Here We Go Again

No one can say they weren't warned. Whatever ends up actually transpiring in terms of named hurricanes and other bad weather this summer, the 2006 hurricane season already has to be in the running as the most-analyzed season on record. I don't remember ever hearing or seeing as much coverage about the start of hurricane season as appeared at the beginning of June.

Not surprisingly, insurance companies have been right in the middle of the media storm - sometimes cast as greedy villains, sometimes (usually by the carriers themselves) as entities also victimized by hurricanes (and also in need of aid), and sometimes as valuable and effective players in the aftermath of past and future storms. It does seem that the industry has been pretty smart about assessing what worked and what didn't last year (see Associate Editor Maria Woehr's article on catastrophe models, page 11) and trying to apply that analysis in ways that will do better by all parties (insurers and policyholders) going forward.

It could all end up being much ado about nothing, but it also could turn out to be the proverbial worst-case scenario, and of course, the industry has to prepare for the worst. That was the gist of recent commentary from Robert P. Hartwig, the Insurance Information Institute's SVP and chief economist. Assessing the P&C industry's financial performance in 2005 and making some predictions for 2006, Hartwig notes: "The financial and underwriting performance of the ... industry during 2006 is expected to be strong, assuming 'normal' catastrophe activity." But even if activity is "normal" - and, as we know from the June media blitz, that's not what is being forecast - there are other risks to consider, including price competition, regulation and the possibility of a general economic slowdown. These are conditions that challenge all insurance companies, not just those in the P&C business.

With so many external factors that really can't be controlled or consistently predicted, it sounds like a no-win situation for the industry. This is where insurance IT organizations can be the heroes - not just in their underwriting-support, claims-processing and fraud-detecting roles, but more so in facilitating the operational efficiency and excellence that make the difference in achieving an under- or over-100 combined ratio. This is particularly fitting for a summer in which a new Superman movie is released - it truly could be "IT to the rescue" this year.

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