The nation's largest insurers together received a mediocre score for online customer respect. But the good news is: The banking and securities sector, as well as Fortune 100 firms overall, didn't ace the test either.This assessment comes from The Customer Respect Group Inc., a Bellevue, Wash.-based research company that studies the Web sites of Fortune 100 and Fortune 1000 companies. The group gave insurers among the Fortune 1000 a 6.8 overall customer respect index (CRI) for their Web sites, while financial services firms scored 6.7 and Fortune 100 firms scored 7.0.

With trading volume reportedly far below management's expectations, Web-based reinsurance risk-trading hub inreon was terminated in early May, leaving two players to service the global online reinsurance risk-trading market.London-based inreon was launched in December 2000 as a partnership between global reinsurers Munich Re, its U.S. subsidiary American Re, and Swiss Re. But according to industry sources, the decision to close inreon down came when the reinsurance giants concluded that the service would have a difficult time turning a profit-both short- and long-term.

Although the Sarbanes-Oxley Act of 2002 is focused primarily on financial reporting and accounting processes, the law is forcing publicly traded companies to assess their IT systems too.Thanks to the transgressions at Enron, WorldCom and other now notorious corporations, all publicly traded companies in the United States-including insurers-are in the throes of trying to determine how to comply with the law that was passed to deter such corporate malfeasance in the future.

Rules-based underwriting systems are designed to reflect the logic of the best and most experienced underwriters. In this way, they can provide agents and customer service representatives with the appropriate questions to ask applicants, and enable the company to more accurately and efficiently assess risk. But what if the data the applicant provides is wrong?"The problem with technologies such as rules-based systems or efforts to streamline information flow to agents is the matter of the quality of the information," says Daniel Finnegan, Ph.D., and president and founder of Quality Planning Corp. (QPC), San Francisco. "You can make all the rules you want, but if you don't get the data right, the outcome is wrong."

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.

In an effort to become comprehensive financial service providers, some large insurers have taken an aggressive approach by forming their own banks.Banks, on the other hand, have carried out insurance expansion more conservatively-mainly through the acquisition of large agencies to drive insurance-product distribution through the bank branch.

At the recent ACORD technology conference, keynote speaker Larry Downes offered a theory that information technology spending shouldn't be curtailed just because operating conditions are poor.Downes, a technology strategist, noted that technology should not be perceived "as an obstacle within a business," adding that insurers "can't save their way to success" by scaling back on IT investments.

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.

For years, Hispanic consumers have had to settle for "Americanized" versions of a wide variety of consumer goods-financial services products included. But as the Hispanic population in the U.S. rapidly ascends, industry experts insist that insurers must adopt new selling strategies to fully capitalize on a ripe opportunity.By the year 2025, Latinos are expected to represent the largest minority group in the United States. And, as this growth emerges, some insurers have begun to customize products to meet the needs of this burgeoning ethnic demographic group.

Using Global Positioning Satellite (GPS) and cellular communications technology to gather information about when and where a motorist is driving, United Kingdom-based insurer Norwich Union is launching a pilot study this summer that could play a role in transforming the way auto insurers underwrite policies.Called "Pay As You Drive," the two-year study will involve retrofitting the cars of 5,000 Norwich Union policyholders with a "black box" that will gather and transmit vehicle and driving data to the insurer's back-end systems. Norwich Union statisticians will then analyze the data to determine which variables affect risk and claims, and those results will be used to calculate usage-based premiums.

At this time of economic and operational uncertainty, many global insurers are scurrying to identify-and then rectify-vulnerable components of their operations.In April, executives at Boston-based John Hancock Financial Services Inc. believe they made a key decision to help restore stability to the operation when the carrier inked a multi-year agreement to implement IBM Corp.'s e-business on-demand solution.

Already on the defensive about the use of credit scores for underwriting, property/casualty insurers now face another assault on one of their prime data tools in the nation's largest market for homeowners insurance.In late April, California Insurance Commissioner John Garamendi all but banned carriers' use of the main data source to underwrite and rate homeowners insurance policy. For 11 years, the Comprehensive Loss Underwriting Exchange (CLUE) has tracked claims on properties and property owners supplied by carriers of the nation's homeowners insurance policies.

Last year, for the first time, more than 50% of banks in the United States produced some sort of insurance revenue.According to a "Bank Insurance Fee Income Report" from Michael White Associates, 4,359, or 52%, of all commercial banks or federally insured savings banks in the United States generated revenues through insurance sales.

When insurers examine business intelligence systems, industry observers say, data warehousing capabilities sit at the forefront of the effort."When it came to data warehousing, most insurers saw it as massive projects driven by IT and not business," says Matthew Josefowicz, senior analyst at Celent Communications Inc., Boston.

The task of turning data into an operational asset rather than a liability can be a complicated process. Sometimes it's the simple and common themes that resonate best in times of uncertainty.The concept "less is more" is regarded as a driving principle to developing a data warehouse for the purpose of enhancing a business intelligence strategy. "Building a huge data warehouse does not work if the idea is to obtain an enterprise-wide, 360-degree view of customers," says Bill Sinn, vice president, insurance healthcare marketing for Dayton, Ohio-based Teradata Corp., a provider of enterprise data warehouse solutions. "The question of 'how do you eat an elephant' certainly applies in this instance. The way you eat an elephant is, of course, one bite at a time."

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.

In response to how Allstate Insurance Co. handled its employee-agents during its reorganization in 1999 and 2000-and to prevent other employers from repeating that action-the Employee Benefits Protection Act of 2003 was introduced in Congress in March.The Northbrook, Ill.-based carrier reorganized the company to reduce expenses by $600 million annually, to bring its agents under one program, and to integrate its agency force, direct response call centers, and the Internet. As part of that plan, Allstate terminated 6,400 employee-agents in June 2000, and offered them the option to convert to independent contractor status.

Most insurance e-business solutions providers have long considered investments in Web-based insurance distribution outlets as bold and risk-taking strategies to enhance their corporate fortunes.This belief didn't deter Brookfield, Wis.-based Fiserv Inc., an information management systems and services provider, from acquiring Falls Church, Va.-based ReliaQuote Inc., an Internet-based insurance agency and brokerage that dabbles in term insurance. Consummated in April, the terms of the deal were not disclosed.