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Insurance & Technology: The Blog

« May 2007 | Main | July 2007 »

June 29, 2007

Will Wal-Mart Be Competing With Insurance Companies?

Could Wal-Mart soon be selling insurance products? It's not such a far-fetched possibility, based on last week's announcement by the Bentonville, Ark.-based retail giant that it will open 1,000 Wal-Mart MoneyCenters -– covering one-fourth of its stores -– by the end of 2008.

In an official statement, the company said: "Wal-Mart MoneyCenters will assist customers who are outside mainstream banking with convenient, nationwide access to low-cost money services, including check cashing, money orders, bill payment and money transfers." The company also noted, "Wal-Mart will continue to pilot and test many different products and services in an effort to provide the financial services customers need at various stages of their lives."
The unveiling of this initiative was the latest development in an ongoing saga that has preoccupied the banking industry, especially smaller community banks. Over the past 18 months or so Wal-Mart had been trying to obtain approval to launch an industrial loan corporation (ILC), which would help eliminate third-party transaction costs it currently incurs from processing credit, debit card and electronic check transactions in its stores. Banks made it clear they (probably correctly) viewed this as a first step by Wal-Mart towards offering a complete array of financial services, and they exerted enough pressure that earlier this year Wal-Mart withdrew its application.
But Wal-Mart clearly (and understandably) is determined to provide financial services to its existing and potential customers. Its "plan B," unveiled last week, seems to be even more ambitious than the ILC proposal. The retailer has recognized a need/opportunity to provide underbanked and unbanked people with financial services, and is determined to find ways to serve this segment of consumers.
So, what does this have to do with insurance? Well, obviously, Wal-Mart has the resources -– and, let's be fair, the ingenuity and determination –- to efficiently and securely support a broad portfolio of financial products and services. So, I'm sure it's only a matter of time before the company is also in the insurance and investments business. It remains to be seen whether this might involve selling low-cost auto, renters or homeowners insurance, or even take the form of new models such as micro-insurance, which is gaining momentum in other emerging markets. But it seems inevitable that insurers, especially personal lines carriers, must now understand Wal-Mart as an eventual competitor, and gear their strategies and systems to meet the challenge.
One more thing: Meeting that challenge shouldn't necessarily involve lobbying and pushing for legislation intended to keep Wal-Mart out of the insurance business. An industry that is seeking regulatory reform -– and that generally has applauded the inclusion of insurance in the Treasury Department's announcement this week that financial markets regulation must be revamped –- shouldn't seek to have it both ways. Successful competition with Wal-Mart (and other non-traditional players) will be all about technology proficiency in areas such as customer insight, consistent reliable service, security and aggressive pricing.

Posted by Kathy Burger

Posted by Kathy Burger at 02:06 PM | Comments

June 27, 2007

RMS/Florida Reconcile, Sort Of…

It wasn’t long ago that public officials in Florida were casting serious aspersions on Newark, Calif.-based catastrophe/hurricane modeling specialist Risk Management Solutions (RMS) for supposedly stacking the deck in favor of insurance companies by switching to a medium-term model that emphasized the increased frequency and severity of recent storms. However, it seems the two parties have come to an understanding, or the State of Florida has made its point. RMS has issued a statement saying that Florida had certified an updated version of the vendor’s hurricane model. During any other year, that would have been a routine announcement.

Since Florida does the certifying, RMS had little choice but to withdraw its “medium-term” model and toe the line. But the vendor nevertheless reasserted its position (and its dignity, one might say) in its drily expressed explanation of the conflict’s denouement:

This is the second version of the model that RMS submitted to the FCHLPM for review. The first uses RMS' forward-looking medium-term view of hurricane activity that has become the 'new average' since 1995, reflecting the increase in hurricane frequency and intensity being experienced in the Atlantic basin. Earlier this spring a review by the FCHLPM Professional Team indicated that the regulatory standards would not accommodate the RMS forward-looking medium-term view, so RMS withdrew this version of its model from the certification process, and re-submitted one based on the historical average.

Posted by Anthony O'Donnell at 04:14 PM | Comments

June 19, 2007

Last Call For I&T's Elite 8 Nominations

The insurance industry continues to struggle to attract talent, in great measure because the workings of the industry demand a high level of talent, despite what the more cynically minded among us might say. Here at I&T we're in the midst not so much of attracting talent as identifying it, as we move toward the deadline for nominations for Insurance & Technology's Elite 8. This annual issue profiles eight innovative and successful senior technology executives in the insurance industry (check out the I&T's 2006 Elite 8 issue).

Unsolicited nominations have already begun to trickle in, along with the beginning of those that we solicit from analyst and consultant sources.

We hope to see several more and, as in years past, we're a little surprised that we haven't already received many more—especially on the part of vendors nominating their customers, since it's a great way for the former to receive some desperately desired publicity.

That said, if we didn't receive another nominee after today, we'd still be somewhat saddened that we had to pass over some very deserving technology executives. However many multiples of eight we end up receiving, we'll have the same old problem of picking only eight honorees out of a stellar field of nominees.

The cynics referred to above might scoff at the idea, but there are far more high-quality candidates than we could ever acknowledge. At the very least, we'd like the worthiest technology execs to have a fighting chance, so consider this note a call to get those nominations in. It will only make our job harder and more bittersweet, but then again, the definition of "elite" is that select few, and the more worthy people we consider, the higher the quality of the winners, and the greater the distinction of the Elite 8 Award.

That at least will make writing our annual Elite 8 issue all the more fun, along with celebrating the Elite 8 Award winners themselves, which we will do at the Elite 8 Award Dinner at I&T's ninth annual Insurance & Technology Executive Summit, held this year at the Phoenician in Scottsdale, Arizona from November 4th to the 7th (Visit I&T's registration page to register for the event). We hope to see you there.

Please submit nominations directly to aodonnell@cmp.com, including the name, title and company (include lines of business). Explain why your nominee should be considered for the Elite 8 Award in 500 words or less, and indicate major achievements in bullet points. Feel free to include any addenda that you believe help make the case for your candidate. Deadline for nomination submissions is July 6.

Posted by Anthony O'Donnell at 05:25 PM | Comments

Liberty Mutual's Jim Sweeney Teams Up With Business, IT To Optimize Solutions Delivery

Jim Sweeney has built a career on partnering with business and IT to optimize solutions delivery, as exemplified by his recent role as second vice president at Guardian Life (New York), where he transformed the carrier's corporate project management office, and as a consultant before that.

Sweeney is now applying his expertise to support the delivery of state-of-the-art technology to agents as vice president and manager of systems development planning and management for Liberty Mutual Agency Markets (a unit of Liberty Mutual, Boston; total assets of $88.1 billion).

Sweeney will work closely with IT and the business, beginning with a review of the current state of process and technology, in order to chart a course forward. "The CIO James McGlennon and I are going to work with the business people to help them shape what they want to do, based upon where they are today," Sweeney says. He describes his role as "partnering with IT for the business."

Sweeney will also oversee Liberty Mutual Agency Markets process reengineering department with a view toward formalizing a continuous improvement process based on feeding metrics into ongoing initiatives, and he will engage with project teams to assist them in execution.

- Anthony O'Donnell

Posted by Anthony O'Donnell at 05:15 PM | Comments

Insurance Call Centers Lag Behind Other Industries, Survey Says

While there are many signs that the insurance industry has made overall customer service improvements in the past few years, a recent study shows it still has a way to go when it comes to call center satisfaction. According to the CFI Group’s Call Center Satisfaction Index, the insurance sector trails all other industries surveyed — save personal computers — in terms of call center customer satisfaction.

The insurance industry earned an overall score of 68, which the report called worrisome. Banking call centers scored a 77. Catalog retailers earned the highest marks, with a score of 80. The index was based on a 100-point scale.

The study showed that customer satisfaction was closely tied to call resolution. Within insurance, the 73 percent of respondents that reported that their issues were resolved also expressed overall call center satisfaction, awarding insurers an average satisfaction score of 80. For the 22 percent (the remaining 5 percent didn’t know if their issue had been resolved) whose issues were not resolved, however, the average satisfaction score dropped to an abysmal 29.

Further, insurance sector customer service representatives (CSRs) scored well overall but again dropped the ball when it came to call resolution.

Posted by Nathan Conz at 04:31 PM | Comments

Safeco Insurance Launches Teensurance Program

In an effort to differentiate itself in a crowded auto insurance marketplace, Seattle-based Safeco Insurance recently rolled out the Teensurance program, a bundle of technologies and services designed to aid parents as they deal with their new teen drivers. The program was launched by Open Seas Solutions, a division of Safeco formed last August to focus on research, development and innovation.

The Teensurance program allows parents to monitor specific aspects of their teenaged children’s driving, thanks to the Safety Beacon, a GPS device installed under the dashboard. Parents can set specific speed, distance, location and curfew limitations, according to Safeco. Notifications are sent when those limits are exceeded.

Teensurance will be available starting June 27. To view a video demo of the Teensurance system in action, visit the Teensurance Web site and click "View Teensurance Video."

—Nathan Conz

Posted by Nathan Conz at 04:25 PM | Comments

June 18, 2007

What Does Beneducci's Departure From FFIC Signify for the CEO Role in Insurance?

You've heard of the Sports Illustrated and Time jinxes –- no sooner does a prominent figure from the sports, political or business worlds appear on the cover of one of these magazines and they either go into a literal or figurative slump, or take on some kind of new assignment -– either way, rendering the previous coverage obsolete. Well, it appears now that there may be an Insurance & Technology jinx. No sooner had we featured Fireman's Fund Insurance Company's president and CEO Joseph Beneducci on the cover of our June issue as one of I&T's 2007 Tech-Savvy CEOs, when the Novato, Calif.-based carrier announced that Beneducci had suddenly and unexpectedly (according to the company) resigned.

So far there's been plenty of speculation but not any real information about the factors in Beneducci's departure. If, in fact, it truly was the 39-year-old executive's own choice, look for him to resurface in a different, high-profile spot. Then, again, for all we know there could have been internal factors (such as board demands, budgets, parent company Allianz pressures, rank-and-file attitudes, etc.) that somehow came together to convince Beneducci it was time to leave.

If nothing else, the sudden turn of events illustrates that -– as with jobs at every level, not only in insurance but across business and industry –- the CEO role is in transition. Not long ago, the CEO was almost a celebrity, vaunted as a wonder-worker who could accomplish anything from boosting the company's stock price to improving brand awareness to driving innovation. In today's post-Enron/Worldcom/Tyco scandals world, CEOs are still expected to accomplish these goals and also are expected to have hands-on industry and operational expertise, be sensitive to global warming issues, and have insights about which sports teams, events and sites to sponsor (among an array of requirements. Clearly, as the job becomes more complex, it also becomes harder to succeed in this position.

In today's business environment of continued layoffs, stagnant salaries, reduced benefits and mega-mergers, it's hard to feel a lot of sympathy for a CEO who finds himself (or herself), in that timeworn euphemism, "pursuing new career options" (which may or may not be exactly the case with Joe Beneducci). But you certainly do have to tip your hat to the CEOs who succeed, flourish and truly make their organizations more competitive.

Now, we just have to convince these folks to appear on the cover of Insurance & Technology.

Posted by Kathy Burger

Posted by Kathy Burger at 02:31 PM | Comments

June 11, 2007

Fireman's Fund's CEO Resigns

Novato, Calif.-based Fireman's Fund has issued a press release saying CEO Joe Beneducci has resigned, effective immediately. The carrier has named former CEO, Chuck Kavitsky, president of Allianz of America, interim CEO.

This very sudden announcement included the following comment:

“Joe has been a significant part of Fireman’s Fund’s success and I want to thank him for his many contributions,” said Kavitsky. “We are fortunate that Fireman’s Fund has deep bench strength in its leadership team in addition to a strong position in the property/casualty insurance market. Our direction and strategy will continue as planned.”

There was no further comment from Fireman's Fund about the reason for Beneducci's departure or whether he was moving on another opportunity.

Posted by Anthony O'Donnell at 04:02 PM | Comments

June 07, 2007

ACORD LOMA podcasts

1. The Future of Insurance Technology [download]
I&T’s Editorial Director Kathy Burger interviews technology analyst Kimberly Harris-Ferrante of Gartner about what insurers need to know about tomorrow’s hottest technologies.

2. Claims and Technology [download]
I&T’s Associate Editor Nathan Conz interviews Celent’s Senior Analyst Donald Light about the challenges and opportunities facing insurers in the area of claims operations.

3. Transforming Policy Administration [download]
I&T’s Senior Editor Anthony O’Donnell talks to The Hartford’s Gary Plotkin and Celent’s Chad Hirsch about the industry trends towards replacing legacy systems and SOA integration.

4. Mastering Multi-Channel Distribution [download]
I&T's Editorial Director Kathy Burger talks to Chubb's Linda Dodson and ACORD Director and WRG CIO Keith Savino about changing distribution models and the factors that drive the changes.

Get I&T Podcasts in iTunes

Posted by Vitali Zhulkovsky at 08:47 PM | Comments

June 05, 2007

Skywire Launches InsBridge 3.8

Skywire Software (Frisco, Texas), announced the availability of InsBridge 3.8, the latest release of the rating, rules and underwriting system. InsBridge is a Web-based rating, rules and underwriting system that can integrate with any platform and operate on all major operating systems, according to Skywire. Key features of the new release inclue import and export of products, program call outs and program workflow.

Posted by Anthony O'Donnell at 04:20 PM | Comments

Trumbull Launches Subrogation Solution

Trumbull Services announced source-it vm, the newest in a series of products designed to improve the way subrogation claims are handled. In a BPO environment, source-it vm allows companies to improve productivity and eliminate tasks associated with managing a vendor network for subrogatable losses. An inventory scorecard provides performance measures including: collection, cycle time, settlement, and accurate and timely reports and payments.

Posted by Anthony O'Donnell at 04:16 PM | Comments

Pendo Signs American Agricultural Insurance Co.

Pendo Systems, Inc., New York-based provider of the portfolio accounting solutions BasisPoint, reported that it has signed Chicago-based American Agricultural Insurance Co. as its newest client. According to David Elstrom, VP, accounting systems and internal controls, at American Agricultural, "We selected BasisPoint for our nearly $1 billion of investments because it offers the most comprehensive features in an intuitive, easy-to-use package." The BasisPoint system, which runs on a Microsoft-based platform, provides the flexibility to support complex investments in multiple currencies and tax regimes, Pendo Systems says.

Posted by Anthony O'Donnell at 04:14 PM | Comments

Fiserv Debuts eFreedom Annual Statement

Fiserv has debuted eFreedom Annual Statement, a new system for NAIC filing software that is designed for enterprisewide deployment, and which offers enhanced security features. This new .NET solution represents a complete redesign and reinvention of the NAIC filing process for insurance accountants. According to Fiserv, waiting for crosschecks and internal calculations is eliminated with the system, as they are continuously updated "behind the scenes." According to Deborah Hopkins, VP Compliance Solutions for Fiserv Insurance, “The screen designs are based on Microsoft Excel, which is very intuitive to accountants. We’ve used automation at every turn to eliminate keystrokes, present an array of statements and pages simultaneously, and provide instant access to underlying data elements and formulas."

Posted by Anthony O'Donnell at 04:12 PM | Comments

CSC Launches Precedent ID for Claims Assessment and Negotiation

CSC has announced the release of Precedent ID, a Web-based application that enables adjusters to search an insurer's unique closed claim database for potentially precedential claims to support assessment and negotiation, according to the vendor. The software incorporates new technology to analyze the relationships and constraints surrounding injuries, treatments, prognoses and loss payments. CSC claims that Precedent ID is the only commercially available software that integrates information across claims evaluation, negotiation and resolution.

Posted by Anthony O'Donnell at 04:06 PM | Comments

Business Objects Planning Solution Now For Life, Health

San Jose, Calif.-based Business Objects announced that it has extended its insurance planning solution to life and health insurance. The build-out of the activity analysis solution will include the ACORD business processes in its insurance activities library. Life insurance-specific reports include balance sheets, income statements and life insurance planning models.

Posted by Anthony O'Donnell at 04:00 PM | Comments

Camilion Debuts New P&C Policy Admin System

Camilion Solutions introduced Authority Suite, which it describes as a next-generation policy administration system for the property and casualty market. Leveraging a service-oriented architecture and built on a tools-based technology platform, Authority Suite gives insurers the agility they need to overcome the challenges created by hard-coded legacy systems, according to Camilion, including the ability to quickly revise and develop new products, automate underwriting and provide online sales – all while reducing their systems maintenance costs.

Posted by Anthony O'Donnell at 03:51 PM | Comments

Hyland Releases OnBase

Hyland Software released version 6.4 of the OnBase enterprise content management software suite. The latest version provides information workers with new ways to leverage the familiar Microsoft Office System user experience to interact with OnBase transactional content and process management solutions.

Posted at 03:14 PM | Comments

MedRisk Unveils EMPower

MedRisk introduced the EMPower Debit Card, a new service for issuing workers' compensation disability payments. Claims payers send payment files electronically to MedRisk, which then coordinates with the bank to issue debit cards to each new claimant.

Posted at 03:14 PM | Comments

DAVID Launches NavRisk 4.0

DAVID Corporation launched version 4.0 of NavRisk Risk Management Suite. Comprised of NavRisk Policy, NavRisk Central and NavRisk Claims, the solution is designed to automate and streamline labor intensive and error-prone tasks associated with claims and policy processing.

Posted at 03:12 PM | Comments

Sapiens Announces New Version of INSIGHT

Sapiens International released Sapiens INSIGHT for Reinsurance version 3.5. A web-enabled solution for the insurance market, the new version is designed to support carriers and reinsurers in the management of all types of reinsurance for P&C and Life business and is capable of providing ACORD compliant XML.

Posted at 03:10 PM | Comments

Colin Powell Focuses On Openness In IASA Keynote; Attendees Hear Words Of Caution

By Anthony O'Donnell

There was a curious moment during former Secretary of State Colin Powell's keynote speech Monday at the 2007 IASA Educational Conference & Business Show. Powell rhapsodized about the open and generous character of the American people, and how in the post-9/11 era Americans need to cultivate that character and continue to welcome the outside world with open arms.

Powell built an emotional crescendo, telling touching stories, such as Brazilian students move by the generosity of a restaurant owner buying their meal when they came up short, and a Manhattan hot dog cart operator who refused to let the senior diplomat pay because America had already paid the vendor so much. No doubt many were touched, as I was, by the stories as Powell moved to an applause line saying that America would remain great "as long as we remain an open and welcoming society." And yet, the applause didn't materialize for the moving words of this man who had been welcomed to a standing ovation. Rather, a woman next to me aborted a motion to clap, seeing that others remained still, and for a second or two stray coughs punctuated an awkward quiet.

Probably a critical mass of listeners felt as I did: it's all very well to counsel and open and welcoming spirit and to applaud a degree of generous, hospitable spirit that Americans have traditionally aspired to; but are not some caveats due in an age when terrorists take advantage of openness to study at our aviation schools to learn to fly jets into our buildings, and where freelance jihadis have similarly gamed the open societies of the United States, Canada, Spain and the United Kingdom to plot and execute atrocities?

Powell left, as he had arrived, to a heartfelt standing ovation from an audience that no doubt deeply appreciates his long and distinguished career of service to his country, his leadership qualities and unparalleled experience—to say nothing of the unexpected familiarity and humor of his speech. However, I remain convinced that many held their applause because however much they agreed with Powell's optimism, many wished, if only with regard to that one argument, that it had been tempered by caution.

And caution is a good enough theme for a conference dedicated to questions that influence the spending large amounts of treasure on technology solutions—perhaps all the more with the (perhaps irrational) exuberance with which I wrote my last note, on the subject of the ACORD/LOMA conference and the state of insurance technology.

Perhaps trade show fatigue (TSF) is beginning to set in, perhaps the emphasis on sessions more than personal meetings has dampened my enthusiasm slightly, but I find myself dwelling as much this time on the risks as the opportunities. Will the rash of policy administration investments bear the expected fruit? What strategic rethinking inspires the Indian companies to continue to seek American front-men (or women)? Is SOA the new SEMCI (as suggested by Patni front-woman Judy Johnson)? Are insurance company technology organizations truly aligned with the strategic vision of senior business leadership, or is a superficial pretense of same actually undermining the success of long-term architectural planning.

For most of the big questions, there are no obvious and unambiguous answers, which is why we get together and talk about these things at shows like IASA and ACORD/LOMA, and in the pages of Insurance & Technology, to build knowledge and trust and try to mitigate the risks of technology investment. But as long as risk exists—along with death and taxes—and as long as enthusiasm leads to hype and false investment trails, caution will be a cardinal virtue of CIOs and business executives alike.

Posted by Anthony O'Donnell at 12:09 PM | Comments

Experts Debate Value, Future of SOA

By Anthony O'Donnell

Ever the controversialist, Judy Johnson, VP and principal solutions architect, Patni, speaking at the Monday, June 4 session "Analysts & Vendors Debate Insurance Technology," at the IASA Educational Conference & Business Show in Minneapolis, Minn., rhetorically asked whether SOA was the new SEMCI, as an example of vast, quixotic spending toward an elusive object.

Johnson was joined on the annual discussion panel, noted for its informed, frank and often humorous treatment of key issues, by Matt Josefowicz, Celent; Chuck Johnston, Oracle; Pat Saporito, Business Objects; and Rick Hoehne, IBM.

Josefowicz, managing director of Celent's global insurance group, began the discussion with his take on what is new in insurance and technology. "There is no 'next big thing," he commented. "It's just about doing things a bit better."

The only truly 'big thing' in recent history for insurance technology has been the emergence of the Internet as a business and consumer tool, which continues to shape the business. However, insurers are working on significant projects in areas such as those that spring from treating data as a strategic asset, Josefowicz said. He also noted the growth of business process management, which he characterized as a kind of souped-up "workflow, coming together with [enterprise application integration]."

Josefowicz cautioned against believing the hype surrounding SOA (services-oriented architecture), but said that, "SOA [enables] more efficient ways to do the same things as EAI." SOA wouldn't suddenly transform the industry, he said, but "there are incremental improvements to be made."

Data, Demographics & Differentiation

IBM's manager, business solution sales, Rick Hoehne, affirmed the role of technology in driving globalization, speed to market and valuable new architectural approaches, but focused on three specific areas where technology was especially relevant: data, demographics and differentiation.

"Differentiation will be key because technology is lowering the barrier of entry to our business," he commented. "You have to be more differentiated in products and how you work in the marketplace." Outside competitors with novel ideas threatened a complacent industry, Hoehne implied: "You should ask yourself, 'What would Richard Branson do if he wanted to attack the insurance business?'"

A self-satisfied insurance industry is also liable to underestimate the impact of demographic changes, particularly the generational differences with regard to use of information technology as a part of daily life. "The Information Age has changed what people expect from every industry," he asserted. "As much as adoption of the Internet has changed things, it's nothing compared with what consumers will expect going forward."

But consumers are not the only participants in the industry who are changing, Hoehne added, but also employees, distributors and other business partners. The businesses that will survive are not necessarily those with prior longevity and economic clout, he argued, noting that, "significant businesses are no longer around; it has nothing to do with size but rather responsiveness and agility."

Data is a key area because we are moving from treating data as a somewhat static asset to a resource, according to Hoehne. "It moves from being something you own to something you consume," he explained. "The future will see us moving not away from structured repositories, but in expanding what we can do with sparse and unclean data from diverse sources…growing at astronomical rates."

Success, Hoehne concluded, depended on the judicious use of that data in combination with a focus on the imperatives of differentiation and demography.

Pat Saporito, Business Objects' director, insurance solutions, continued the focus on data. "The growing amount of data becomes a liability to an extent, so the real trick is to make that data actionable," she said.

In the future state, the boundaries between applications, processes and the analytics they employ will grow increasingly indistinct, Saporito predicted. "Analytics become absolutely embedded in your systems and processes," she commented.

Chuck Johnston, senior director, insurance industry strategy and marketing, Oracle, predicted change in the areas of governance, risk and compliance. At a recent industry meeting Johnston recalled European executives being "horrified" at how little Americans had done with regard to compliance, for example in such areas as risk-based capital. The American attitude is, "We've got things covered; it's a process issue," Johnston said. "But are we really doing enough about governance, risk and compliance?"

Johnston concluded with a more optimistic take than Josefowicz on the degree to which SOA and BPM could reshape business. "Now that you've broken everything down [via a SOA approach] into 500 services, [BPM] allows you to weave it back together in new ways," he said.

Patni's Judy Johnson took issue with Johnson's optimism, saying, "I can believe, given all the hype, that we are, as an industry, once again on the cusp of doing something stupid."

SOA is a boon to CIOs looking for an opening to create something strategically compelling; it will generate abundant work for consultants and it will give service companies the chance to "get inside a company that they will never leave again," Johnson warned. But such eventualities would be a waste of resources because, she added, "the issue is that we have so many things wrong with the systems we already have, mixing them around won't fix them."

SOA, according to Johnson, assumes a 10-year vision to fundamentally change the way an insurer does business. The problem, is "I've never seen an insurance company whose senior leadership has a 10-year vision that they want to share with the technologists," she claimed. "Technology and architecture are not the vehicles of competitive advantage—knowing how to run the business is."

Celent's Josefowicz countered that while, "technology is not the answer, it will be part of the answer." Whereas the senior executives of insurance companies in the 2002/2003 time frame might have said to their CIOs, "Just shut up and spend less money!" they had come to the realization that underinvestment in technology was holding their companies back, Josefowicz asserted.

IBM's Hoehne was more specific in defense of SOA, saying, "I disagree that technology and architecture aren't the vehicles of differentiation. I think SOA is part of the answer."

The problem with much of the SOA hype is that it too often tends to sell SOA as a "thing" that will solve all of insurers otherwise intractable technology problems, Hoehne argued. However, he maintained that SOA is a means to move toward innovative products, sold through innovative channels. "It's not a quick fix," he affirmed, "but if you're going to be innovative, technology will help you to do it."

Posted by Anthony O'Donnell at 11:04 AM | Comments

Data Awareness Emerges At IASA 2007

By Katherine Burger

One of the themes that has emerged from discussions and presentations at this year's IASA Annual Educational Conference & Business Show in Minneapolis is the importance of insurers taking a different, more-savvy approach to information management, in order to leverage the opportunities enabled by the new generation of data management and analytical technologies, as well as to avoid the costs, inefficiencies and operational risk of poorly managed data.

"There's more data awareness in the industry than ever before," commented Peter A. Marotta, AIDM, Enterprise Data Administrator, Enterprise Data Management, ISO (Jersey City, N.J.), who is charged with both documenting ISO's data assets and taking an enterprise view or the organization's data. That's partly because there is more external and internal data than ever before available to insurance professionals, and also because technologies such as data warehouses and analytics tools potentially make that information more accessible, he noted. But more is not necessary better, according to Marotta. The challenge, he said, is "how to make optimal use of the data itself," and to view "data as a corporate asset," similar to financial assets or staff assets.

The problem, especially where less-informed users are concerned, has to do with the quality of data that's coming from a wide range of sources, including census and postal data, Marotta said. "Do you really know what that data is, where that data is, and how it's defined?" he asked. "To make the best use of data you need to know what you have."

The good news is that a growing number of insurance companies "are migrating to some kind of enterprise data strategy," he said. Marotta also is starting to see a few companies appoint someone to a "chief data officer" kind of role. Still, he stresses, this should not be viewed as strictly an IT responsibility. "A data steward has to be on the business side," he said. "A lot of companies cede [this] to the CIO or CTO." But IT can only focus on the tools and systems that help organize and store the data. "Typically it's the business people who head; if you're chief underwriter you oversee risk information; you're the guy who owns the asset."

Improved data quality is one of the potential benefits insurers can gain by adopting a straight-through processing strategy, agreed the panelists for the conference session "STP Does Not Mean Someday's Terrific Promise." Like Marotta, Celent managing director, global insurance group, Matt Josefowicz urged insurers to view "data as a strategic asset. There's an increasing awareness of importance of enterprise data – customer data, risk data and operational data," he said, adding, "The key issues about data are transparency, accessibility and quality." That said, "Data quality is a major issue – making sure data is clean and not corrupted," Josefowicz noted. "STP is key to supporting data quality."

He outlined several improvements that can be gained when data can flow through the enterprise electronically are automated decisioning and workflow; as well as integrated production systems, external data sources (e.g., automating requirements gathering) and internal data (e.g., claims and policy data).

STP actually helps an organization "leverage institutionalized business knowledge," noted Bill Dochterman, VP, product management, Insurity. "It automates the flow of business and exception processing [by] applying the right resource to the right transaction at the right time."
At Swiss Re, an organization that has been traveling the path to STP through initiatives such as development of a single electronic workflow for data and a each business has single integrated systems path for each line of business, the benefits have included reduced expenses, improved compliance and transparency, and more organizational flexibility, reported Mike Rubin, SVP, technology.

Looking ahead, Rubin said, Swiss Re is looking at opportunities to expand the current platform "to include more of a value chain, and add external data to internal data," as well as consolidating processes in a services-oriented architecture (SOA) environment, and "aggregating all data for better management and analytics."

Posted by Kathy Burger at 08:05 AM | Comments

Moving on Legacy: When and How?

By Nathan Conz

The Monday, June 4, afternoon session, "Legacy Systems - When to Hold 'Em and When to Fold 'Em," at the IASA 2007 Educational Conference & Business Show, held in Minneapolis, Minn., touched on many common concerns held by insurance company IT professionals regarding the replacement of legacy systems.

Panelist Marcus Ryu, vice president of strategy and new products at Guidewire Software (San Mateo, Calif.) described that decision as a fork in the road. Some carriers decide to place a new front end on an existing legacy system, while others undertake a longer, more costly full replacement.

While adding a new front end may be a less painful endeavor, it's not always the right choice, many of the panelists suggested. Legacy systems, in a growing number of cases, have become a key source for enterprise risk. There are compliance issues, of course, but also concerns regarding the changing workforce demographics. As older workers retire, years of legacy system knowledge are being lost.

Further, some insurers look at their legacy systems as roadblocks for innovation. "There's broad consensus among insurers that there are things they'd like to do that their legacy systems prevent them from doing," Ryu said.

Because these key business drivers are abstract, it can sometimes be difficult to justify the high cost of legacy replacement to the business. "There is an opportunity cost that goes into replacing a core legacy system," explains George Grieve, CEO of CastleBay Consulting, who described legacy replacement as changing the engines on an airplane in mid-flight.

That "mid-flight" challenge, where a legacy system must be integrated with an incoming system during the implementation process (to keep core business process running throughout), was of particular interest to many attendees, who helped steer the topics of conversation at the event.

Guidewire's Ryu initiated perhaps the event's most lively discussion when he wondered aloud about bringing up a new system in parallel to a legacy system, without integration points. New business would go on the new system, and old business would migrate over as policies were renewed.

"It may be a lot less risky than a re-build," Ryu said.

Reaction to Ryu's brainstorm was mixed, some attendees considered it a viable alternative, while others were wary of the trade-offs inherent in such a project, like the possible need for two separate teams to run the two systems. Many were doubtful that the business would accept such a plan.

"It's an interesting idea, but selling that uptown will be difficult," said Main Street America Group (Jacksonville, Fla., $843 million in net written premium) IT director Bill Garvey, the panel's lone carrier representative.

Garvey also said his company has implemented many new systems over the past several years, with varying degrees of success. He believes that the technology options available to replace core systems now are more effective than those available back in the first part of the decade, although he still sees room for improvement.

"We all looked and said 'we gotta have it,'" Garvey said when recalling those earlier years. "At the time, I don't think the software companies were ready. I still not sure [vendors] are entirely there yet."

Today though, many more software options are well written, a fact that will make the programs more effective when they become legacy systems in 15 to 20 years, some panelists said.

"What's most encouraging is that this generation's software vendors are fundamentally better [than those in the past]," CastleBay's Grieve explained. "If you can have a set of legacy systems in 20 years that you can still use, you're going to feel a lot better about things than you do now."

Posted by Nathan Conz at 04:05 AM | Comments

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