Security risk

If the laws of physics hold that for every action there is an equal and opposite reaction, then the laws of business hold that for every reaction, there can be unexpected consequences.An unexpected consequence of the recent spate of insurance company demutualizations is the renewed interest by state governments in newly revealed unclaimed property. At first blush, states would seem to have limited interest in how a mutual insurance company chooses to structure its capitalization.

Humana needed to replace its outdated billing system that relied mostly on paper and snail mail. Today Humana offers its employer-group customers an easy-to-use e-billing alternative that's available in real-time on the Internet.Back in 1999, Humana Inc. began to implement a wide-ranging e-business strategy that would include customer self-service features across its spectrum of business lines.

The mere mention of a data warehouse has often caused even the most unflappable insurance carrier executive to break out into a cold sweat.In recent years, the failure rate of data warehousing projects in the insurance industry has been a dubious distinction, owed in no small part to insurers' inability to effectively plan and execute such projects. Considered "data rich yet information poor," insurers have struggled to create data warehouses that can truly tap into the power of their customer data.

We are living in interesting times. The U.S. insurance industry is in a state of transformation as the competitive landscape changes. This transformation presents a significant upside market opportunity for insurance companies.The industry is very mature, has rich customer information, established distribution channels, favorable product positioning, and years of sound business practices and solid investment reputation.

Let's face it. During an economic downturn, every dollar earned, spent or saved seems to carry more weight than it does when the economy is growing. With more financial pressure on carriers these days, IT departments are under more scrutiny to rationalize projects and expenditures.Rationalization translates into greater discipline in measuring and managing the costs of IT hardware, software and projects-and the desire to get a more comprehensive, enterprisewide picture of those assets.

Life insurers are seeking quick and painless solutions for compliance with the USA PATRIOT Act, which requires insurers to develop and implement anti-money laundering (AML) compliance programs intended to disrupt financial networks that support terrorist groups.How they plan to achieve it is the next hurdle: will life insurers decide that it's more prudent to develop a compliance program in-house or seek third-party support? A survey released in February by Gartner Inc., Stamford, Conn., focused on how enterprises choose their anti-money laundering software, whether they were pleased with their choices and whether they were able to remain within their budgets.

The insurance industry could learn as early as this week the broad outlines and ballpark costs of the so-called third wave of asbestos litigation.That's the timeline Sen. Orin Hatch, R-Utah, chairman of the Senate Judiciary Committee, has established for drafting proposed asbestos litigation legislation as he has woven his way between industry, insurer and labor interests in an effort to forge consensus legislation that will pass the Congress.

Facing a mandate to reduce their loss exposures for a variety of reasons-from the threat of terrorism to the need to secure better insurance coverage terms-risk managers are upping the ante on loss control spending.A survey of nearly 400 risk managers conducted by Warren, N.J.-based Chubb Group of Insurance Cos. revealed that nearly 50% of respondents increased their loss control spending over the past year; 34% held their budgets constant; and 5% decreased their loss control spending.

Everyone knows the numbers by heart: Insurance fraud costs property/casualty carriers an estimated $27 billion each year, or roughly 10% of premiums collected.The tricky part is detecting fraud so that some of those losses can be redirected to the bottom line. In the world of auto repair, fraud rears its head higher during dicey economic times like now when folks are hurting for money.

Fraud can be subtle and complex. It can be hidden among voluminous amounts of data. New schemes are always emerging. Insurers understand the impact of fraud and consider it a serious problem.Fraud management technology that uses predictive modeling to identify suspicious claims can accurately cull out high-risk claims and label them at the earliest possible moment. It not only makes it practical for insurers to process and close the vast majority of claims faster, it focuses the adjusters review on claims that require the most attention. Lastly, it provides higher quality referrals to investigative units.

The quiet catastrophe of insurance fraud is gaining more attention as insurance executives continue to look to operational efficiencies-rather than investment income-to protect their bottom lines.With the Coalition Against Insurance Fraud (CAIF) estimating an annual fraud cost of $80 billion dollars, the industry has realized that the harmless fudging of a million here and a million there is adding up to real money.

The typical profile of a perpetrator of fraud has been that of trained con artist who plans his or her scheme in a calculated fashion. But a new study depicts insurance fraud not only as a sophisticated ring carried out by professionals but as an act often executed by mainstream insurance customers.The study, by Bermuda-based consulting and technology solutions provider Accenture, found that nearly one in four U.S. adults say that overstating the value of claims to insurance companies is acceptable, and more than one in 10 say they approve of submitting insurance claims for items that were never lost or damaged or for treatments that were not provided.

As concerns over asbestos liability continue to mount, industry observers say carriers need to find solutions to manage the risk-other than just throwing money at it.Insurance Services Office Inc. (ISO) estimates that newly incurred asbestos loss and loss-adjustment expenses rose from $1.4 billion in 2000 to $3.7 billion in 2001. Based on partial data, Jersey City, N.J.-based ISO estimates newly incurred asbestos losses more than doubled in 2002, rising to about $8 billion.

With technology playing an increasingly important role in the modernization and standardization of the 50-state system of insurance regulation, officials from the National Association of Insurance Commissioners have decided the time is ripe for development of standards that can make the process more seamless.The National Technical Architecture working group started work early this year on standards that will be mandatory for information projects developed directly for the Kansas City, Mo.-based NAIC, and serve as a guide for state and industry efforts that target national regulatory interoperability.

The most important aspect of getting the back-office policy administration system up and running in eight months-without delays, excuses and empty promises-was a project protocol that Security Benefit Group followed."The piece that made it successful was project management guidelines that we followed," stresses David Keith, senior vice president and CIO for Security Benefit Group, Topeka, Kan.

A year ago, health insurers, health plans, providers, hospitals and clearinghouses collectively were heaving a sigh of relief.That's because they were granted the option of applying for a one-year extension to comply with the standardized transactions and code set rules of the Health Insurance Portability and Accountability Act (HIPAA).

Allstate Insurance Co. is in the process of negotiating a settlement with the California Department of Motor Vehicles to restore the carrier's access to electronic driving records in the state.In January, California DMV officials indefinitely suspended the Northbrook, Ill.-based carrier's access to electronic driving records.

As if a ghost from the past has reawakened, property/casualty insurers are again confronting a huge potential wave of asbestos claims.Indeed, the recent moves by Ace Ltd. to boost its asbestos reserves by $1.9 billion, following Travelers Property Casualty Corp.'s decision to add almost $2.5 billion to its asbestos reserves, has caught both credit agencies and financial analysts off guard.

The insurance industry is taking aim at a survey sponsored by the Washington Office of the Insurance Commissioner which raises the issue of whether credit scoring can adversely impact the ability of low-income and minority consumers to obtain affordable insurance.The latest controversy over the use of credit scoring comes as the industry braces for another round of legislative efforts to either curb the practice or ban it altogether. As many as 40 states are expected to tackle the issue this year, industry groups say.

If you build it, they will come. But, if you want to make sure they flock to it, ask them to design it for themselves. Essentially, that's what Zurich North America did when it began developing its state-of-the-art underwriting workstation-an integrated online platform that the Schaumburg, Ill.-based commercial insurer began rolling out last year.Currently, approximately 250 large-account property underwriters are using the workstation, which houses the company's best underwriting practices, provides underwriters access to data they need from internal and external sources, and enables collaboration and knowledge-sharing between risk engineering, claims and field offices.