The insurance industry was one of the last to open its private gates to the Internet. Apprehension about exposing confidential customer information and other proprietary data to the outside world prevented insurance companies from jumping too quickly on the e-business bandwagon.

The financial success or failure of a property & casualty carrier largely depends on the company's ability to manage risk. Based on sophisticated actuarial models, carriers can formulate a risk model for virtually every type of physical risk exposure, and through these assumptions decide whether the risk is worth bearing.

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.

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.

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.

In a world where even the smallest insurance company can advertise its wares to a global audience, some new and not-so-new compliance issues arise.Compliance specialists play far too limited a role in the development of insurers' Internet strategies, says Gary Hernandez, an insurance regulatory specialist with Sonnenschein Nath & Rosenthal, a San Francisco-based law firm.

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.

Purchasing new technology is like buying a new car. In both cases, you first have to assess your immediate and long-term needs, and then shop around for the product that best fits those needs.That's why it's hard to figure out why sports utility vehicles remain the vehicle of choice for many consumers at a time when gas prices have shot past $2 a gallon. Why would anyone spend more than $30,000 for a vehicle that's primarily used to shop for groceries at the local store or haul kids to soccer games?