If insurance is indeed sold and not bought, it is because consumers continue to find the product complex and confusing. This may be less the case with car insurance in the age of online quoting and shopping. but even with that line of business, consumers may be more focused on price than on the arcane wording of policies and the actual details of the coverage they are purchasing.

That thought struck me as I watched Allstate's recent "Pop Quiz" advertisement, which invites consumers to ask themselves, "Are you covered?" The ad takes viewers through a set of unusual accident scenarios and, through the compelling voice of spokesman Dennis Haysbert, plants a seed of doubt:

What if you hit a car because another car hit you? What if you hit one that cost more than $60,000? What happens if your friend wrecks your car? Or if a city tree falls on it? What if someone breaks in? What if? Are you covered for that? Don’t hope so, know so. Call Allstate agent today for a free Good Hands Coverage Checkup.”

The ad executes an ingenious diversion from the simple question of price that has driven so much business in the direction of Progressive and GEICO. It taps into the appetite of more engaged insurance consumers who increasingly expect to make more informed decisions, and it avails itself of one of the most powerful motivating forces: fear.

Homeowners' insurance aggregator HomeInsurance.com took a similar approach with an Aug. 18 press release about a survey it conducted. The survey found that 54 percent of all homeowners admitted they knew "not much at all about their home insurance policies.

As with Allstate's ad, the release is calculated to drive consumers to its site (through the intermediation of story-hungry journalist) where it can offer up quotes from its carrier partners such as Travelers, Safeco and Foremost. HomeInsurance's ploy sweetens interest by making the ignorance of consumers a matter of public record, adding a layer of humiliation to the basic fear ploy it shares with the Allstate ad.

Lest I'm misunderstood, I don't see anything wrong with this at all. Quite the contrary. Alerting consumers to ignorance that may cost them is a public service. If Allstate and HomeInsurance gain more mindshare in the process, good for them. Consumers remain responsible for sorting out what coverage suits them, and from which insurance carrier.

To that extent, these ploys are a win/win for carrier/distributor and consumer. But the value goes even further. Encouraging consumers to learn more about the specifics of coverage will help them to avoid under-coverage. If it's worth having insurance, then it's worth having enough insurance to secure one's property. If consumers understand their exposure better, they are likely to minimize their own risks by buying adequate coverage. Insurers have been trying to crack the under-coverage problem for ages, so this is a major step in the right direction. Policy holders buying more comprehensive coverage means good business for insurers. Furthermore, adequate coverage helps insurers avoid one of the biggest sources of bad insurance PR: policyholders who feel they've been cheated when their insurer informs them that they're not covered for a loss.

In that vein, the level of transparency afforded by collaborative examination of coverage creates a higher level of trust between consumer and insurer, and not least by conditioning realistic expectations for the claims experience.

As technology has made price comparison a competitive battlefield, it can similarly help insurers to invite comparisons with regard to coverage transparency. The next step for efforts such as Allstate's "Coverage Checkup" will be for them to rise from being a gimmick to attract customers to being a standard service by which insurers can further differentiate themselves. This service will likely develop as have others in the e-commerce realm, appearing early on in the form of tools in the hands of CSRs and distributors, and later as self-service functionality available through the carrier's customer portal.

I've written enough articles on transparency tools, mobile-enabled provider search capabilities and physician rating systems that, as an insurance technology journalist, I feel that the health industry is in a pretty good place with their consumer-facing web sites.

However, as a consumer, I know that the industry still has a long way to go. Health insurers' web sites are still, in many ways, limited. At least in my experience, I've found basic tools such as provider networks directories to be out of date and incomplete. Has functionality improved drastically over the past five years? Sure, but, as start-ups like ZocDoc.com show us, there's so much more than can be done.

ZocDoc, founded about a year ago, is sort of like an OpenTable.com for health care providers. Individuals seeking treatment can search the ZocDoc site based on location, specialty area and, perhaps most importantly, whether the physician accepts your particular insurance plan. Using the site, individuals can find open times and schedule appointments online.

In public comments, ZocDoc's founders have been very critical of insurers' web sites, and that's likely because the start-up company is positioning itself as an alternative source of information to insurer's member web sites.

In my opinion, some of that criticism is a bit off base. While I'm sure there are many insurer sites that are poor, there are just as many that are very effective. The ZocDoc technique of picking out particular aspects of particular insurance sites doesn't really accurately portray the industry as a whole. It's a bit like using the Kansas City Royals as an example when criticizing how poorly Major League Baseball teams are performing.

However, the basic premise of what the ZocDoc team is saying does ring true. Members should be able to expect more from their insurer's Web sites. If people can make reservations at a restaurant online, then they should be able to just as easily book a doctor's appointment.

It's too early to tell if ZocDoc will ultimately find success, as there are many challenges ahead – mostly around developing a critical mass in terms of provider participation. Regardless though, this should serve as a wake up call to insurers: The technology exists to drastically expand the functionality of carriers online provider directories -- already the most popular online tool for most insurers.

Actuarial consultant EMB is advising insurers to jump on the telematics bandwagon and give auto insurance customers the option to “pay as they drive,” to paraphrase Progressive Insurance’s patented cliché (Pay As You Drive). “Usage-based insurance will become the industry standard in the next five years,” EMB predicts.

Well, maybe. When Progressive Insurance first put together the technology it failed to result in a successful launch. However, the company licensed the technology to (Aviva-owned) Norwich Union in the U.K., and that carrier did launch a program. Now Progressive has launched its MyRate/Pay As You Drive (PAYD) program, available to drivers in Oregon, Minnesota, Michigan and Alabama (it’s hard to see what that last state fits with the rest, but I’m sure Progressive has a wicked algorithm that proves that it does). Meanwhile, Norwich Union has discontinued its PAYD program.

In the wake of Norwich’s pioneering use of PAYD, conventional wisdom was that Americans were more suspicious about anything smacking of surveillance. Perhaps the British weren’t all that different. Other Commonwealth countries have adopted the approach, including an Aviva program in Canada. And now Progressive is taking its chances in states where perhaps there is less antipathy to what might be perceived as Big Brother-like intrusions into the private space.
EMB’s recommendations are largely focused on the technical issues:

Insurers must develop a method of obtaining data, either through driver self-reporting, existing tools such as OnStar, or new tools such as proprietary hardware that plugs into the on-board diagnostic port (OBD) and uses the car's internal computer to track driving behavior. Then, challenges arise around how to retrieve and store the information, which data matters, and how to develop predictive models that meet customer acceptance and regulatory scrutiny, all while considering the privacy of the customer.

Clearly, the consultancy takes the privacy issue seriously, but it doesn’t allude to any distinctly American attitude about privacy. That was disappointing because the first thing I wondered when I heard EMB’s prediction was whether they would comment on the cultural issue. I don’t have any information about other PAYD programs in Britain, or in Canada and South Africa.

However, the failure of Norwich’s program resurrects the question of cultural barriers to PAYD programs. News reports say that Norwich claimed that consumer demand was affected by a slow uptake on the part of automobile makers. The suggestion is that pricing included installation charges for the "black box" that records the telematic information; if cars came ready made with the capability, costs would be lower and not tied directly to premium. Assuming that factor affected demand for Norwich's product, it still may not reflect the whole picture.

Many social commentators claim that technology has already killed privacy and we just haven’t noticed yet. As we begin to notice, will we be ready for PAYD? Will tough economic times push careful drivers over the PAYD edge? Will parents wanting to monitor their teen drivers be the thin end of the wedge? Or will Americans (and others) continue to resist intrusions to their privacy? Or—another possibility—will hackers find a fraud greenfield in PAYD and similar programs, making those programs less attractive to the insurers?

It will be interesting to see how EMB’s prediction plays out. Wagers?

It seems only fair that there should be some compensatory dividend for enduring a prolonged winter this year but that is certainly not the case for the P&C industry. In the midst of this soft market, floods and wildfires already resulted in massive losses before the first tropical storm of the year had made its appearance.

Bad business results are untimely for companies struggling to modernize, especially mid-tier P&C companies. It would be nice, then, if they could achieve their goals without unnecessarily high systems investments. The prevailing thinking about policy administration may not help.

Despite the welcome availability of newer systems built on more open architecture, the industry mindset is still stuck on the "monolithic" mode. Carrier business and IT execs still think in terms of policy administration rather than the specific capabilities they need. As Deb Smallwood of Smallwood Maike & Assoc. puts it, carriers are thinking from back office to front, rather than from front to back. She advises that insurers focus on the capabilities they need and not assume they need a multimillion dollar, whole-hog policy admin replacement.

Vendors can hardly be blamed if they cater to this perception. However, says a CIO friend of mine, "while they will try to sell you the whole system, if pressed they will sell bits of functionality in modular fashion."

That would save carriers buying redundant code where they have already achieved some degree of modernization or simply where they have viable capabilities.

Of course all this fits with the direction technology architecture is taking toward more plug-and-play integration, service-orientation and zero functional redundancy. To get there, the vendors who have the technology may need to make it easier for carriers to shop a la carte, and the carriers themselves need to ditch their legacy technology conceptions along with their systems.

A Great wave of water is washing over the Midwest. According to the news programs I listed to as I drove across Northern Illinois this week, while the water had crested at the Fox River (visibly swollen from Interstate 90) areas downriver in the Mississippi system were due to face rising waters as the floods that have devastated Iowa drained in their direction.

It wasn’t clear from the announcements how severely these more southerly areas could be affected, but it was ominous to reflect on the building, slow-motion character of the floods. The Iowans who watched the waters build at the end of this rainy spring were better off than those who recently suffered disaster without warning in that state, and those in other areas with more warning still are in a better position to take what measures may be available to secure their lives and property.

As I gathered sources for a story on Solvency II the inexorable character of the rising waters provided a metaphor to think about the possible consequences of changing European insurance regulatory framework. As Solvency II moves forward to its 2012 effective date, American regulators and insurers have plenty to think about. The Europeans felt the need to clean house and adapt to a changing competitive field. As a result they are moving toward a state-of-the-art regulatory approach that uses sophisticated risk management and capital allocation to establish an economic or “full fair value” approach to measure companies solvency.

According to Celent’s Nicolas Michellod, author of “Solvency II: Overview and Impact on IT,” European insurance companies will invest between €700 million and €900 million on IT projects to comply with Solvency II.

If the Europeans are right about their need to overhaul their regulatory system in order to compete effectively, their arguments should apply to the United States as well, to the extent that the American insurance industry participates in the global insurance market and competes with its market leaders.
“The US is watching, interested, recognizing that the leading edge in risk and performance measurement is European based,” says Bob Stein, Director of Ernst & Young’s global financial services practice.

Companies outside the European Union are watching Solvency II not only as a regulatory development but as a managerial leap forward, in that it will institutionalize advanced risk management methodologies. “There aren’t many U.S. companies that have anything comparable,” Stein comments.
That being the case, American companies will eventually be at a disadvantage in their ability to more accurately price products and manage risk. “We’re rapidly becoming outliers in the global markets,” Stein says.

Like the gradually building floods in the Mississippi basin, the threats posed to the U.S. insurance industry by the Solvency II are visible from a long way off. The question is whether American insurers and their regulators will move with the speed necessary to stave off potentially disastrous consequences.

This year’s spring trade show season (ACORD LOMA Insurance Systems Forum and IASA Conference and Business Show), wrapping up this week with the IASA event in Seattle, has not struck me as particularly memorable in terms of earth-shaking -– or industry transforming -– technology announcements. That’s not to say that things are standing still, technology-wise.

At both conferences there was been plenty of news about systems upgrades and new features and capabilities. There was clear evidence that SOA is making significant inroads in the insurance industry, as well as encouraging signs that STP is getting closer to being a reality at many companies. Talking to exhibitors, attendees, and association executives, it is evident that critical technology-related concepts such as standards, business process management (BPM) and customer-centricity are being embraced and implemented. Still, it is hard for me to identify any emerging technology trend or development that has emerged over the past three weeks at these two industry events.

Still, there have been some frequent conversational topics, most of which would fall under the thematic umbrella, “Where is the industry going and what’s going to happen with technology spending?” One gets the sense of waiting for several shoes to drop. The anxiety, of course, is related to a number of macro factors -– the subprime mess and related global credit crisis and the prospects of more and stricter financial services-related regulation; the upcoming presidential election; the economic downturn, including concerns about both recession and inflation -– as well as some issues that are more “micro,” such as industry consolidation among both carriers and technology solutions providers. At both shows, many people asked me what I thought about the prospects for more vendor mergers, for carrier acquisitions, for insurance IT budgets, and for executive job security.

While I’m reluctant to stick my neck out too far in terms of specific predictions, it seems to me that right now insurers probably can breathe a bit easier than their counterparts in the banking and capital markets industries. According to the “Budgets, Benchmarks, and Business Priorities For Insurer CIOs 2008: U.S. Property/Casualty Edition” research report from Novarica that was released in partnership with IASA, “IT budgets are holding steady at 3 percent of premium.” In the P&C segment, spending continues to be focused on initiatives such as policy administration system replacement, e-business and underwriting -– areas that are essential to both driving customer retention and growth and responding to compliance and risk management requirements. This could be seen as “business as usual” but in such a tough climate that probably should be considered a good thing.

On Monday, Google announced that it has started to offer online personal health records to the public. The Google PHR, which provides users with tools to collect manage and store their personal health information online, was previously only available to patients at the Cleveland Clinic as part of a pilot program.

From InformationWeek:

For years, the Cleveland Clinic has provided its patients with electronic access to their health information via the clinic's MyChart initiative. But back in February, the clinic and Google announced that 1,600 MyChart patients were involved with a pilot in which they could add information online about their medical histories and conditions.

That's because like most Americans who get their health care from multiple providers -- specialists, family physicians, dentists, eye doctors, and so on -- many Cleveland Clinic patients also receive their care from multiple providers, many of whom may not be part of the clinic.

By having a Google Health account, Cleveland Clinic patients who were part of the pilot -- and now any patient anywhere -- have the ability to enter medical information into their Google PHR, whether it be about treatments they're receiving from other doctors, medical history, allergies, or the drugs doctors have prescribed to them.

InformationWeek also says that third-party alliances -- such as those with pharmacy chains, testing labs and prescription drug management companies -- will be key to Google's initiative. However, it's my opinion that biggest outside player to the ultimate success of Google's PHR or similar programs such as one launched by Microsoft last fall will be the insurance industry.

Certainly, PHRs can help improve patients' quality of health care by providing physicians and other healthcare providers with a more holistic clinical record. Still, PHRs are only as valuable as the information they contain.

What if a patient forgets to add a new drug they're taking to their PHR? What if they aren't vigilant enough in updating their PHR with their most recent medical history? In some cases, PHR integrations with physician or third-party data feeds can help catch what falls through the cracks.

Health insurers, though, with their claims data are best equipped to fill-in those gaps. Just about any patient is going to receive healthcare from multiple sources in a given year or over the course of a few years. What will remain relatively consistent will be the health insurer handling all those disparate claims.

It seems to me that the best way to keep PHRs up-to-date (and thus, actually useful) isn't to rely on patients to populate the records with data. It's to create a central depository for a patients medical data by integrating with disparate data sources . Then, allow the patient to control it. Let them choose how to use that information and which health care providers they want to have access to it. In that scenario, claims data would be key.

If Google or Microsoft are looking to improve the usefulness of their respective online health management efforts, they'd be well served to partner with as many insurers as possible. Of course, then the questions becomes: will insurers, many of which have PHR offerings of their own, be willing to cooperate?

This year's ACORD/LOMA Systems Forum was like other years for me in that it meant a great many back-to-back appointments and some fairly intense socializing with industry friends whom I seldom get to see otherwise. It was also similar in the mixed reviews of the show from the standpoint of the vendors. Courtesy no doubt plays a role in these matters, but I heard very positive remarks about the show both on and off the floor until the very end. Only then did reports come to me, usually second hand, that the traffic was perhaps not so great.

The contrast of the negative comments with the positive was striking, and yet it was familiar. When is there ever enough traffic. Of course, from the perspective of a journalist meeting vendors and analysts, the show can't fail to be a success, and so it was for me and my colleagues at I&T. However, I also had an outstanding experience in terms of the number and rank of insurance executives I happened to see. Several were old friends but some were new people I was very happy to have the chance to meet.

The tone of the show was welcome too, considering that the economic downturn might have cast a pall over the proceedings but didn't. Finally, I had the chance to do some video podcasts with some very smart and personally delightful people, including Linda Dodson of Chubb, BA Scott of New York Life, Frank Neugebauer of ACORD and Deb Smallwood of Smallwood Maike & Associates.

Since the ACORD/LOMA Insurance Systems Forum ran right through midweek this year, it was impossible to cover the show's announcements in the normal way through I&T's weekly newsletter. That being the case, we saved some announcements for the May 21 edition and will no doubt use others for the next print issue we produce.

There has been no shortage of health insurers who have made news over the past few years by embracing a more customer-centric business strategy and, as a result, rolling out several customer-facing online tools. The next step though, I believe, center around how insurers make those tools available to members (and, in some instance, potential members) on mobile devices. It’s something that I’ll write about in an upcoming Update story about a recent project at WellPoint.

I’d argue that one of the primary reasons that customers began demanding or expecting better online functionality from their insurers was because broadband internet access, over the past few years, has become much more prevalent in the homes of average Americans. Fewer consumers were looking for transparency tools and online provider directories when their 56k dial-up modems grinded web surfing to a snail’s pace.

With that sentiment in mind, perhaps a similar transformation is on verge of taking place on mobile devices. While web-enabled mobile phones, BlackBerries, iPhones and the like have already reached a critical mass, some recent developments could lead to a vastly improved overall mobile experience and, as a results, perhaps wider acceptance of mobile applications by the public at large.
Early this month, a diverse group of companies including Sprint Nextel, Google, Intel, Comcast, Time Warner and Clearwire came together and announced a joint effort to build a next-generation wireless data network.

from the New York Times:

The partners have put the value of the deal at $14.5 billion, a figure that includes radio spectrum and equipment provided by Sprint Nextel and Clearwire, and $3.2 billion from the others involved.

They expect the network, which will provide the next generation of high-speed Internet access for cellphone users, to be built in as little as two years, but there is no timetable on when it will be available to users and the price is not determined. The partners are seeking to beat Verizon Wireless and AT&T Wireless to the market.

...

The hope of the telecommunications industry is that users will begin using such service for a range of applications, including surfing the Internet on laptops and phones, and downloading music and video more often to those kinds of devices.

I don’t know enough about wireless data networks to understand the full impact of this agreement, but I do know that improved data speeds will undoubtedly lead to an uptick in the number of organizations that focus more effort on mobile, customer-facing applications.

Right now, cell phones and other devices have certainly reached a critical mass, but web-based applications build for those devices are lagging just a bit behind.

As the times article suggests, “The wireless network of the future is expected to be fast enough — rivaling speeds that cable customers have in their homes today — to allow delivery not just of text and simple Web pages, but of video and advertising.”

If and when that occurs, consumers will start expecting insurers to deliver mobile functionality in the same way that they are just now starting to deliver web functionality.

As a member of the I&T editorial team, I’m constantly inundated with new product announcements, story pitches and press releases -- with each e-mail or phone call assuring me that the product or concept in question is revolutionary, industry-changing or both. As a result, a big part of our job here at the magazine is to cut through the hype and find out what really works -- not in theory, but in practice.

Cutting through the hype is especially true when it comes to Web 2.0-type technologies. Can social networking initiatives, blogs, or wikis really benefit an insurance company or are they just buzz words that are fun to throw around at business meetings?

Even with that necessary skepticism in mind, I couldn’t help but be intrigued by a new feature in Grand Theft Auto IV: Liberty City , the controversial and obscenely popular video game that hit store shelves at the end of April. The game’s developer, Rockstar Games, has partnered with Amazon to market GTA IV’s in-game music tracks.

[If you need some background, the Grand Theft Auto series of video games are set in fairly well-developed, 3D, virtual cities. Gamers are free to accept missions or simply explore the game’s environment on their own. A gamer can quite literally hop in (or steal) a car, flip on the radio and cruise around aimlessly if they so desire.]

from Yahoo:

Advertised throughout Liberty City, the cheekily-named "ZiT" technology is built into the game's mobile phone interface system. As players cruise around the world listening to the in-game radio, they can at any point 'mark' a song by opening their phone and dialing the number ZIT-555-0100. Gamers will then receive a text message with the song and artist names, and if they're registered at the forthcoming Rockstar Games Social Club community site, they'll find an e-mail waiting in their inbox with a direct link to a custom playlist on Amazon.com. All songs tagged "ZiT" will be stored here, available for preview and purchase at Amazon's going rate of $.89-$.99 per track. Best of all, those MP3s are free of the Digital Rights Management (DRM) limitations imposed on files downloaded through Apple's iTunes store and thus can be imported into any computer or digital device with no constraints.

Needless to say, record execs are thrilled at the prospect of using GTA IV's radio to reach millions of ears and, in turn, wallets.

So what are the insurance industry implications of this innovative new distribution model? Right now, there are none. It’s one thing to market rock and hip-hop music to young adult gamers. It’s another to try and sell them insurance products.

Still, many studies suggest that the average gamer is older than conventional wisdom dictates and now that the latest generation of video game consoles practically require Internet connectivity, it wouldn’t be too big a jump to link an in-game billboard (maybe even one advertising, let’s say, auto insurance) to an actual Web site.

I’m not saying that insurers need to immediately dedicate valuable time and resources to marketing opportunities that may exist within popular video games. It’d be foolish to do so.

On the other hand though -- given the increasing popularity of the video game medium -- it’d be just as foolish to ignore them completely.

I guess the key is to separate what’s viable and what’s just hype.

Every once in a while, when acquaintances jocularly question the economics of a trade publication dedicated to the subject of insurance IT, I ask them to guess how much the largest insurance carriers spend annually on IT. My interlocutors typically answer, "I dunno; maybe $10 million?" I laugh in a way reminiscent of the characters responding to Dr. Evil's pathetic ransom demand in the first Austin Powers film and say, "Try again." They give their second answer, sure that this time they vastly overshoot the mark: "OK, one hundred million!" I laugh some more.

I bring this up not so much to reflect on what insurance CIOs spend as what CEOs entrust them to spend. Given that insurers typically spend 2.5 percent to 3.5 percent of direct written premium on IT, it seems unlikely that a respectable understanding of the potential of technology for business success should be a rare commodity among insurance CEOs.

Every time we embark on Insurance & Technology's "Tech-Savvy CEOs" issue, someone is sure to remark: "Isn't that an oxymoron!" And I am always tempted to respond, "Good one! Haven't heard that before!" However, there's enough anecdotal evidence and appreciation of IT's not-too-distant historical role of order-taker to forgive a wag suffering from painful memories. Memories they must be, however.

Technology has revolutionized business, period. And the insurance industry, whatever its shortcomings, is no exception. It may be that some few technophobic stragglers exists, perhaps in smaller companies, or surrounded by capable executives who can protect them from themselves. But success is increasingly tied to astute commitment to technology investment, and not just for cost-control.

Vendors, consultants and analysts may have occasionally exaggerated the importance of tech savvy at the higher tiers of management in the past, but their exaggeration had the saving grace of being prophetic. Today, equity analysts who follow CEOs performance, and boards who hire and fire CEOs, act under the assumption that a CEO ignorant of the potential of technology is not likely to be a good CEO.

Along with other observations and commentary, you can read about the increasing expectations boards and equity analysts have of CEOs in my introduction to I&T's June 2008 Tech-Savvy CEO issue, due to be circulated electronically within the next few days. The issue will also contain written profiles of the five CEOs recognized this year, along with other special content and regular I&T features. In the meantime, we decided to take advantage of our weekly newsletter to share with our audience podcasts featuring conversations between the this year's Tech-Savvy CEOs and the editors of I&T.

Even considering wikis and social networking and user generated content, I still think the most important development to emerge from the Web 2.0 movement has been users increased tendency to go online for self-help and to seek educational opportunities to handle their everyday problems.

This isn't earth shattering stuff, but in more and more cases, people are eschewing the more traditional ways of seeking out answers and, instead, developing trusted relationships with Internet sources.

Don't understand a word in a book you're reading? Forget Merriam-Webster and try dictionary.com.

Need to learn the basics before you start investing? Who needs a financial planner when there's The Motley Fool?

Have a book report due tomorrow on Isben's A Doll House? Why waste time searching Barnes & Noble for a Cliffs Notes, when you can check out SparkNotes?

Speaking of Barnes & Noble, the bookseller has recently made a major splash in the realm of online self-help with the launch of Quamut.com, a (poorly named) Web site that offers how-to information on a wide array of topics.
Certainly, the concept of a Self-help Web site is not new.

There's already HowStuffWorks.com, not to mention Wikipedia, a site that can bring curious Web surfers up to speed on just about any topic or subject imaginable. However, as a recent New York Times article points out, B&N is banking that users will view Quamut's content as coming from a trusted source.

from the New York Times:
Quamut is the latest brand to capitalize on what company executives said is a growing disinclination among Web users for amateur how-to advice. Whether that distaste can support a departure from Barnes & Noble's core business is a question investors will be considering.
***
Quamut pays a team of freelance writers to create those, which are vetted by the company's editors.
Those writers, Mr. Weiss said, are the other important difference between Quamut and sites that rely on self-proclaimed experts or site visitors for content. "We actually don't believe in the wisdom of the crowd," he said. "This is the old-fashioned publishing model."

Other popular Web sites have demonstrated a similar belief -- that users are more inclined to visit sites that can provide info from trusted, expert sources, as opposed to anonymous users. For instance, The New York Times Company owns About.com pays over 700 freelancers to cover 70,000 topics.

from the New York Times:
According to Martin A. Nisenholtz, the Times Company's senior vice president for digital operations, About.com's authors go through a monthlong screening process that gauges the candidate's expertise in the subject and writing skills, and culminates in an ethics quiz and a background check.
"There are a variety of ways people can get their questions answered online," Mr. Nisenholtz said. "But particularly when you get to very important categories, like health and others where the risk of getting a bad answer is very high, documents from experts are important."

A big part of the Web 2.0 concept is trust in numbers. That's why a site like Wikipedia -- with its seemingly infinite number of anonymous contributors -- can become a trusted source of information. Still, I can help but agree with people behind Quamut.com, About.com and other sites that actively seek to put some credibility behind their content. As users seek to educate themselves online more and more, a self-help site that can deliver piece of mind to visitors, by establishing itself as a clearing house for expert advice, could see its page view and unique visitor numbers sky rocket.

And that brings us to the insurance industry. To a typical person, insurance can be a complicated subject and also one with major implications to their financial and, in some cases, physical wellbeing. I know that if I was looking to make an insurance buying decision, I wouldn't want to just trust the online, anonymous masses.

I would, however, trust someone with decades of insurance experience... you know, like just about any insurance carrier with long-time established brand recognition. Maybe that's something for insurers to keep in mind when developing their Web portals. Capturing new business via the web is key, as are enhanced online customer service capabilities. Perhaps though, there's something more important to be gained by becoming users' go-to destination for trusted insurance advice and information.

As the editors of Insurance & Technology work on this year's Tech-Savvy CEO (June) issue, our thoughts have been turning to the qualities of both individuals and company culture that make for IT/business alignment -- which in turn drives the greatest impact for each technology dollar spent. One would like to think that the SOA craze and associated developments are helping to forge a common business and technology language, but the consultants and analysts I speak to remain skeptical. For now, what appears to matter most is the relationship that CIOs have with line-of-business heads and the CEO, and how well the latter understands the utility of IT to his or her company's strategic goals.

As much progress as CIOs have made over the last decade in making their mark on strategic direction, their ability to bring their influence to bear remains dubious. That being the case, "it is critical that the ultimate strategic leadership of the insurer -- the CEO -- understand the potential enablers IT brings, since they are often the only leader that can get past the tyranny of the ROI model," says Chuck Johnston of Oracle. "The ROI model often stifles tectonic change since it is not predictable."

Nevertheless, "tectonic" change may be what insurers need to achieve. As challenging as the previous year may have been, insurers face an even tougher time going forward as new economic pressures and regulatory issues compound existing challenges. As the margin of competitive victory narrows, visionary leadership that leverages an understanding of IT to carve out greater efficiency, more precise pricing and compelling service to distributors and customers will be increasingly important.

The best of insurance CEOs seem to understand this, as I trust I&T's Tech-Savvy CEO issue will demonstrate. Some of our honorees are more hands-on in their technology interest, some less so, but all are close observers of the evolving role of technology in the service of business, especially as it pertains to customer- and distributor-facing applications.

It's too late to submit nominations for this year's Tech-Savvy CEOs, but we encourage you not to hesitate to share with us any outstanding chief executive officer you may know about so that we can consider him or her for next year.

It is just the right time to send us your nominations for this year's Elite 8 and next year's Elite 8 International. I&T has honored many fine insurance IT officers over the years, but we're confident that more and more CIOs and other senior technology executives are rising up to distinguish themselves. There is no question that outstanding people continue to rise in the ranks, evidenced by the appointment, since late last year, of numerous new CIOs at some of the industry's leading companies, including New York Life, State Farm, UnumProvident, Chubb, MetLife, Safeco and Northwestern Mutual -- to say nothing of the numerous CTOs, VPs of IT and divisional CIOs eligible for the Elite 8 award.

Whether the reader is a technology executive, a business officer or a vendor, I&T's Elite 8 (domestic and international) and Tech-Savvy CEOs are a great way to honor distinguished colleagues and by doing so enjoy a little reflected glory.

One of the nice things about writing a blog, in addition to writing for the print edition of Insurance & Technology, is that I get to do this:

I’m currently working on a story for the next issue of Insurance & Technology on a new MassMutual Web site that seeks to recruit and retain agents by connecting visitors to the site with actual MassMutual employees and agents. The video-intensive site, in part, seeks to dispel the negative stigma attached to the insurance agent profession.

Scott Capurso, director of net field force growth at MassMutual, describes that stigma as the “Groundhog Day effect,” after the 1993 Bill Murray comedy which features some memorable appearances by a sleazy insurance agent (as seen in the above clip).

Of course, Capurso could have just as easily named the stigma “The Incredibles effect” after the digitally animated Disney film:

I guess what I found interesting about MassMutual’s project is that the company has started to fight back against those prevailing views of insurance workers – not with boring rhetoric or even with slick ad campaigns. What better way is there to dispel the negative stigma that surrounds insurance workers than with actual insurance workers?

As I've worked on an upcoming issue of Insurance & Technology, I've found myself in conversations with several insurance carrier sources based within their respective organizations' innovation areas, such as The Hartford's innovation lab director John Anthony and Humana's director of integrated consumer experience, Greg Matthews.

In the case of The Hartford, I was able to visit the actual lab -- located on the carrier's Hartford, Conn. Campus -- and sit down with, among others, Anthony and P&C division CIO Gary Plotkin, who in his past role as CTO, teamed with Anthony to create the lab three years ago.

Innovation groups, to me, are almost as interesting from a cultural and organizational standpoint as they are from a, you know, innovative standpoint. As Plotkin told me recently, IT employees are traditionally engineers. "We tend to think about delivery dates and scope," he said. "Working in a lab environment requires more of a scientist-type model."

In other words, if IT professionals are working within an innovation group, they'd be well served to change the way they view success and failure.

Plotkin remembers when the lab just got off the ground. "Things would fail and we'd try to introspectively figure out why they failed. Well, the answer is [because] less than 20 percent in a standard lab actually succeeds," Plotkin explains. "We needed to change our paradigm, because it is a bit anomalous to the standard IT individual."

Of course, while the rest of an organization must adapt to the kind of expectations necessary to cultivate innovation, it's still important that such groups produce results. That's something that can be facilitated, Anthony says, by securing business sponsorship early in the idea process and by making sure that, in the end, projects have clearly defined business objectives.

"A technology innovation lab...is probably the closest within our industry that you'll get to research and development," Anthony told me. "So, there's an additional burden to make sure that the things we're working on are recognizable by our key stakeholders -- that there's a clear line of sight between what we're doing and how that aligns to the longer term strategies, typically, of the organization."

Thankfully, the latest IT security breach story to hit the news wire -- that the computer system at Hannaford Bros., a Scarborough, Maine-based supermarket chain, was hacked, resulting in the theft of 4.2 million credit and debit card numbers and about 1,800 fraud cases to date – had nothing to do with the insurance industry.

As I wrote a few months back, I think there's an opportunity for a few insurers to establish themselves as IT security leaders, and maybe leverage such a reputation to built brand awareness and increase customer loyalty. While some insurers agree with this assertion, the experts I spoke to for the story couldn't identify any insurer that had really established itself yet in this area.

However, while no one in the industry has truly set themselves apart via their own internal IT security strength, many insurers are looking at opportunities to offer security-related "value adds" to policyholders.

Case in point: the more than 100 insurers that have contracted with Identity Theft 911 to offer identity theft resolution services to policyholders. Included among those insurance carrier clients are Chubb, Amica and more recently, MetLife Auto & Home.

"It's not a security measure so to speak. It's an after-the-fact service provided to the insured should something happen," explains Ben Kaplan, director of operations, Identity Theft 911.

Essentially, the service allows victims of identity theft access to an Identity Theft 911 advocate who helps get them back on track. "It's a manual process, really, to remove the fraudulent activity off of one's credit file and dealing with the creditors that are affected by the situation," Kaplan says. "We are really a rather low-tech company, very brick and mortar."

So, in one way, perhaps insurers already are viewing security as differentiator -- just from a different point of view, where security piece-of-mind is offered to customers as an added service, rather than as a feature of company's IT operation (not that you couldn't do both).

"It's essentially a value add to their services. It has a nice fit to it," Kaplan says. "The insurance companies are out there to help their customers, that's the nature of the business. This is just an additional way that the insurance industry can assist and help the general public out there."

The big new last week from Apple was that, suddenly, the iPhone is set to become a much more viable option for business users.

Last Thursday, Apple previewed its iPhone 2.0 software, which features support for Microsoft’s Active Sync protocol, allowing workers to sync their device with a company's Exchange e-mail, contacts and calendar programs. The software update will also feature improved security features, most notably Cisco VPN support and the ability to remotely wipe data on lost or stolen iPhones.

Over at Bank Systems & Technology, my colleague Maria Bruno-Britz wonders how the iPhone might now compete with the Blackberry for business users.

from the BS&T Blog:

The iPhone is certainly pretty, but it's also chock full of handy features in a fun, intuitive interface. I know from personal experience the differences in navigating an iPhone (in my case, an iPod Touch) versus a Blackberry (my husband's). The Blackberry certainly does what it's supposed to do, but there's just something about the iPhone interface that takes the user experience to the next level.

Indeed, few understand the intricacies of user experience better than Apple, and with this latest, business-friendly software update, the iPhone is certain to grow in popularity from an enterprise point-of-view. I am especially impressed with the remote wiping capability -- something I believe to be a key mobile security feature for insurers going forward.

And yet, I wonder -- for all of the iPhone’s wonderful features and functions -- if Apple will have trouble attracting more than just Apple enthusiasts and the most tech-savvy business users. Sometimes, it’s the simplest and most obvious things that are overlooked...

As Yahoo! Tech blogger Ben Patterson pointed out, “Of course, the iPhone still lacks a physical QWERTY keypad, which will give many enterprise users -- especially those who love cranking out messages with their thumbs -- a moment of pause.”

Just when I'd forgotten that I've been with Insurance & Technology for a full year now, I discovered - in my e-mail inbox - the recently released American Customer Satisfaction Index (ACSI) report for the fourth quarter of 2007. Around this time last year, I wrote my first story for I&T on ACSI data from the fourth quarter of 2006.

Last year, the ACSI showed that health and life insurers had made big customer service improvements. And at the time, I wrote (well, I quoted ACSI leader Claes Fornell) that contact center improvements had a lot to do with the industries' improved customer satisfaction scores:

From the March 2007 issue of I&T:

From a value standpoint, premiums remained relatively flat, according to the study. While that certainly helped customer satisfaction scores, Fornell says, the quality of service -- a big part of which is call centers -- also improved. "Insurance companies don't have that many points of interaction," Fornell explains. "When they do have them, in large measure, it would be at call centers."

Looking at this year's ACSI (and keeping the sentiments of my colleague Anthony O'Donnell's recent blog post in mind), I'm reminded of just how intangible the concept of customer satisfaction can be. It's price, it's service, it's reputation and, more than likely, it's several other things no one has considered.

In this year's results, life and health insurers saw their ACSI scores drop 1.3 and 1.4 percent from the year previous. Last year both those industries saw large gains of more than 5 percent.

Commentary provided by Fornell says that, on the health side, last year's increase was due in part to slower growth in premiums. Fornell writes that such momentum has slowed.

from Fornell's analysis:

Not only are premiums and co-pays now rising faster than inflation, but fewer employers are providing group health coverage. As a result, healthcare (and health insurance) has become an out-of-pocket expense for a larger number of households, something likely to negatively affect the satisfaction of customers.

While 2006's big winners, life and health, faltered slightly in 2007, the P&C side saw an impressive 2.6 percent improvement over last year's score.

Most notable among those insurers was Progressive, which jumped up 8 percentage points - the highest increase among any company in any industry measured.

from Fornell's analysis:

This is a large increase. Progressive made improvements to its award-winning website and offered significant rate cuts on insurance for RVs, motorcycles and boats.

So what have I learned in a year? Well, I know now that improved contact centers -- while still a key for any insurer with a customer service improvement initiative underway -- isn't the silver bullet when it comes to keeping customers satisfied. In fact, I'm not so sure that customer service improvement initiatives, in the traditional sense, are the best idea. Initiatives have a beginning and an end, while the myriad of factors that influence customers' satisfaction levels will continue to change -- with no end in sight.

Sometimes I get a little fatigued hearing people complain about the insurance industry's reputation for questionable claims practices. Therefore it was with a certain grim satisfaction that I found out that banks are apparently setting a new standard for screwing their customers. However, the example should serve as a cautionary tale to insurers as well as bankers about fair dealing.

My impression about banks' ill-treatment of their customers developed as the result of three recent, unconnected conversations where acquaintances and friends reported to me that they had been stuck with sudden and drastic credit card interest rate increases. My first correspondent — a Bank of America customer — described herself as a very reliable customer who had made a late payment for the first time. The other two — one a JPMorgan Chase customer, the other WaMu — reported sudden, very high rate increases for no reason in particular.

The WaMu customer reported a conversation with WaMu that went something like this:

Customer: Could you explain why you raised my rate over 10 percent?

Service Rep: Well, your FICO score must have changed.

C: I happen to know that my FICO score has not changed.

SR: Well, we notified you that your rate would change.

C: First of all, since I make payments automatically, I don't necessarily read every bill beyond the payment amount; secondly, the contract I signed when I transferred the balance was for a certain rate for the life of the loan.

SR: Well, if you looked at the fine print you'd see that we reserve the right to change the rate at any time.

C: Then was your offer of a single rate just a lie?

Bank of America has received a great deal of bad publicity not merely for its use of industry standard "risk-based" pricing whereby rates are increased by criteria that are not likely to be clear to customers, but for "hiking rates base on no apparent deterioration in their credit scores at all," according to this report. Based upon my correspondents' reports, B of A isn't alone.

In the opinion of author and columnist Bob Sullivan, the banking industry isn't alone either. Sullivan's book, "Gotcha Capitalism: How Hidden Fees Rip You Off Every Day — and What You Can Do About It," addresses what the author characterizes as:

The constant bait-and-switch tactics that layer on fees and surcharges long after we're in a position to bargain over them. It's about rampant false advertising, about the explosion of small print and asterisks and about the seeming disappearance of federal authorities working to keep our marketplaces fair.

Whatever the merits of Sullivan's work, it points to rising resentment at what consumers regard as sharp practice. It doesn't help that in this instance, as the above-linked article suggests, responsible customers feel they're being opportunistically scorched by bankers trying to make up for their own lousy decisions.

Of course, customers are responsible for their contractual relationships to their lenders and thus must exercise due diligence when it comes to the wording of their contracts. However, the message many banks are sending their customers is, "Don't take your eyes off me or I'll pick your pocket."

Maybe it's a crazy idea, but perhaps the building consumer dissatisfaction with Bank of America and others creates the opportunity for some bank to use honesty and plain dealing as a differentiator. I can imagine the advertising campaign: "We're the bank that won't shaft you when we need some extra money."

The appearance of the Transportation Security Administration's blog occasioned a great deal of mirth both within and beyond the blogosphere. The TSA has been reviled, justly or not, for greatly increasingly air travelers' inconvenience while not necessarily increasing their safety to a proportionate degree. The TSA's launching a blog and one, moreover, that accepted comments, was like pinning a "kick me" sign to one's back.

Predictably, when the TSA blog opened shop, the kicking began. Not so predictably, the TSA accepted the kicking by maintaining a genuinely open comments policy. To give a little flavor, the following are from among the comments:

At least the clowns at the TSA are having some fun with this… … The real question is Why do we need TSA @ all? We don't, it is a complete waste of time… you check nothing, find nothing, and simply clog up air travel… … Let's face it--you are strikebreakers, not security people. As pleasant and patient as I try to be with your staff, they are still RUDE, and have the pseudo-official air of camp counselors or DMV workers for the most part. … You thought my banana was a bomb. It was not a bomb. It was a delicious and nutritious fruit. … Congratulations on beating the IRS to become the most hated government agency in America. You've earned it!! …

Some critics of the TSA think that inviting ridicule merits further ridicule. But they miss the point of the whole exercise. By opening the blog, the TSA has acknowledged problems and made a good faith gesture in the direction of addressing them. By saying, in effect, "Let's talk about it," the TSA simultaneously gains a platform to explain what critics might not understand about its procedures and puts the onus of civility on its critics. It channels the criticism and moderates its tone. Perhaps most importantly, the TSA has built a mechanism to track criticism for purposes of improving the quality of its service.

There are lessons here for the insurance industry, which similarly has a less than stellar reputation with the public. Insurance companies aren't necessarily well-advised to start blogs but they would benefit from encouraging policyholder feedback and using that feedback to drive improvement. Even the best service performers are likely to be missing an opportunity here. They may work at mollifying the small number of "squeaky wheels" that bother to complain or otherwise comment but they miss the larger number of customers that tend not to express their complaints.

The impact of that "silent majority" can be tremendous, and at least one vendor thinks it can be calculated.

Fortunately, the Internet has given the quiet ones an easier means of engaging. Customers who would have dreaded picking up the phone think nothing of filling in a field or IM'ing a company representative. However, if insurers want to get the greatest benefit from customer feedback, they have to ask for it.

As I've written about in the past, the pending retirement of the baby-boom generation continues to be major force in shaping the hot topics for discussion in the insurance and technology sector.

Gartner touched on the topic this Tuesday when it released its list of top predictions affecting insurance in 2008.

from the Gartner release:

Gartner predicts that through 2010, IT and knowledge worker staffing challenges will drive a 30 percent increase in rule-based systems, knowledge management, outsourcing, and training among P&C and life insurers. Insurers will have a tremendous problem during the next five to 10 years retaining their core process knowledge and maintaining the aging legacy systems that they continue to run. Companies must start to implement new processes for knowledge management, training, recruiting, and rule-based systems to combat and overcome this challenge.

It's my opinion that if insurers decide to embrace Gartner's advice, they need to embrace it as a whole and not just in bits and pieces. In other words, companies need to recruit and train younger workers, while at the same implementing knowledge management and rules-based systems. One effort is dependent on the other.

Insurers aren't just competing with one another for the top IT talent. They're competing with any industry that needs IT professionals, which is to say, they're competing with everyone. Even technology stalwarts like Microsoft and Yahoo are feeling the workforce crunch, according to a recent New York Times article that suggests that companies like Google, Facebook and many small, nimble start-ups are attracting the most talent.

from the New York Times:

The competition for engineering talent in Silicon Valley and other redoubts of technology is as fierce as its been since the late 1990s, if not fiercer, some in the Valley say.

The battle for tech supremacy, then, is largely a battle for talent. And so one crucial question about Microsoft's $44.6 billion bid for Yahoo is whether a combined company could more easily attract software engineers — an increasingly precious commodity. Both companies are already fighting the perception that their most innovative days are behind them.

"Engineers here want to work on tomorrow's technology, not yesterday's," said Bill Demas, who worked at Microsoft through much of the 1990s and then at Yahoo until leaving last year. He is now chief executive at Moka5, a start-up of around 30 people based in Silicon Valley's Redwood City.

And let's face it, if the likes of Microsoft and Yahoo are viewed by some recent college grads as technology laggards, then insurers (and their less than stellar technology repuation) have an uphill battle to fight. That makes it critical for carriers to implement knowledge management and rules-based systems. After all, if young workers are given the choice between a position consisting of time-consuming administrative tasks and a position where automation and technology have removed that busy work, allowing for a job that involves more critical and strategic thinking, they'll choose the latter every time.

One of the consolations of my October 2006 trip to India was Lufthansa's provision of in-flight wifi. Not that I couldn't simply have read a book during my inevitably sleepless flights, but having Internet access gave me the ability to do routine things such as keep up with e-mail and keep up with various news sites as well as to do really cool things — such as IM my wife from 38,000 feet over Karachi. Reflecting on that experience brought a smile to my face as I read that Southwest Airlines is planning to test satellite-delivered broadband (30mbs) on four of its planes. The carrier is working with the same provider that is working with Alaska Airlines to pilot (hard to avoid the word) in-flight Internet.

Oddly, while I was genuinely excited to be able to use instant messaging while hurtling over the surface of the globe, I felt a certain sense of entitlement. Human nature has a way of transforming technological luxuries into necessities, and Internet access has become one of them. Using the Internet is part of how we live from minute to minute (at least in the case of journalistic wretches chained to their desks) and is more important, by far, than the telephone.

That being the case, I have been convinced for a long time that it is ridiculous that in-flight Internet access is so rare. We are rightly deprived of some liberties on planes, but perhaps the habit of obedience these restrictions foster make us less likely to demand what it is ridiculous to be denied. Phone service has been available in the air for ages. It is seldom used, partly because it is considered over-priced but mostly because most passengers realize that hearing someone speak on the telephone is unpleasant for any length of time. Probably the average traveler is also happy not to have to talk on the phone constantly.

But the Internet is different, not only because it is a vehicle for entertainment but also because solitary work is emotionally easier than work-related telephone contact and e-mail and IM.

There's something to be said for the ability to tune-out when various parties are clamoring for one's attention, most blissfully unaware of one's other demands and some with an exaggerated sense of their priority. However, in a life tied more to deliverables than simply "being there," no downtime goes unpunished, so it's nice to have the option to catch up as one can. However, given that the technology is now available for deployment, in-flight Internet should be acknowledged as a "must-have" for business travelers, not a "nice-to-have."

At the risk of appearing even more of a prima donna, I'll insist that merely providing broadband in-flight Internet is not quite enough. Connected or unconnected, business travelers trying to get work done are limited by another inconvenience, as this commenter on the linked article observes:

I don't care if it's cheap or even if it's free, my laptop's battery wipes out after an hour. And of the many airports I visit every year, very very few have enough outlets to go around when at least half the travelers present need to charge.

I'm grateful that many airports have indeed begun to provide places to charge up, so that I stand less of a chance of having to sit in a corridor if necessity demands. My home airport is better than any other I can think of in providing outlets in convenient public spaces, though I prefer the outlets in some of the commercial zones, and am indeed typing from one right now. Other airports lag in this respect, but at least they try — the service is simply unavailable on the vast majority of domestic flights. Lufthansa managed to provide it — even if I did struggle with my international adapter plug — and domestic carriers should start providing it too.

Mountaineering is an activity so pure in its objectives, so absolute in its terms of success and failure that it serves as a metaphor for any kind of achievement. That being the case, the signature accomplishment of Sir Edmund Hillary—who died last week at 88 years of age — provides an enduring example for all who face seemingly insurmountable difficulties. That applies to insurance IT executives as well as anybody else.

There may be further ground for analogy to IT in that mountain climbing, at least in its more refined forms, is a highly technical activity requiring expert knowledge of tools and environments. In the case of Hillary's successful 1953 Everest expedition, led by British Army Colonel John Hunt, it can also be a significant triumph of project management.

The world remembers Sir Edmund and his colleague Tenzing Norgay (who died in 1986) but as The Telegraph's obituary of Hillary notes, the climb began with 362 porters, 20 Sherpa guides and 10,000 pounds of baggage.

Not being the expedition leader, Hillary's concerns were more focused on execution than preparation. But technical judgment and planning were essential to his role. Once chosen for the final push, along with Norgay, he was given awesome responsibility, both in terms of the technical acumen required, and the magnitude of the consequences of bad decisions.

In an age where rich tourists are practically carried up Everest, it is easy to underestimate the difficulties associated with being the first to summit. Hillary had to rely on his experience to determine whether the snow would support him, he had to rely on his skill to determine the best routes and techniques, sometimes on a step-by-step basis, and he had to continually calculate not only the odds associated with external conditions, but also those based on estimates of his own endurance and that of his oxygen supply.

At one point, in his published account of the final push to the summit, Hillary, having temporarily disengaged his oxygen tube noted, "I was greatly encouraged to find how, even at 28,700 feet and with no oxygen, I could work out slowly but clearly the problems of mental arithmetic that the oxygen supply demanded. A correct answer was imperative — any mistake could well mean a trip with no return. But we had no time to waste." Later, after he and Norgay had ascended above 29,000 feet, Hillary "made another rapid check of the oxygen —2,550 pounds pressure (2,550 from [a maximum of] 3,300 leaves 750, 750 is about 2/9; 2/9 off 800 liters leaves about 600 liters; 600 divided by 180 is nearly 3 1/2)." Such calculations, as important as they were, were only a baseline from which to make further decisions on which his and his partner's lives depended.

Later climbers, beginning with Reinhold Messner and Peter Habeler in 1978, reached Everest's summit without oxygen. But that's beside the point. Habeler begins the account of his and Messner's final ascent saying, "The tracks of our predecessors, which could be seen in the snow, served as an excellent orientation guide." He meant, of course, climbers who preceded him and Messner by hours or days rather than a quarter century, but it may have been a subtle nod to the pioneers.

It is also beside the point whether the only fall one is threatened by is a fall from favor, or whether the only rarified atmosphere one struggles in is that of the corporate boardroom. Anybody attempting novel accomplishments against daunting obstacles can draw inspiration from Hillary's example.

In the business world and maybe even within the much smaller world of insurance technology journalism there's always a tendency to over-hype the latest and greatest, whether that be in terms of a new technology or a new trend in the marketplace.

That said, there's one trend that I'm seeing that seems to be under-hyped: how growing numbers of consumers, when considering a new purchase, first turn to the internet in an effort to educate themselves on a given field or topic. As this “self-help” trend continues, there may be opportunities for insurers to turn their web sites (and the consumer-facing tools within it) into major drivers for brand loyalty, by not only providing service to existing customers, but more information to the general public.

If a recent study from eHealth, the parent company of eHealthInsurance, is any indication, there certainly is a need for trustworthy, informative web sites that consumers can turn to when looking to educate themselves in preparation of making an insurance product decision.

According to the study, less than one quarter of respondents said they were very sure of what the terminology in their health insurance policy actually means. And forget all terms, even basic industry acronyms like HMO (36 percent), PPO (20 percent) and HSA (11 percent) are a mystery to many of the 1,010 U.S. adults that were surveyed.

So what does it mean? Well eHealthInsurance, not surprisingly, suggests that side-by-side comparisons of policies would be a good place to start (and their study backs that up). But I think the answer might be simpler. If an insurer created web tools that focused on educating consumers -- perhaps in designated areas of their web site that went easy on the cross-sell and up-sell -- it might be able to establish itself not just as a trusted source insurance products, but as a first-choice destination for general insurance questions and information.

It’s an ill wind that blows nobody any good, as the adage goes, and weather sufficiently foul to damage property is an opportunity for Insurance & Technology’s reporters to take a look — always with sensitivity toward the victims of these events — at the role of technology for catastrophe response, risk selection and geographic exposure management. In this regard, the winter of 2007/2008 has been an embarrassment of riches, if the reader will excuse such a perverse use of the phrase.

We’ve seen a repeat of last year’s Pacific Northwest “storm of the decade,” and numerous snow and ice storms and other weather related events involving landslides, floods and other hazardous conditions. Waves of snow deposits have brought special dangers. According to a report on Northwest Cable News, 13 people have died in avalanches already this winter, eight of them in Washington State. In the last week of December a highly experienced snowboarder jumped beyond the safety zone and landed headfirst into the deep snow of a tree well. It took bystanders 15 minutes to free him, by which point he had suffocated.

On the one hand it’s heartening to see the latest press release from Farmers, et al., showing that the CAT team is on the job; on the other hand, its distressing to see so many events that require their services. The primary concern is for the people harmed by these events, but the greater frequency of these occurrences also raises questions about insurers’ ability to predict them and to vary the price of risk accordingly.

Insurers have made significant progress with the use of GIS (geographic information systems) technology, and also in the analysis of claims data to refine rating and underwriting. But it is in the nature of these tools that they can be used in increasingly refined ways as insurers get more comfortable with them and incorporate more and more experience into the way they are applied.

There are limits, of course — insurers will never be able to anticipate every possible landslide or avalanche. However, there is room for optimism about how well insurers can leverage technology to build a much more refined risk picture, according to Pat Saporito of Business Objects. “The available tools bode well for better protection of policyholders’ assets and a better understanding of exposures and their impact, on the part of insurers,” Pat remarked to me during a phone chat yesterday.

As insurers continue to build their geographic risk expertise they may even be in the position to provide novel services, according to Ms. Saporito. “Exposure analysis could be a value-added service provided by a carrier’s agent, perhaps even part of the real estate process when the customer is looking to buy a home,” Pat speculates.

St. Paul-based Travelers' announcement this week that it is pledging to reduce total U.S. greenhouse gas emissions by seven percent by 2011 is another example of how high-profile topics such as green computing, sustainability and energy efficiency have become in financial services.

Travelers' initiative stems from the company’s participation in Climate Leaders, the U.S. Environmental Protection Agency’s (EPA) industry-government partnership that works with companies to develop comprehensive climate change strategies.

Not to detract in any way from Travelers' goals or climate change-addressing activities to date -– but it's gotten so that I'm seeing announcements of this nature from insurance companies and banks almost every day. Yes, there's a lot hype and "happy talk," but as I have noted before, the issues of climate change and environmental risk are real and so are the potential business benefits for insurers that start to address these issues in a meaningful way.

I will go so far as to predict that 2008 will be "The Year of Green" in insurance and financial services IT. Reducing carbon footprints and addressing sustainability won't necessarily replace any of the other urgent topics of discussion and analysis, such legacy systems, customer experience, recruiting and retaining IT talent, and risk management/regulatory compliance. But these new concerns will move towards the top of senior executives' agendas.

In fact, I think discussions of and actions on all these long-standing high-priority challenges actually will incorporate sustainability-related concerns –- the green computing angle might actually be a way to make a stronger business case and seal the deal. For example, CIOs still trying to persuade doubters about legacy transformation strategies can make the argument that moving to a more efficient platform also will position their companies as leaders in addressing sustainability. Carriers that are struggling to renew their IT workforces with new, younger blood have a better chance of attracting Millennials by being on the right side of dealing with climate change. Sooner or later (after the 2008 presidential elections?) there will be tougher regulatory requirements related to businesses' and consumers' carbon outputs -– why not get a head start on compliance?
As always, the real test will be to go beyond rhetoric, hype and PR, and to contribute to actual measurable results -– both for the environment and the bottom line.

Yesterday a friend in the industry asked me about how much of a hot topic billing was, and I had to concede that I wasn’t sure. Certainly, I hazarded, there is still an appetite for best-of-breed solutions, even if more often owing to CIOs following a more cautious route.

More often than in the past, according to Celent analyst Chad Hersh, insurance CIOs are taking an incremental, component-based, services-oriented architecture approach, and will seek to assemble as many modules as they can from a selected vendor. However, since open architecture permits more choice, they can opt for alternatives if a particular component is found wanting. I would add that given more demanding customer expectations, billing ought to be more than an afterthought.

Whether I was on the right track or not, the question got me thinking about what makes a topic “hot.” Without question, necessity is the mother of a good deal of invention and implementation in the insurance technology space. However, that doesn’t mean that all systems priorities are correctly ordered: some needs assert themselves with greater force than others. A CIO may have a small number of clear systems priorities and a dozen others that are further down the priority list. It may take more thorough analysis to prioritize these items, and in its absence less rational drivers may come into play.

What I am suggesting is that some items, at some point, are likely to get less attention because they are less interesting or more forbidding. If one had to make a list of more “boring” functionality, billing might be on it.

Lack of flash may not be the only irrational factor in disordering priorities. Fear may drive slow adoption of technological innovation in some areas — actuarial for example.

I have made the case before that actuarial technology was an area in urgent need of technology and process reform, and I’ve had reason to think so since. For example, yesterday I received a press release from Ernst & Young announcing results of a survey that found a “crisis of confidence towards actuarial and IT” on the part of senior management. While the release was self-serving, it made legitimate points:

“Understanding and explaining results is fundamental for insurers, and it will be increasingly difficult to do so as companies get larger and the reporting requirements grow more complex,” explains Steve Goren, leader of the Ernst & Young IAAS Actuarial Transformation practice. “The bar has been raised and actuaries are beginning to recognize the potential role business intelligence can play in their future success.”

It’s true that, like underwriters, actuaries are reluctant to relinquish any control over their activities, resisting automation. That assertion is amply demonstrated by their dependence on free-floating spreadsheets that can make financial reconciliation a nightmare. But it is probably also true that CIOs are quite happy to leave actuaries to their arcane concerns unless they are commanded by senior management to get involved.

Never underestimate the value of stating the obvious.

Karen Pauli, a senior analyst in TowerGroup's insurance practice has told me that her latest research -- on the importance of e-signatures and secure documents -- has stirred more reaction than just about any other topic she's covered.

“It seems like a no-brainer, but nobody has said it,” Pauli explains. “Nobody has really articulated the value of electronic signatures and secure documents in business terms.”

In part, Pauli believes that the surge of interest is due to the emergence of so-called Green issues. E-signatures can be leveraged she says to reduce the paper-based processes in place for many insurers.

“Carriers are having to stand up in front of investors and consumer groups and say what steps they're taking to reduce the impact on the environment,” she explains.

Green issues aside, Pauli also received a lot of feedback from the vendor area. Many e-signature solutions providers have told her that they're having difficulty finding traction with insurers.

To me, that's puzzling. E-commerce, of course, isn't some passing fad. And it'd be very difficult for a carrier to build a successful e-commerce strategy without some sort of e-signature or secure form technology.

Pauli suggest that the disconnect is most apparent within the independent agent community.

Among insurers, many direct writers and e-commerce leaders have adopted e-signature technologies. However, according to Pauli, it's almost entirely missing from the independent agency world.

“It is a cultural issue when it comes time to look at agents and brokers,” Pauli told me. “[They] have a very slow uptake on technology.”

Pauli has found that most agency owners and producers are baby boomers and are not big technology adopters. “The vast majority of producers are over the age of 50 and they don't even use laptops. They're still paper-based,” Pauli says.

So what has to happen? Pauli says that the involvement of agency management system vendors could be crucial in developing a critical mass for e-signatures and forms. “You have to get the agency management system vendors to do it. It has to be the whole chain - from the carrier to the agency management system vendors to the distributors.”

Unfortunately, the topic isn't on most vendors' radar. “It's not there because the agents aren't asking for it, because they're stuck in their old way of doing things,” Pauli explains.

Sooner rather than later though, the agent community needs to wake up. If they're truly stuck in their old way of doing things, as Pauli suggests, then it's only a matter of time before the industry as a whole considers the independent agent channel as “the old way of doing things” as well.

E-signatures are one of the most basic and most necessary steps when it comes to selling insurance globally and selling it online. “Otherwise, you are online, but then have to to backfill with a paper process, which is not only counterintuitive, but stupid,” Pauli says.

Probably the anniversary of 9/11 was observed more or less this year the same way it was last year. However, it felt different to me because I happened to be in New York, where I worked at the time of the attacks. The memories lasted beyond the date since the dull, humid weather of this year’s 11th gave way on the 12th to conditions very similar to those on the day of the terrorist authorities.

My industry-related memories went back to stories of business continuity efforts, some of which we wrote about. Overall the financial services industry got mixed reviews for its response, which was likely much better than it otherwise would have been if the World Trade Center itself had not been attacked in 1993.

Where do financial services and, in particular, insurance companies’ capabilities stand at this six-year remove from the day when devastating attacks closed down lower Manhattan, presenting firms with unprecedented business continuity challenges? For insight into that question, I turned to Mike Hager, enterprise security advisor and senior security architect at Unisys.

The insurance industry has done somewhat better than others, according to Hager, but he claims that there remain shortcomings associated with the difficulty of keeping track of the continually changing profile of mission critical systems and processes.

“Many companies today do not have a business continuity management process that provides for current up to date information about the critical business functions needed to continue their critical operations, nor up-to-date information about the mission-critical systems that support these operations,” Hager said. “Also the level of risks associated with their company not being able to recover are not formally identified and considered in the BCM process.”

Because companies are undergoing constant change, Hager recommended performing a business impact analysis at least every two years. However, he cautioned, “if you don’t have an effective change control process and a good system development life cycle process in place, the BCP [business continuity planning] and DR [disaster recovery] plans quickly become out-of-date and incapable of providing recoverability should something go wrong.”

Insurers also need to improve on training employees to be ready for their disaster event roles and on testing how plans function, Hager said. Without demonstrating the adequacy of a plan through testing, a company can’t really know whether the plan will really keep it going in the event of disaster. “While some companies, such as USAA, do an excellent job at making their exercises realistic, many do not provide adequate training and testing of their plans,” Hager asserted.

Insurance carriers share with their financial services counterparts the problem of maintaining the availability of data across geographically dispersed facilities, Hager noted — all face the challenge of ensuring that data is recovered within the period predetermined within their business continuity plans.

“Today many are looking at replicating data between facilities and locations to ensure that data is available when needed, however I would caution that that data/technology is only one of the key elements of an effective recovery plan — people and facilities must also be considered,” Hager concluded.

To summarize Hager’s critique:

First, while the insurance industry may be first-rate in its business continuity/disaster recovery efforts, BC/DR is not a once-and-done task — at a minimum, analysis and re-planning should be done on a two-year cycle, and at best, some kind of change management process should track mission-critical changes as they happen. After all, disasters can hit anywhere within the refresh cycle.

Second, when all is said and done, planning is a theoretical exercise. As with most extreme situations, one never knows how one might perform until the day of reckoning. However, prudence demands thorough testing of BC/DR plans, preceded by initiatives to keep employees updated as to their BC/DR responsibilities.

Finally, BC/DR is far from simply a technology challenge; it is a people, process and technology problem, and one, moreover, that must pay special attention to the physical facility within which those people, processes and technology elements are located.

I encourage those who agree, disagree or have other observations than Hager to share them with me.

Posted by Anthony O'Donnell

With the finalization of its acquisition of Moncton, New Brunswick-based Whitehill, Skywire Software (Frisco, Texas) brings itself closer to its stated goal of “being able to manage the complete life cycle of insurance information,” as the vendor’s president and CEO Patrick Brandt has expressed it.

In an earlier blog entry, my colleague Kathy Burger argued that the then proposed Skywire/Whitehill deal was “unsurprising and logical,” given Skywire’s ambitions and Whitehill’s assets in the document management space.

That view is in keeping with what Celent’s Matthew Josefowicz said to me yesterday: “The Whitehill acquisition helps Skywire broaden its customer base and achieve an even stronger position in document automation,” he observed. “I suspect that Skywire will continue to make strategic acquisitions of additional companies in other areas, but I’d be somewhat surprised if they acquired further players in document automation in the short term.”

In terms of the more logical and obvious benefits flowing from the merger, Skywire’s Brandt comments that take it “further and deeper” in its capability to manage the insurance information, for example with the addition of Whitehill’s Tracker compliance solution, which Brandt says will “integrate nicely with our document automation, rating and quoting products.”

On the not-so-obvious side, Brandt says the acquisition brings a variety of “soft” benefits, such as Whitehill’s employee base, which he characterizes as having notable longevity and domain expertise. “It gives us a much deeper talent pool to do some really cool stuff with our products,” he says.

Whitehill also brings a senior management team with skills that complement those of Skywire, according to Brandt.

Brandt claims that the two organizations have very similar visions and corporate cultures. “It’s not just a good 'spreadsheet' merger,” he claims, “it truly is a ‘one plus one equals three.’”

Whitehill boss Paul McSpurren, now Skywire’s chief strategy officer and general manager of Skywire Software Canada, agrees. “Skywire’s core values of ‘company, cu