Insurers have been on a quest to know their customers. They have heeded exhortations to think of policyholders in terms of relationships, not contracts and documents. Getting with this program is the key, the industry recognizes, to being competitive and profitable. Now there are some unanticipated wrinkles to the art of knowing the customer that even the smartest CIOs and CEOs probably never imagined. Turns out that knowing the customer is your patriotic duty as an insurance company executive. That's because of the USA PATRIOT Act, the recently passed set of regulations that seek to track and halt money laundering and other financial activities (both legal and illegal) that may be used to fund terrorist activities.
The PATRIOT Act's provisions aim to give financial institutions and government agencies unprecedented leeway to share informationprimarily information about transactions and other activities (opening accounts, moving money, address changes, e-payments, etc.) that could reveal a pattern of unlawful activity. "The government's most valuable weapon in this war on terrorism is information," Jimmy Gurule, undersecretary for Enforcement, US Department of the Treasury, told a group of bankers last month at Bank Systems & Technology's Executive Technology Forum. But this leeway is a "double-edge sword," attorney Michael Verde of Rosenman & Colin told the same gathering. "There are new penalties to make sure you comply."
But the most severe penaltyand this applies to insurers, as well as banks and securities firmswould be the horrible publicity, recriminations and loss of business if it turned out an institution's systems and procedures were not up to the challenge. How would you like to be the CIO of an organization that did not know its customers well enough to identify and track activities that were unlawful, or even murderous? How would you like to be the vendor of systems that didn't live up to their promise in this regard? It almost makes you long for the era when customers were strictly the agents' concern. For better or worse, those days are over.
Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio