Insurers are discovering that strategic outsourcing ventures performed overseas can provide a great deal of mileage when it comes to capturing significant long-term efficiencies.Those that have launched offshore endeavors have found that establishing a presence outside the U.S. with information technology and business process outsourcing possesses a greater degree of leverage for a couple of reasons. From a labor standpoint, the cost of doing business outside the U.S. is far less expensive, and the savings can be passed along to the client.

Most IT purchasing decisions made by insurance companies put careers on the line. Don't start a project until the costs and payback can be reasonably defined.The insurance industry has been exposed to much hype about new technologies. I believe executives should avoid this urge to jump on the next technology bandwagon.

Even though claims service provided by property/casualty insurance carriers represents a major factor in their ability to retain customers and attract new ones, insurers are not providing the level of service that is considered acceptable to corporate customers and consumers, two new studies conclude.Moreover, even well-capitalized carriers that possess the financial stability to support quality claims service appear to be dropping the ball.

Over the past few years, many financial services providers have struggled to automate their operations across the enterprise. For most, the task of extracting data that resides in antiquated legacy systems and seamlessly linking these systems across various business units has proved to be nothing short of rocket science.

After spending the past several years sitting on the sidelines, mid-size insurance companies are poised to break out of their IT spending inertia.In a report titled "Technology Market Snapshot: Mid-Size Insurance Companies," Boston-based Celent Communications Inc. estimates that mid-size insurers-those with direct written premiums between $100 million and $1 billion-will spend $1.1 billion on new technology projects over the next three to five years, primarily on Web-enabled policy administration systems and agent extranets.

Bob Lucas isn't your typical insurance company CIO. For starters, he has been with one company-The Hartford-for 30 years. What's more, he's a business administration major who was hired right out of college by the Hartford, Conn.-based financial services firm.

Northwestern Mutual's IT philosophy is right out of Aesop's Fables. By applying the strategy of the tortoise and its slow and steady approach, this insurance giant with $92 billion in assets and annual revenues of $15.4 billion gets the most bang for its information technology buck.The Milwaukee-based company has to be careful how it uses technology because it can't jeopardize its shining reputation. This year, it was voted the "most admired" life insurance company for the 19th year in a row in a Fortune magazine survey. And, it ranks as the nation's best in customer satisfaction among all financial services studied, according to a Wall Street Journal 2001 report.

Environmentalists should be happy about the new document scanning and imaging system at Prudential Group Insurance-because it's saving a lot of trees. The insurer's disability insurance customers should be pleased too-because it's enabling the company to process their claims more quickly.What had been a manual, paper-intensive process of receiving disability claim documents via fax machine or mail has been replaced by a nearly paperless operation.

Insurance is an important component of modern economic life. The logical outcome of the millions of policies in force today is a proportional number of claims to pay for covered losses.From an operational cost and policyholder perspective, the claims handling process is the heart of property/casualty insurance. It's true that performing risk analysis, selling policies and retaining customers are important issues for carriers.

The outsourcing of information technology is proving to be popular with carriers these days, reversing the industry's historical apprehension of working with third parties. But experts caution that time will tell how widespread the concept becomes.In January, PacifiCare Health Systems Inc. became the latest insurer to chart this course by completing a 10-year, $1.2 billion venture with Armonk, N.Y.-based IBM Corp. and Boston-based Keane Inc.

Insurers have invested significant amounts of capital on technology based on the belief that those investments will improve their top- and bottom-line performance. However, new research indicates that carriers are experiencing mixed results to date and they're seeking refined metrics to measure how technology is impacting their operations.Those are some of the conclusions of a recent survey of 248 North American financial services firms conducted by Tillinghast-Towers Perrin. The survey is the second in a series of industry studies conducted by the management and actuarial consulting firm intended to learn how new technologies are impacting carriers' performance, and how carriers are measuring the success of IT implementations.

It's easy to define what manufacturers produce and sell. Toy makers make toys. Auto manufacturers make cars. Pharmaceutical companies make drugs. But what do insurance companies do?

When Florida Combined Life decided to become a primary player in the dental PPO and fee-for-service business in that state, it had two major challenges: an aggressive timeline and an inflexible claims system.The Jacksonville, Fla.-based subsidiary of Blue Cross Blue Shield of Florida had been offering dental coverage as an ancillary product to its health insurance offerings, and it had been paying dental claims through its health claims system. But that system was inflexible, and would not meet the company's future needs, says Charles Brody, dental division vice president at Florida Combined Life.

Five years ago, Security Insurance Co. was suffocating under the weight of paper files. The company's file room was packed to the point where the company had to place file racks in hallways, consuming office space that cost $20 per square foot.Space constraints weren't the only problems that the Alpharetta, Ga.-based carrier's paper filing system created. Call center representatives had to put customers on hold and ask a file room clerk to retrieve the caller's file just to answer routine questions. Moreover, only one person at a time could work on a customer's file during the underwriting process, a situation that didn't foster high worker productivity.

With more than 20 years of IT experience in the insurance industry, June Drewry has a vast knowledge of technology. Nevertheless, she insists she is not a high-tech wizard.In fact, when she talks about her responsibilities as executive vice president and CIO for Chicago-based Aon Corp., she peppers her conversation more with relaxed chuckles than with dry techno-speak.

In 2000, insurers rode an information technology investment wave that was largely fueled by ambitious dot-com providers eager to plant their flag in the online insurance market.A year later, insurers jumped off the wave. The dot-com shakeout that intensified in 2001 meant that more than $15 billion in technology demand had suddenly evaporated. Moreover, a sliding economy contributed to a significant IT spending spiral-reducing healthy double-digit growth in 2000 to a less-than-stellar 3% growth rate last year.

When it comes to information technology investments in the insurance industry, there is a clear delineation of priorities predicated on the sector of business in which a carrier operates.Underwriting, pricing and products are the most important IT priorities for property/casualty insurers, while distribution reigns supreme for life insurers, states Tillinghast-Towers Perrin's e-Track report on insurance technology investments, which polled 248 large and mid-size carriers across North America.

Louisiana State University Health Sciences Center thought it had an efficient claims submission system. Half the claims from the nine-hospital integrated delivery system in Baton Rouge go to Medicare or Medicaid. Staff used to load the claims on magnetic tape each week and ship them to the government payers.

In March 2000, seven major health care payers started earnest negotiations to create a joint company to enable providers to communicate with the payers via the Internet.By July 2000, MedUnite was formed with a goal of offering services within a year. MedUnite launched its services last September, only six weeks behind its original schedule. However, it's a different company from what was originally envisioned.

Insurance companies spent more than $20 billion this year on new technology. But which technologies are the most innovative and will have the greatest impact on carriers' success?The Internet won't replace agents or call centers, nor will it become the preferred method for purchasing insurance. But it certainly is becoming an integral part in carriers' efforts to market, support and sell insurance policies to customers, and to attract new policyholders.