tennessee identified its "incident response" capabilities as a viable compliance strategy.More specifically, the Tennessee Blues plan formed an incident response team (IRT) to respond to information systems incidents that could potentially compromise the security of personal or protected health information of its customers. The Blues plan can now better respond to information systems incidents as a cohesive team and minimize impact of incidents on its business and customers, says a security analyst at the company.

HARTFORD, Conn. -- The process of proofreading 17-digit automobile VIN numbers or lists of property coverages can consume as much unproductive time for an insurance agency as recording account information with a quill pen. New tools are needed to match the insurance business with the competitive needs of a new century. Thanks to one major insurance company, agencies will soon find they have more time to devote to managing customer relationships, time which used to be spent knee-deep in paperwork.

OVERLAND PARK, Kan.-- Sprint announced plans today to launch Sprint Mobile Claims Adjustor, a mobile solution that will allow insurance claims adjustors to process claims on-site using wireless handheld devices.

SAN FRANCISCO--Quality Planning Corporation (QPC), the Rating Integrity Solutions Company, today released its annual Premium Rating Error report. The report concludes that premium rating errors lower the overall profits of auto insurance companies. QPC estimates that $15.2 billion of premium revenues were foregone in 2003 due to inaccuracies in rating information. The report can be found online at: http://www.qualityplanning.com/research.html.

BLOOMFIELD, Conn.-- CIGNA HealthCare and WebMD Health today announced a multi-year agreement that will offer help to millions of CIGNA HealthCare members in making vital health care decisions and in understanding and using their health care plan. Under the agreement, CIGNA will integrate WebMD Health's comprehensive suite of online health information and decision support tools into myCIGNA.com, the personal health benefits Web portal for CIGNA HealthCare members.

Uniondale, NY--OnlineBenefits Inc., provider of Internet-based HR solutions, announced that it has signed a Letter of Intent to acquire Captiva Systems, a producer of agency management software for group insurance brokers.

Atlanta--Jacada Ltd., a provider of solutions that accelerate business improvement, today announced Jacada Fusion, a first-to-market solution that delivers The Perfect Interaction between people, process, and information.

NEWARK, Calif.-- Risk Management Solutions (RMS), the world's leading provider of products and services for the management of catastrophe risk, today announced that it has released a new data formatting tool called the RMS Data Wizard. The tool is designed to help clean up and convert data about insured locations into a common format for use by insurance buyers, agents, brokers, insurers, and reinsurers.

NEW YORK--AIG Technologies, Inc. (AIGT), a member company of American International Group, Inc. (AIG), today announced the launch of WINS Now, a Web-based insurance processing system designed to streamline policy administration and increase speed to market for Managing General Agents (MGA) and small property-casualty companies, including start-up and virtual insurers.

SPRINGFIELD, Mass.-- MassMutual Retirement Services unveiled new aged-based asset allocation options that allow defined contribution (401k) plan participants to select an automatically-adjusting investment strategy based on their anticipated retirement date.

COLUMBIA, S.C.-- Following health insurance scams that have hit South Carolina recently, BlueCross BlueShield of South Carolina has added new tools for consumers to use to report fraud.

COLUMBIA, S.C.-- Insurance Services Office Inc. (ISO) has launched the new Microsoft .Net-ready version of its ISO Claims Outcome Advisor (COA) personal injury claims management solution. COA Release 3.1 offers major new features, including the Treatment Protocols function and enhancements to the COA Medical Library and Settlement Analyzer tool. This will enable claims handlers, managers and third parties across the entire enterprise to manage information about personal injury claims via a secure Web browser, thereby speeding up claims resolution, improving accuracy and ensuring best practices.

Data standards are critical to streamlining the financial reporting process, according to industry sources. And a new add-in to Microsoft Office 2003--to be released this summer by the Redmond, Wash.-based software giant--may be the missing link in the concept of "straight-through reporting."The Microsoft add-in will provide XBRL support within Word and Excel, and it will enable companies to automate manual tasks associated with using Word and Excel for financial reporting, says Mike Willis, founding chairman of XBRL International and partner at New York-based PricewaterhouseCoopers.

Rating agency demands (71%), financial reporting issues (55%), shifting product preferences (55%) and changes in regulatory requirements (48%) are driving the industry's need for improved risk and capital management practices, according to life insurance company CFOs surveyed by the Tillinghast business of New York-based Towers Perrin in its latest CFO survey.As a result of such pressures, 86% of the CFOs surveyed say they are paying more attention to risk and capital management practices. Four out of five (81%) of the executives polled are going one step further; they are proactively implementing them.

It's no secret that for insurers, aligning technology staffs and business units into a full partnership has been challenging. Frederick Matteson, the newly appointed chief information officer for Novato, Calif.-based Fireman's Fund Insurance Co., isn't able to fully grasp the automation-related woes that have bedeviled insurers. That's because Matteson has deftly been able to avoid them himself.Having spent a number of years as an executive in the brokerage industry, Matteson championed the concept of total alignment between IT and business long before it became commonplace. A proponent of disciplined strategic scenario planning, Matteson has a keen sense of determining early on whether to expand or reduce a corporatewide initiative, including those centered on information technology.

When it comes to inefficiencies surrounding information technology security practices, global corporations are discovering that to err is human.A survey conducted by Oakbrook Terrace, Ill.-based global trade association Computing Technology Industry Association (CompTIA) discovered that human error-defined mainly as a lack of adequate certification and training-is the root cause of lax IT security at most corporations.