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Insurance & Technology: The Blog« February 2007 | Main | April 2007 » March 27, 2007Carriers Can Better Utilize Fraud Mitigation TechnologiesBy Nathan Conz, Insurance & Technology A recently released report from research and advisory firm Celent suggests that many insurance companies aren't taking full advantage of technology when it comes to fighting fraud. "There really isn't much excuse for an insurance company to not be using some of these technologies depending on how big they are and what the extent of their exposure is," says Donald Light, Celent senior analyst and author of the report. Despite the fact that insurers have started to put more resources into fraud mitigation technology, Light says that the traditional "red flag" method — where adjusters use predetermined lists of about 30 circumstances to gauge if a claim may be fraudulent — is still over used. "Red flags are one of the more traditional or legacy methods of identifying fraud. The problem is they rely totally on experience and distilled best practices. They're limited in terms of being able to scan the totality of the claims and discover complete sets of fraud methods," Light says. Meanwhile, several newer techniques — predictive modeling, neural networks, profiling and identity matching — have gone underutilized. "These are all established technologies that have been around for years," Light explains. "Some have been used in other parts of the insurance enterprise, but only fairly recently have been brought to bear on fraud." One of the most difficult aspects of insurance fraud mitigation is knowing when to refer a claim to the SIU (Special Investigations Unit) and when not to. Too few referrals, and fraudulent claims go unchecked. Too many, and lawsuits and poor public relations problems can persist. The newer technologies, in part by employing business rules and workflow design, can create more-accurate fraud scores that go beyond the 20 or 30 red flags that a typical claims adjuster would be equipped with. Scores at certain levels would trigger deeper investigation or SIU referral. "There are a lot of technologies out there that can make the identification of potential fraud much more sophisticated and fine-grained, and can make the subsequent investigation of those fraudulent claims much more effective through the application of more powerful tools," Light says. The full report, Insurance Fraud Mitigation: Beyond Red Flags, is available on the Celent Web site. Posted by Nathan Conz at 05:06 PM | Comments Pitney Bowes to Acquire MapInfoBy Nathan Conz, Insurance & Technology In a move to further expand its presence outside its core mailing business, Pitney Bowes ($5.7 billion in revenue) announced plans to acquire MapInfo Corporation (Troy, N.Y.) for approximately $408 million in cash. The deal could significantly strengthen the Stamford, Conn.-based company's position in geographic information system (GIS) technology. Pitney Bowes first established a foothold in business geographics as part of its acquisition of Group 1 in 2004. Its GIS capabilities in the insurance vertical are presently focused almost entirely on underwriting, with offerings such as address verification in policy management systems. "Historically, we've been focused on the operational side of business geographics. We don't have map displays. We're about returning just information," says Steve Walden, vice president, business geographics for Pitney Bowes Group 1 Software. MapInfo has a broader reach within the insurance vertical with its predictive analytics and modeling capabilities. From a marketing standpoint, insurers can use MapInfo products to target a given area for a certain new product or promotion. On the actuarial side of things, carriers can plot out where historical losses have occurred to help build rating territories. Growth potential within the insurance vertical was a motivating factor in the acquisition. "We think it's an industry where, from a timing perspective, it couldn't be any better," Walden says, specifically pointing toward the multichannel distribution trend. As some companies abandon the captive agent-only model, technology is needed to supplement — but not replace — the local agent's understanding of local geography, he says. "Insurers are going to welcome this move. I think the combinations of technologies from both sides are going to create much more compelling solutions for the various carriers. A lot of the same companies have independently chosen both organizations for what we do best," Walden says. Most organizations are trending toward dealing with a single vendor for many capabilities, Walden continues. "It allows us to deliver a much broader solution set for our customers, which they're telling us they really want." MapInfo will function as a company, with its existing management in place, under the Pitney Bowes umbrella, and will remain headquartered in Troy, N.Y. Posted by Nathan Conz at 03:12 PM | Comments AML Still a Top PriorityBy Nathan Conz, Insurance & Technology Anti-money laundering (AML) compliance has been a high priority for insurance carriers and other financial services institutions since 9/11 and the subsequent Patriot Act, which placed a regulatory focus on money laundering and terrorist financing. As a result, significant AML investments have been made in recent years. Still, a recent survey suggests that companies have set AML benchmarks that they have yet to meet. A survey of banking, brokerage and insurance executives conducted by audit, tax and advisory services firm KPMG (New York) found that 75 percent of respondents plan to either implement an automated transaction monitoring system or upgrade their current one. It's a statistic that's all the more telling when one considers that 71 percent of those same respondents said their financial institutions already had automated systems to help monitor transactions and identify potentially suspicious activity. "This is still a very big focus for institutions even now, many years after the regulations have been in place," says Darren Donovan, a principal and forensic services leader for the banking and finance sector at KPMG. "You always look for something to plateau, and we haven't seen that yet." Insurers are vulnerable to money laundering in much the same way as other financial institutions — when strong monitoring controls aren't in place. Specifically, carriers need to be aware of clients who are putting money into a product and then quickly turning it over. "Insurers need to make an inventory of their products and services where they could be vulnerable to those turnaround or u-turn transactions," Donovan says. Implementation of monitoring technology has become a "de facto requirement" in the realm of AML compliance. Donovan says. "It's hard to for a company to convince a regulator that it could reasonably do an effective job of monitoring without such tools," he explains. Data feed gaps, where certain lines of business or geographic areas don't show up in the monitoring system, are a potential pitfall for AML software. "Sometimes this happens because of acquisitions or legacy systems. The work isn't done to tie them to the monitoring system," Donovan says. Regardless of how well AML technology performs, a key to AML compliance is in the workforce. In fact, Donovan is careful when referring to AML compliance products as solutions. The products are tools that help real people identify unusual and suspicious activities and decide when to file a suspicious activities report (SAR). "Everything about monitoring really comes down to KYC, Knowing Your Customer, and really understanding the risks of your business. That allows you to have the right rules and scenarios in place [within the AML technology]," notes Donovan. KPMG issued its survey at the Florida International Bankers Association AML Conference in Miami, which drew a mix of executives from U.S., Latin American and Caribbean institutions. The survey also found that a majority of respondents plan to increase spending on their automated transaction monitoring system over the next 12 months. Interest in AML technology has not waned, Donovan says, because of the regulatory momentum behind anti-money laundering compliance. There's great awareness within financial services regarding AML and a culture around enforcement, he says, due in large part to the events of September 11 and the Riggs Bank controversy. "There was a big, hopefully once-in-a-lifetime event in 9/11, and then on top of that there was a regulatory kick-in. It created this momentum that has built a really big infrastructure and culture around AML," Donovan says. "It's rare to get that critical mass on any sort of regulatory issue, but it does happen and it certainly did happen around AML and terrorist financing." Posted by Nathan Conz at 12:42 PM | Comments March 13, 2007Fidelity National Title Launches Multilingual Web SitesBy Nathan Conz As part of a larger effort to increase home ownership in Latino and Asian-American communities, Fidelity National Title Insurance, an underwriter for Fidelity National Financial (Jacksonville), has launched four new foreign language Web sites - in Chinese, Korean, Spanish and Vietnamese. Fidelity National Title, along with FNF's other title insurance underwriters, issues approximately 29 percent of all title insurance policies in the United States. FNF senior vice president of market development Pablo Wong says FNF doesn't have the capacity to make all materials available in all languages, but that Chinese, Korean, Spanish and Vietnamese were chosen for a variety of reasons. Spanish, of course, is widely spoken. According to the 2005 American Community Survey by the U.S. Census Bureau, there are over 32 million speakers of Spanish in the U.S. Wong says that Chinese (2.3 million) and Vietnamese (1.1 million) speakers are also prevalent. The Korean site was added, instead of a Filipino site, based on the comparative needs of the two communities, Wong noted. “The Korean market is smaller than the Filipino market. However, we learned through our research that most Filipino homebuyers can understand and read English. There's really a level of need that exists within the Korean community,” Wong says. The Web sites are part of a larger initiative by Fidelity National to increase home ownership in minority populations. The overall program also includes diversity training for employees, relationships with ethnic realty associations and training for real estate professionals. While the sites could represent new business opportunities, Wong says that was not the driving force behind the four new Web sites. “The real estate professional or lender normally chooses the title company,” he says. Going forward, Fidelity National is looking to expand resources through similar initiatives in Indian and South Asian markets. Posted by Nathan Conz at 12:25 PM | Comments Online Compliance Data ReviewBy Anthony O'Donnell Addressing retirement plan employer customers' increasing desire to interact with their plan provider online, Standard Retirement Services (a subsidiary of StanCorp Financial Group; 2005 revenue of $2.3 billion) has launched Compliance Data Review (CDR), a Web-based tool that enables employers to view a summary of plan information online. In addition to easing the preparation of data for annual reporting and compliance testing, the tool enables direct entry of data into the Web front end and automatically flags potential errors, such as missing or invalid data. "The end result is a more-efficient compliance testing and government filing process for plan sponsors," according to a StanCorp source. CDR builds upon The Standard's existing practice of collecting customer data online through its participant data management tool, according to Keith Feist, 2nd vice president, retirement plans administration, Standard Retirement Services. "We were using a Web-based tool prior to this, but it was uploading Excel files through that secure connection," Feist says. "They would receive the file, make their changes, send the file back through the secure connection and we would actually have to update the system." Customers could also request the sensitive documents to be faxed, and manage the process in an entirely paper-based manner, Feist adds. With CDR, plan administrators are able to make changes directly. "Before, there was a great deal of back-and-forth, using a third-party Web site, and sometimes involving a paper-based approach," Feist comments. "Now it's our own Web site and the information is automatically updated on a daily basis." CDR enables customers to enter data on a 24-hours-a-day basis, giving plan administrators greater flexibility. "We all get busy and sometimes take work home," Feist observes. "This is an opportunity for someone to connect at their convenience." Feist says that feedback from CDR users has been very positive so far, owing to the tool's ease of use and features such as messaging for erroneous data entry. "We think The Standard's data management philosophy for retirement plan customers is fairly unique in that we gather data on all employees all the time, which enables downstream services, such as compliance testing," he comments. Posted by Anthony O'Donnell at 12:08 PM | Comments Commerce Banc Insurance Services, Travelers Team UpBy Nathan Conz In an effort to offer increased value to customers and stay competitive in the marketplace, Commerce Banc Insurance Services (Cherry Hill, N.J.; $1 billion in annual premium volume) has launched a new service that allows customers to get instant automobile insurance rate quotes and initiate their purchase of coverage online. The insurance agency, a subsidiary of Commerce Bancorp, offers the new service through a partnership with Travelers, a business of St. Paul-based The Travelers Companies ($113.76 billion in total assets). Travelers has similar partnerships with other insurance agencies, says Peter Crichton, director of partnership marketing at Travelers. "We're trying to reach those customers whose preference is to shop online and who might normally only be exposed to direct-writer companies," he says. "Here, we can go into that segment of the marketplace and bring them to Travelers through an independent agent." While Travelers' "co-branded sites," as they're called, are capable of handling purchases entirely in an online environment, the Commerce site doesn't yet offer that option. However, Crichton says that most customers prefer to speak to an agent before actually purchasing coverage, even if they initially begin the process online. On the Commerce co-branded site, potential customers do have the option to initiate a purchase. If visitors indicate that they're interested after reviewing their quote, their contact information and their quote are uploaded onto Travelers' processing system and Commerce agents are notified via e-mail. "We actually go into the Traveler's processing system. We see your quote and we can call you up and talk to you about it," explains Rosalie Grosso, Commerce Banc Insurance Services' vice president of personal lines. "If nothing has changed, we just hit 'issue' and it's done. It's a very quick process." "For both the distributor and the carrier, the economics are much more favorable when consumers initiate the purchase process online. It expedites the process and takes costs out of the acquisition," Crichton adds. Commerce executives say that Travelers was chosen as a partner because the carrier is in all markets within the agency's footprint and was willing to work on a special program basis. Special emphasis on streamlining and expediency steered Commerce away from a multiple carrier online presence. "The day may come when we actually do get more involved in providing online, multiple carrier rating pieces," says Timothy Casey, chief information officer for Commerce Banc Insurance Services, "but the technology is such today that to do that is a cumbersome process." The co-branded site is essentially "a Web-linking integration" from the Commerce site to the Travelers site, Casey says. Potential customers access the instant rate quoting service from a link on the Commerce site, but the service is actually hosted by Travelers and uses the insurance carrier's software and tools. The service launched in October, but Commerce refrained from marketing until February, when the agency was comfortable with the service's functionality. "We started out very, very slowly, but now we're getting there," Grosso says. We've received about 200 to 300 contracts so far." In all, more than 2,500 people have visited the site. Crichton calls the early returns "favorable." In the future, Commerce will consider "buy now" capability for the service and similar partnerships in other lines of business. Eventually, Commerce executives expect this to be a bigger part of the business. "I think it will be significant, but it won't be the only channel of distribution. In order to get a good response, you need to have presence with your customers in multiple ways. That's what we're working on now," Grosso says. Posted by Nathan Conz at 12:00 PM | Comments March 09, 2007See You In A Second LifeBy Nathan Conz If stories about Second Life -- the online, virtual world that's been growing in popularity since mid-2006 -- haven't been staring you in the face as of late then you're obviously not reading Investor's Business Daily or the LA Times or PC Magazine...or even esteemed Insurance & Technology Editorial Director Kathy Burger's "from the editor" note in our last issue. Late last month, an insurance company made news in the virtual 3D world when Unitrin Direct (a subsidiary of Unitrin, Inc., $9 billion in assets) opened an office building within Second Life where visitors can shop for auto insurance and visit with other Unitrin customers. The virtual skyscraper is a replica of Unitrin Direct's Chicago-based headquarters. From the lobby, visiting Second Life residents can get instant, real-world auto insurance quotes by typing in a ZIP code and answering a few questions. When they leave, visitors can take a gift with them -- a miniature replica of the building, also equipped to provide auto insurance quotes. "We're excited to offer a new way to introduce customers to our direct business model, which allows us to reduce overhead and pass on the savings to customers while still providing first-class service," Tom Mercer, vice president of marketing at Unitrin, said in a press release. Other businesses have already established a presence within Second Life. Circuit City, for example, lets customers arrange furniture in a virtual living room to help decide the best placements for televisions sets and surround sound. But as far as the insurance sector is concerned, Unitrin Direct is trailblazing. It should be interesting to see how the carrier's program helps business. Posted by Nathan Conz at 11:53 AM | Comments
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