Blog | What We're Thinking

Regulatory Reform: Insurance as an Afterthought

Posted on June 18, 2009

President Obama's presentation of financial reform proposals yesterday felt anti-climactic from the perspective of an insurance industry observer. While the financial crisis unfolded as a banking and securities debacle, the spectacular failure of AIG seemed to implicate the insurance industry, legitimately or otherwise, for better or worse. And yet, with the publication of the Treasury Department's reform proposal white paper, it seems as if the Obama administration is treating the insurance industry as an afterthought, while it focuses its limited resources on more pressing objectives.

In his opening statement before the Senate Banking Committee this morning, Treasury Secretary Geitner made clear that the Department had limited bandwidth:

"Let me be clear, our plan does not address every problem in our financial system. That is not our intent. It does not propose reforms that, while desirable, would not move us towards achieving those core objectives and creating a more stable system.

A story in today's Washington Post referring to the reform proposals bluntly states that, "problems in the insurance industry were deemed by officials to be peripheral to the financial crisis." The article, entitled "Core Reforms Held Firm As Much Else Fell Away," goes on to state that a proposal for a federal regulator for insurance companies was "shelved."

The ACLI might take issue with that characterization, as the organization's president and CEO Frank Keating said yesterday that the President's plan was a step toward "a modern efficient and consumer-oriented regulatory system," by which he meant a system that included optional federal charter (OFC).

The ACLI's advocacy of OFC, reinvigorated by the financial crisis, has been derided in some quarters as an opportunistic shoe-horning of a tired proposal into circumstances that suggest other remedies. OFC, critics argue, calls for deregulation when better regulation may be warranted, it attempts to fix a system that is not broken, and it invites regulatory arbitrage.

Among the critics of OFC, the National Association of Mutual Insurance Companies (NAMIC) has advanced an interpretation of the Treasury white paper more in line with the Washington Post article cited above. "Since the paper does not propose assigning regulatory authority to the ONI [Office of National Insurance], we believe that 'any new insurance regulatory regime' refers to regulatory reforms that potentially could be undertaken within the existing state-based regulatory system, which the paper leaves undisturbed and fully intact," NAMIC president and CEO Charles M. Chamness said yesterday.

The Big "I" (Independent Insurance Agents & Brokers of America) similarly chose to interpret the government's vague recommendations for insurance in a way that suits the interest of its independent distributor membership. "We are pleased that the Obama administration's proposal retains the current state regulatory system and does not directly call for the creation of a federal regulator," commented the organization's president and CEO Robert Rusbuldt.

All three organizations make valid points but, ultimately, all are likely to be disappointed by the actions of a government too busy with the other financial sectors to focus its efforts on insurance reform. The Obama administration has neither the energy nor the inclination to budge the state regulators from their position of authority, and the National Association of Insurance Commissioners is already showing its approval of the administration's reticence. However, a similar deference toward banking regulators on the part of the administration affirmed in principle the ability of financial institutions to choose their regulator in some circumstances. I interpret that deference as a potential opening for OFC in the future, whatever the current role of the proposed Office of National Insurance might turn out to be.

For those opposed to OFC, danger may also lurk in the proposed Consumer Financial Protection Agency, which could influence how OFC proposals might be evaluated as a consumer-friendly measure. As Datamonitor's Jonathan Steiman argued in an I&T story earlier this year:

"The IIABA's reasons for opposing the development of an effective federal regulator are simple: a federally regulated insurance commission would accelerate the amount of premiums sold direct over the Internet or through call centers," Steiman claims. "This is good for both insurers and consumers, but terrible for agents and brokers."

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The New Approach to Cost-Containment

Posted on June 11, 2009

The two major spring insurance technology trade shows — ACORD/LOMA and IASA — give the editors of I&T a great opportunity to feel the pulse of the market, and with the conclusion of the second yesterday, one theme has clearly established itself as a major industry narrative: insurers' approach to cost-control during this economic downturn is radically different than the last time. Whereas the mood of insurers was to slash IT spending in the wake of the dot-com bust, insurers are now looking to leverage IT to attack waste elsewhere.

It may be that insurers are smarter about the role of IT today than they were from 2001 to 2003, but other circumstances are different also. For a start, the perception that IT inefficiently used capital was correct. The incidence of project failure was legendary by the time the earlier downturn hit and insurance IT organizations, along with over-ambitious technology start-ups and venture capitalists, were due for a call to discipline. Since then, insurers have begun to apply a great deal more discipline to the financial side of technology investment, and they have made great strides in tightening up project/program management discipline, along with more strategic approaches to configuring the skill profiles of internal versus external IT staff.

Today insurers indeed understand better the importance of technology for both supporting operations and ensuring distributors and end-customers are satisfied. They also understand that IT costs are minor compared to overall operational costs, and that IT is key to reducing operational costs while supporting acquisition and retention initiatives.

Our experience talking not only with vendors, analysts and consultants but also carrier executives continues to confirm this new approach to cost-control in the industry. While spending patterns are changing, carriers continue to spend and most of the vendors we have met with are upbeat and often quite pleasantly surprised.

We encourage you to click through to Kathy Burger's recent conversation with Accenture's Michael Costonis at the ACORD/LOMA Systems Forum for a brief discussion that addresses some of the specifics of how carriers are spending more strategically in these challenging economic times.

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Laugh and the Industry Laughs With You?

Posted on May 15, 2009

Managers at my company recently were asked to weigh in on what we think are the essential capabilities for an effective corporate leader in this challenging business environment.

One that I suggested is a sense of humor –- not to make light of today’s problems, but to provide some perspective on things. Sometimes, no matter how serious the challenges are, you just can’t take yourself that seriously. A little irony or satire can help you prioritize and cope. In that spirit, I encourage you to read a recent column by the pseudonymous Stanley Bing, who writes the “While You Were Out” column for Fortune. As Bing points out, the stresses of dealing with the recession can affect managers in a number of unexpected ways.

With new times come new job-related ailments. As the federal government looks at new regulatory initiatives, it's possible that the Occupational Safety and Health Administration should be investigating the contemporary disorders that afflict us as we go about our daily duties.

And you can let Insurance & Technology know more about your coping strategies at our new LinkedIn group, Insurance Technologists & Strategists. Visit this link to check the group out and sign up:

Over the next few days I’ll be reporting from the 2009 ACORD LOMA Insurance Systems Forum –- it’ll be interesting to see if the “buzz” at the conference is hopeful, desperate, or bemused.

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Optimism Holds in Insurance IT Investment

Posted on April 06, 2009

As the year wears on, the news is now at least mixed with good signs along with the continuing bad news. We still have no clear picture of how deeply economic activity will decline, both home and abroad, and for how long. We have seen, at least, that the markets respond positively and quickly to favorable news. We have written here about the resilience of the insurance industry in the face of the financial crisis and the resolution of carriers to stick close to their original budgets. Our conversations with senior insurance technology executives continue to confirm that insurers are determined to steam ahead with major technology projects.

Insurers’ continuing investment is the subject of my latest feature story, “Despite Downturn, Insurers Remain Committed to Core Systems Evolution.” CIOs and their senior business partners are more focused on cost than they were a year or so ago, but they are driving ahead with project in-flight, and some of those we interviewed were enthusiastic about the opportunities afforded by the downturn. More than one technology officer interviewee thought this was a better-than-usual time to invest and one discusses how the economic situation gives his company a chance to deepen collaborative partnerships with vendors.

Amid the optimism, carrier executives and other industry observers remain aware of the downside of the current economic situation, as the article reflects. Obviously, the financial crisis has hit the life industry much harder than the P&C industry, and all insurers will feel the pinch of the economy as a reflection of how it is felt by their customers.

Risk data and analytics provider Advisen (New York) released a briefing last week that corroborates the darker view of insurers’ outlook in the coming year, at least on the commercial lines side of the industry. The briefing found that the insurance industry’s counter-cyclical tendency to enjoy a hard market during a downturn will be offset by broader economic forces. A press release heralding the survey said that “the economic crisis will cause exposure units to shrink, businesses to fail, and will force companies to consider budget-cutting measures such as higher retentions and lower limits. This falloff in demand will result in a top-line premium decline across the industry, substantially offsetting gains from higher rates.”

The release quoted the briefing’s author, John Molka III, CFA:
“Four years of falling rates is putting stress on both insurers and brokers. Under more stable economic conditions, the market would be poised for a rebound. But economic turbulence is adding a new layer of complexity to the pricing cycle.”

One tends to regard the output of risk modeling with greater skepticism today, but this projection seems a great deal more plausible than a AAA rating on securitized subprime mortgages. However, even assuming that commercial insurance and other lines of business will see rougher times ahead, insurers are investing for the long haul, determined to be prepared to compete for customers and distributors when we finally emerge from the downturn.

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Geithner Affirms Systemic Risk Regulation, Rejects Regulatory Arbitrage

Posted on March 26, 2009

We are still a long way off from knowing precisely what form insurance regulation will take in the wake of the financial crisis, but Treasury Secretary Tim Geithner may have resolved one issue today in his comments before the House Financial Services Committee.

No one following the government’s response to the crisis will have been surprised by Geithner’s plan for “comprehensive regulatory reform,” inactivities.” But Geithner’s specific comment addressing regulatory arbitrage is another matter:

“Financial products and institutions should be regulated for the economic function they provide and the risks they present, not the legal form they take. We can’t allow institutions to cherry pick among competing regulators, and shift risk to where it faces the lowest standards and constraints.”

In other words, calling a product a credit default swap isn’t going to free you of regulatory constraints. Geithner only implied AIG’s actions in this comment, but he was quite specific later. Having cited the company name, he said:

“Let me be clear: the days when a major insurance company could bet the house on credit default swaps with no one watching and no credible backing to protect the company or taxpayer from losses must end.”

While these comments were specifically about regulation at the level of systemic risk, they surely have implications for any other level of federal regulatory oversight of insurance that might be proposed. Assuming Congress had any appetite for optional insurance regulation to begin with, it is hard to imagine the body countenancing such a thing now that the Treasury Secretary has explicitly rejected the regulatory arbitrage as a matter of principle.

Secretary Geithner’s statement makes explicit what many observers have insisted was inevitable. His comment is less “a shot across the bow” at this point than a statement of the obvious. And the fact that proponents of optional federal charter (OFC) have already muted their emphasis on the word “optional” shows that the message, implied or otherwise, had already begun to sink in.

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AIG and the Angry Mob

Posted on March 20, 2009

As I&T has reported, Internet site Gawker published a post headlined “AIG Corporate Security’s Tips for Surviving an Angry Mob,” which consisted of what the author described as a leaked memo emanating from AIG Corporate Security. While the memo was interesting and newsworthy at a time when the nation’s attention is on the now notorious bonuses, the headline struck me as disturbingly frivolous. Does the Gawker author find humor in the idea that AIG employees face physical harm?

Perhaps not, but many have fanned the flames of hysteria against AIG by scapegoating the company, despite the possibility of harm to the company’s employees and its fortunes. One such person is Rep. Barney Frank, who attempted to brow-beat AIG CEO Ed Liddy in Washington, despite the fact that Liddy has taken on the enormous burden of managing AIG after the company’s crash without asking for any meaningful compensation. Frank’s behavior is all the more absurd given that the public now holds an 80 percent share in the company.

Among the most outrageous of Frank’s actions was to demand that Liddy supply the names of the AIG executives, accompanied by a threat to subpoena the list if Liddy failed to comply. Liddy proved more than a match for Frank by asserting that making the names public would endanger not only the executives but also their families. Liddy then read several gruesome death threats that the company had received related to the bonuses.

Frank might well seek a scapegoat to divert attention from his own significant role in the financial crisis. Frank was an enthusiastic booster of the grotesquely mismanaged Fannie Mae and Freddie Mac and notoriously said “I want to roll the dice a little bit more in this situation towards subsidized housing,” when taken to task on the potential systemic risk the government supported entities posed.

But Frank is not alone in his misdirection. The Obama Administration was aware of the bonuses but chose to go ahead with the AIG bailout anyway. Perhaps they reasoned, as has blogger John at Powerlineblog.com, that there was nothing wrong with the bonuses because they were retention rather than performance bonuses and were being given to people who had nothing to do with the transactions that wrecked the company. Perhaps Treasury Secretary Tim Geithner reasoned that retaining these executives would foster the success of this now largely publicly owned company.

Instead of having the courage to own up to that, Administration officials act outraged, the Chairman of the House Financial Services Committee attempts to publicly humiliate a man who ought to be regarded as a hero rather than a scapegoat, and the President of the United States pretends to be shocked, shocked! that such bonuses would be offered.

Perhaps we ought to be shocked at the misdirection that places public focus on bonuses that amount to a tiny part of the AIG bailout, to say nothing of the proposed $3.1 trillion budget. And what are these bonuses compared to the vast amount of rotten debt that is the product of a housing bubble driven in significant measure by public greed and government pandering?

In a better world, the general public would be more inclined to examine the contribution of its own greed and irrationality in precipitating this crisis. But a large portion of the public is always eager to denounce the rapacity of "Wall Street" and have increasingly begun to look at their political and class enemies as pantomime villains. Little surprise, then, that politicians with much to answer for will readily offer up a scapegoat.

Meanwhile, as the protesters nurse their wrath to keep it warm, blameless employees of a company they did nothing to destroy, have to consider the possibility of being physically harmed.

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A Bad Time for CIO Job Seekers?

Posted on March 11, 2009

A few days ago, a CIO contact of mine remarked that he thought it was a bad time to be looking for a job. I should say and "ex-CIO contact," since he ceased to hold that title sometime late last year. My contact's theory seemed to be confirmed by an InformationWeek commentary published this morning , but there is room to speculate whether insurance might be less subject to the economic downturn.

I have to admit that I can think of more former CIOs (of the involuntary kind) than at any time in the recent past. On the other hand, I&T has reported on quite a few C-level appointments recently, including Jay Levine as CIO of BCBS of Minnesota; Vincent Cohan, CTO of AXA Tech; Mike Anselmo, CIO of Narragansett; and Gary Plotkin, CIO, OneBeacon. But let's take a look at what the InformationWeek article has to say:

The recession is turning out to be a career-booster for some folks within IT management ranks, but a dream-buster for a lot of CIOs looking for new jobs.

As companies are consolidating and downsizing in this rotten economy, there's a "huge supply of really good people hitting the streets looking for new jobs, including CIOs, CTO, VPs of infrastructure and other senior level IT executives," says Beverly Lieberman, president of Halbrecht Lieberman Associates, an executive recruitment firm specializing in IT careers. And as you might expect these days, not all of those IT managers and executives are hitting the street voluntarily, she says.

Lieberman says this trend affects financial services and insurance along with other industries. What she doesn't discuss is whether there might be any differences in the occurrence of this trend between industries.

I suspect that insurance will suffer less in this respect because carriers remain well funded and, if they haven't grown their IT budgets to earlier expectations, nor have they trimmed them back substantially. At the same time, insurers have unquestionably begun to act in more cost-conscious ways, and that's at least as true of IT organizations as of other departments.

That cost-consciousness is likely to manifest itself in solutions that include someone else managing what carriers used to do for themselves. That can include ASP and SaaS options, and will certainly mean a renewed emphasis on the offshore outsourcing option. Where insurers can cut back on management, they will, including dropping CIOs of acquired companies and resisting the creation of divisional CIOs.

Though the motives may be different, JP Morgan Chase's moves are likely to show a pattern that will be followed one way or another in the insurance industry. InformationWeek's Bob Evans reports that that the company is expanding its use of Indian outsourcers by 25% to deal with the IT integration of Washington Mutual and Bear Stearns, among other considerations.

Bottom line, insurance CIOs may have less to worry than those in other industries, but for those looking for a CIO spot, it could be a tough time to find a job. On the other hand, given the inclination to spend and the reluctance to hire, now may be a better time to find consulting gigs.

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Health Insurers Reaching Customers with e-Learning

Posted on October 09, 2008

Health insurers don't need to look any further than the industry of their healthcare provider colleagues to see that consumers are increasingly turning to search engines and the web for healthcare information.

from the NY Times:

At least three-quarters of all Internet users look for health information online, according to the Pew Internet and American Life Project; of those with a high-speed connection, 1 in 9 do health research on a typical day. And 75 percent of online patients with a chronic problem told the researchers that “their last health search affected a decision about how to treat an illness or condition,” according to a Pew Report released last month, “The Engaged E-Patient Population.”

Reliance on the Internet is so prevalent, said the report’s author, Susannah Fox, the associate director at Pew, that “Google is the de facto second opinion” for patients seeking further information after a diagnosis.

As carriers themselves begin entering this fray -- developing online initiatives around educating consumers on the basics of health insurance -- it will be interesting to see if any specific approaches work better than others.

As Peggy Bresnick Kendler reported last week, CIGNA recently launched a public-facing e-learning program that aims to educate consumers on the basics of health care and health insurance. Developed by CIGNA University, the carrier's educational unit, the program revolves around three online learning modules that incorporate various technologies such as streaming video.

If CIGNA's program proves to be successful, I wouldn't be surprised if other health insurers follow the Philadelphia-based carrier's lead. In particular, I expect that CIGNA's decision to make its e-learning modules carrier agnostic (the modules do not specifically market CIGNA-branded products or services).

In another way though, I wonder if an insurer that takes a less regimented approach to its education initiative might also position itself for success. The CIGNA modules are built almost like guided tours. It's an effective way to provide information, but the information within the modules is self-contained. It'd be difficult for a user using Google or another search engine, to find an answer to a very specific health insurance query. In other words, it doesn't lend itself to the very specific ways people are likely to seek out health insurance information.

Look at the aforementioned healthcare industry. Sites like WebMD allow visitors to drill down to specific diseases and ailments. In the same way that people don't go to Google and search for "healthcare information," they don't go to Google and search for "health insurance information". Instead they use search terms like "pneumonia symptoms" and "HSA details."

CIGNA's site is an important step in the right direction as insurers learn the value of establishing themselves as a source for good information. It's only a first step though. If CIGNA can build upon this program with a more search engine friendly repository of health insurance information -- perhaps with a glossary of industry terms, user forums around specific topics or a wiki -- it could turn itself into a trusted source for consumers who, in increasing numbers, are going online to educate themselves on the basics of health insurance before enrolling in a specific plan from a specific carrier.

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Are Insurers Going Green or Just Greenwashing?

Posted on October 03, 2008

Every company, it seems these days, claims to be a green company, but I've often wondered how true many of those claims really are. For instance, paperless billing and e-payments are sometimes promoted as green initiatives, but can companies with such initiatives really call themselves green when they still conduct large-scale direct mail marketing campaigns?

It's called 'greenwashing' and it was one of many topics covered in "Green IT – Facing the Downside of Moore's Law," a Wednesday afternoon session at CSC's Connect 2008 conference in Lake Buena Vista, Fla.

"If you really look at what companies are doing, you can see that there's a very fine line between what companies think is best for themselves and what the outside world would [consider] greenwashing," said David Moschella, global research director for CSC's Leading Edge Forum Executive Program, who led the led the session.

Things get particularly interesting, Moschella says, when metrics get involved. "If you want to make yourself look like you're improving things and are lowering your carbon footprint, the first thing you want to do is get energy emissions and usage off your books," Moschella explains. "You can simply outsource your data center...to someone else or move it to another country. All that energy will no longer be on your books, but nothing has actually happened."

Moschella's presentation, to me, was eye opening. The green IT issue is one that, as an technology journalist, I have followed for the past couple years. Some insurers are truly working to use less energy and do less harm on the environment. Others though -- and sometimes this is unintentional -- have launched green initiatives without making it a priority.

In other words, just because a carrier says it's a green organization doesn't mean that it is. In fact, Moschella says that around half of all corporate green initiatives are led by marketing departments (note: his stats were not specific to the insurance industry). That's not a bad thing in and of itself, but a marketing department is not positioned nearly as well as an IT department is truly reduce an organization's energy consumption and emissions.

It is a good thing that companies are beginning to realize the importance (and true value) in "going green." Still, most companies -- inside and outside the insurance vertical -- have a long way to go. Until an insurer takes a good hard look at its overall carbon footprint and not just its perceived carbon footprint, it's just greenwashing. Marketing efforts are great, but it's time for everyone to put their money where their mouth is.

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Drivers Fear Big Brother

Posted on October 01, 2008

The success that Progressive claims to be having having with its MyRate program may indicate some kind of softening on the part of consumers toward having their driving monitored. It may be that taking location monitoring out of the picture will reassure a sufficient number of drivers to make such programs viable. However, insurers should be aware that Americans' "Big Brother" fears are alive and well when considering launching similar programs.

A writer named Edgeling details his misgivings about telematics in an entertaining and informative essay. The author describes the decision of a consumer named Scott Weires to forego buying a coveted Nissan GT-R. The car is everything he had hoped for, but he backs out of a deal when he discovers that it comes with a "black box" electronic data recorder that transmits telemetry allowing others to monitor his driving.

While acknowledging the utility of the technology, Edgeling smells a rat:

It also sounds pretty benign, even useful. But unlike Scott Weires, I’m a technology guy — and I have a very acute sense of how seemingly harmless new technologies have a tendency to metastasize into something far nastier and, usually, end up invading our privacy or diminishing our freedoms. And, perhaps due to my own driving history, the story of Weires and his Black Box had sirens going off in my head.

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The Downfall of Traditional Communication Channels

Posted on September 24, 2008

According to a report released last week by Nielsen, nearly one in five American households will not have a home phone line by the end of the year. To many, I have a feeling that this is a surprising finding, but it shouldn't be. Landline phones are quickly becoming an unnecessary expense. What can one do on a landline phone that they can't with their cell phone?

As far as insurers are concerned, I think the important lesson here has little to do with the downfall of landline telephones and copper wires, and a lot more to do with distribution channels and marketing communications.
There is always a lot of talk in the industry about reaching the next-generation of insurance customers and how to best reach them. The industry needs to make sure that its not making decisions around tomorrow's customers using yesterday's methods.

It's a simple enough concept, to be sure: don't market to young people, don't survey young people, don't provide customer service to young people via out-dated channels like direct mail or phone banking, etc. Unfortunately, old habits can be tough to be break.

Look at the television advertising, for instance. For years, television shows have lived and died by their Nielsen ratings, but do such ratings still provide advertisers with an accurate measurement of a show's popularity? Until the last few years, Nielsen ratings didn't take into account students watching television on college campuses. The ratings also used to ignore new technologies such as DVRs and new ways to view content such as streaming video. Many would argue that the company still hasn't figured it all out. (I prefer to think that this is why something like "Two and a Half Men" is still on the air, while "Arrested Development" is not.)

As a result, it seems to me, many shows that are popular among young adult viewers tend to be under-valued. Take for instance Family Guy, an animated show on Fox that was actually cancelled due to its low ratings. It wasn't until the show posted extremely impressive DVD sales that Fox execs realized that they had miscalculated the show's worth and decided to put the show back on the air.

Politics provide another example. How accurate is polling data, which traditionally only covers landline telephones, if (according to the Nielsen report) 48 percent of heads of household between 25- and 34-years-old use only cell phones?

Are these issues that directly affect insurers? No, not exactly. Still it is food for thought. I know a lot of carriers are exploring and investing in new channels for distribution, marketing and service. Many times though, I get the impression that those projects don't enjoy maximum support from business partners or that they are considered ways to supplement primary, more tradition channels.

Sooner that many think, those traditional channels could become obsolete. Ask yourself, if someone told you ten years ago that 20 percent of the country wouldn't be using landline phones, would you have believed them?

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Getting Privacy Right in Pay-Per-Drive

Posted on September 19, 2008

Our recent report on Real Insurance's mileage-only pay-per-drive policy raised, once again, the question of what it will take to get drivers to use such programs. Industry observers have predicted the resurgence of telematics (the monitoring of driver behavior via telemetry) but privacy concerns continue to shape insurers' pay-per-drive strategy, as the Real Insurance example demonstrates. The Australian insurer bypasses the "Big Brother" fears associated with telematics-based pay-per-drive programs by dispensing with telemetry all together and relying instead on customer-reported mileage alone.

Progressive has struck a different balance, dispensing with location information, but keeping the telemetry. The Mayfield Village, Ohio-based insurer has also addressed cost concerns that dogged Norwich Union's use of Progressive's patented methodology and technology: getting the "black box" that registered the telemetry proved prohibitively expensive.

Through its MyRate program, Progressive supplies a small, portable device that can easily be plugged into the on-board diagnostic (OBD) port of many car models built after 1996. The device delivers a much richer portrait of driver behavior than Real Insurance's mileage-only plan by recording mileage, braking and acceleration, and time of day. The device periodically transmits that information wirelessly back to Progressive.

With MyRate, Progressive has struck a compromise: the insurer loses valuable location information that it could use for underwriting purposes, but the carrier thus reassures customers uneasy with the idea of their insurer (or anyone else privy to the recorded information) tracking their every move.

Will that be enough for Progressive's Pay As You Drive to take off this time? Though the carrier has not reported any business metrics, Progressive claims that customer adoption has been promising. MyRate is now available in seven states and one out of three eligible drivers (e.g., those whose car has an OBD port) have accepted Progressive's offer to use MyRate, the carrier says.

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Risk Modeling and Wishful Thinking

Posted on September 17, 2008

If one wanted to identify a single factor that has had the greatest influence in the current financial crisis it would be poor evaluation of risk. Many people, especially those outside the financial industry who manage risk in their own businesses, are now asking how Wall Street's professionals could manage theirs so catastrophically, especially considering the potential consequences.

The debacle also raises the question of the role of technology. One can easily understand "irrational exuberance" or plain greed skewing risk calculation, but financial services today rely on computers to perform vastly complex calculations that can plot the probability of outcomes and precisely evaluate risks. Or so we thought.

The fact is that risk modeling, like so many other control methods, can be used to mask as well as reveal reality. As useful, indeed as indispensable, as risk modeling is to project future probability it is nevertheless subject to one of the cardinal maxims of information technology: garbage in, garbage out.

No financial experience is necessary to realize that "subprime" mortgages were an especially risky instrument to commoditize, or that risk multiplies as the left side of leverage ratios increases. In late 2007, notes Robert Samuelson, Lehman Brothers' leverage ratio was about 30:1; Fannie Mae and Freddie Mac ran ratios as high as 60:1. Samuelson comments:

It wasn't that Wall Street's leaders deceived customers or lenders into taking risks that were known to be hazardous. Instead, they concluded that risks were low or nonexistent. They fooled themselves, because the short-term rewards blinded them to the long-term dangers. Inevitably, these surfaced. Mortgages went bad. The powerful logic of high leverage went into reverse.

The self-deception Samuelson describes is not surprising in itself, but it becomes troubling when one reflects that self-deception was incorporated into pseudo-scientific arguments for the viability of risky investments. Sellers and buyers could defend their actions because they could prove that the investments made sense through risk modeling.

Thus they present a cautionary tale about the abuse of risk modeling. In the first place, if the assumptions of risk models are wrong, their output will be too. Also, as David West, senior vice president of Valen Technologies observes, the number and quality of sources of input will affect the reliability of output. "A consortium approach to data acquisition and subsequent modeling is necessary to avoid building models that have very limited scope," he says. Furthermore, models have limited shelf life. As the multiple factors influencing risk change, the risk of a given investment may also change, and sometimes dramatically.

On top of all these challenges and limitations, "models do not give black and white predictions – everything is described in varying shades of gray," West adds. "Yet banks and insurers want clear-cut decisioning."

Of course decisions themselves must draw a clear line. However, that line can be drawn under the influence of prudence or wishful thinking. Financial services companies exercising due diligence will refine their risk modeling competence and increase their use of sources to make their models more complete. But the distinguishing characteristic of the best financial services professionals will always be good old common sense.

What else explains the fact that some insurers have been decimated by subprime exposure and others have escaped unscathed? Some months ago, the CEO of one of the nation's largest life insurance companies told me how his company had avoided subprime exposure. He said:

"We never thought it made sense to lend money to people who couldn't put any money down and couldn't afford to pay for the mortgage, no matter what all the models were saying."

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Lessons Learned from Microsoft's Bill Gates/Jerry Seinfeld Ad Spot

Posted on September 10, 2008

I’m not at all sure that it is accurate to describe Microsoft’s latest ad campaign, which recently kicked off with a television commercial starring both Jerry Seinfeld and Bill Gates, as viral marketing. After all, viral campaigns don’t start out with national TV spots featuring two of the world ‘s most famous individuals.

Still though, I find it interesting that the campaign’s first ad has received so much negative attention from blogs and the online media. First, here’s the ad:

And second, here’s the popular criticism: 1.) The ad isn’t funny 2.) Jerry Seinfeld doesn’t appeal to younger viewers and 3.) The ad doesn’t really mention Microsoft or Vista. Here’s how InformationWeek’s Paul McDougall sums it up:

The ad shows Seinfeld helping Microsoft chairman Bill Gates buy shoes at a discount store. Gates opts for a pair called The Conquistador. "They run very tight," Seinfeld warns. It does not get any funnier than that.

But it's a remarkable, 90-second second encapsulation of why Microsoft is going to have a tough time thriving in the Web 2.0 world, where consumers--not agencies and marketers--decide what's in.

For starters, what does the decision to use a 54-year-old, white, multimillionaire comedian, whose show went off the air ten years ago, as the centerpiece of a campaign that's supposed to give Windows a hip new image and help Microsoft reconnect with younger buyers, tell us about the company?

Mostly that it's dominated by middle aged white guys who made their own millions more than a decade ago and who are woefully out of touch with America's changing demographics and any generation that doesn't go by the initials BB.

These guys probably still think the Fonz is cool.

The extent of online criticism is reminiscent of the online backlash that’s usually reserved for ill-conceived and/or misleading viral campaigns. And, after drawing that comparison, I find myself in a state of confusion. What’s so bad about this commercial?

It’s not Seinfeld’s finest work, but I chuckled a few times. Isn’t that really all you can ask for from a TV commercial? Considering some of the other stuff that invades my living room during commercial breaks, I’d say Microsoft did an OK job.

And I don’t necessarily think Seinfeld is that misguided of a choice. It’s not like they pulled Gallagher out of 1985. Seinfeld and his television show reached across many generations, including a group that is now entering its mid-20s (I should know).

What’s really at play here is something that insurance companies -- especially those looking to launch marketing campaigns -- might what to keep in mind. And that is that the online community does not judge marketing campaigns and other corporate efforts on a stand-alone basis. I suspect that bloggers and other online pundits aren’t necessarily reacting negatively to the Seinfeld ad simply because they dislike it from a content perspective, but because they have a negative opinion of Vista.

For example, not too long ago, Microsoft made the cool choice when it partnered with comedian and part-time Daily Show contributor Demetri Martin for an ambitious marketing campaign. In many ways, it was everything that the Seinfeld campaign is not -- it was younger-skewing, made heavy-use of the web, and funnier (I think, anyway). To date though, the campaign with Martin hasn’t taken off.

The lesson here for insurers is that, on the Web especially, a company’s reputation (in the case Microsoft, we’re talking about Vista; for an insurer, we’re talking about customer experience) precedes itself. If prevailing wisdom, accurate or not, suggests that your product or service is less-than-stellar, any attempt to connect with consumers in a less-than-conventional way is likely to be viewed through a harsh lens. (I doubt GEICO’s caveman spots, for instance, would seem as funny if everyone was under the impression that the carrier’s web site crashed during the quoting process.)

I have never used Vista. So I can’t speak with any authority on its strengths or weaknesses. Still, I do know that a series of negative Vista reviews and reports has given the OS a bad rep that has permeated popular opinion. If recent reports are any indication though, Microsoft has taken strides to improve Vista’s performance and fight the stigma currently attached to it. If those efforts are successful, perhaps Microsoft’s subsequent Seinfeld spots will be better received.

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Hurricanes, Civilization and Insurance

Posted on September 03, 2008

During last night's activities at the Republican National Convention, one of the speakers made a poignant observation to the effect that while Hurricane Gustav, didn't turn out to be another Katrina, some people suffered just as terribly as if it had. The speaker was talking about fellow Americans, but owing to what I've been writing about, my thoughts turned to the people of certain Caribbean nations that have been hit in quick succession by at least three significant storms.

Yesterday Hurricane Hanna hit the island of Hispaniola, which has already suffered the ravages of Tropical Storm Fay and Hurricane Gustav. Owing in significant measure to the soaking caused by the previous storms, yesterday's floods and mudslides killed 25 people in Haiti. Those losses come after Tropical Storm Fay killed at least 14 people on Hispaniola during the storm, and Hurricane Gustav killed 22. The immediate effects of these storms were by no means representative of the full toll, as exemplified by a bus accident in Haiti caused by flooding that was reported to have killed another 50 people. The storms are likely to affect agricultural production for some time to come and leave many individuals worse off for the foreseeable future, among other infrastructure-related, longer-term effects.

I'm not bothered that these tragedies get less attention in the American media: it's natural for local media to focus on local concerns. It is heartbreaking, nevertheless, to reflect that the inhabitants of Haiti and other Caribbean countries lack many of the capabilities that the United States enjoys both in preparing and responding to major storms. Poor infrastructure and often flimsy dwellings make life worse for Haitians and others during hurricanes, and so does a lack of insurance coverage.

If one were to look at a map of insurance coverage around the world one would see huge gaps in the geography. This is because many people simply can't afford insurance or the risk factors make the proposition of insurance unviable. Insurance is a blessing of material civilization that enables the more fortunate of us to take measures to secure our property and protect our families. However imperfectly the industry performs when it comes to fulfilling its commitments at the time of claims, it nevertheless provides a vital benefit. Those who work in this industry, including those who staff its information systems, should feel some pride in contributing this service that makes our civilization more secure.

Perhaps someone will find this observation banal or overstated, but I insist on the point. There is a tendency, especially during election campaigns, to dwell on what could and perhaps should be better. But we do well also to reflect on the myriad benefits we take for granted and which could easily change for the worse.

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Explaining Coverage to the Consumer

Posted on August 18, 2008

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.

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When Good Isn't Good Enough

Posted on August 05, 2008

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.

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Telematics Resurgence Predicted

Posted on July 22, 2008

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?

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Rethinking Policy Admin Replacement

Posted on July 15, 2008

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.

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Disasters, Avoidable and Otherwise

Posted on June 17, 2008

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.

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When the Going Gets Tough, Business As Usual Might Be OK

Posted on June 03, 2008

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.

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Google Launches Its Own PHR

Posted on May 20, 2008

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?

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ACORD/LOMA Musings

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.

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Health Insurance Consumer Demand Could Shift Towards Mobile Functionality

Posted on May 13, 2008

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.

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Real Opportunity or Hype?: Video Games and Insurance

Posted on May 05, 2008

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.

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Why Tech Savvy Matters to CEOs – And To Those Who Judge Them

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.

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Insurance Web Portals and Online Self-Help

Posted on April 29, 2008

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.

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Alignment From The Top: Great CEOs and CIOs

Posted on April 22, 2008

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.

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MassMutual Attracts New Agents, Dispels Common Insurance Myths Using Web Site

Posted on April 15, 2008

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?

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Cultivating Innovation

Posted on March 25, 2008

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."

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Security as a Service

Posted on March 18, 2008

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."

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Can Apple's iPhone Become An Enterprise Device?

Posted on March 11, 2008

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.”

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For Insurers, Customer Satisfaction Is A Moving Target

Posted on February 19, 2008

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.

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Banks Might Try Differentiation Through Honesty

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."

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A TSA Blog With a Comments Section? Why Not Rename It "Kick Me, Please"

Posted on February 12, 2008

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.

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Insurers' Competition For Young Workers Extends Outside Industry

Posted on February 05, 2008

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.

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In-Flight Internet: It's About Time (so to speak...)

Posted on January 28, 2008

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.

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Hillary's Inspiring Example

Posted on January 15, 2008

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.

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How Insurers Can Help Customers Help Themselves

Posted on January 08, 2008

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.

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Extreme Weather Gives Insurers Cause To Look At Role Of Technology For Catastrophe Response

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.

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Insurance IT Strategies Can't Avoid Addressing Green Computing

Posted on December 05, 2007

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.

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What Makes a Topic "Hot"?

Posted on December 04, 2007

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.

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Is the Agent Community the Primary Roadblock to E-Signature Adoption in Insurance?

Posted on November 20, 2007

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.

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9-11 Musings: Business Continuity Readiness Today

Posted on September 15, 2007

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

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Whitehill Technologies Now "Skywire Software Canada"

Posted on September 05, 2007

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, customer and community’ are very well aligned with Whitehill’s core values of ‘innovation, customer satisfaction and business performance,’” he says. “Looking from the outside, you wouldn’t see that alignment: the focus on customers, on people.”

Corporate compatibility will likely prove important, since Skywire's plan is to fully integrate the Whitehill organization under the Skywire brand. "Our goal is that we're under one brand with a common leadership structure so that we can truly leverage the value of the merger," Brandt comments. "We believe that's a differentiator in the market from some of our competitors that have made multiple acquisitions and kept multiple brands."

It would appear to be fortunate in another respect that Skywire and Whitehill enjoy a high degree of corporate compatibility since, as Brandt acknowledges, the merger effectively joins two local cultures separated by a common language. Allowing that Texan could count as a "derivative" of English, McSpurren agrees.

McSpurren says no decisions have been made yet as to the disposition of Whitehill’s massive inventory of legacy stuffed lobsters, famous to trade show attendees. “Who knows? They may just have a Skywire logo on them,” he speculates. Not a bad idea.

Posted by Anthony O'Donnell

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Editor’s Note: Alternatives to Offshoring

Posted on August 28, 2007

Offshore outsourcing can seem a questionable and at times very unfair practice, particularly if you've just lost your job to a cheaper counterpart overseas. Is it good policy—is it good citizenship—to sacrifice American workers to foreigners for the sake of profit?

In response one might argue that "for the sake of profit" is a loaded expression, and that the guiding principle is one of economy—doing what makes sense for investors and also for consumers by reducing operational costs. If the offshore option is available, decision-makers have to consider it the way they would other options; if offshoring is prudent and cost-effective, CIOs may have no choice but to outsource. And besides, America has been lecturing about the benefits of free trade as against protection for a very long time. It would be unseemly and counterproductive to change its tune when its own industry or labor force began to feel the pinch of competition.

Opponents of offshoring might respond that there is no level playing field for labor. Through the efforts of organized labor and the enlightened decisions of many employers, the United States has built a better standard of living through better wages and salaries, to say nothing of other features, such as government regulated workplace safety standards. Offshoring overturns those accumulated benfits in one quick-and-dirty step.

That’s a hard point to argue against, but America would nevertheless appear unfair in its trade practices, were it to go protectionist on outsourcing. And in the world of diplomacy, appearances matter more than reality. Better, perhaps, to focus on maintaining an edge on work higher up on the value chain.

But there may be yet another response: developing competitive domestic alternatives to offshore outsourcing. While the arguments are developed at greater length in my piece in today’s I&T News, the gist is that the United States has an underutilized workforce, including students and retirees, that can do work at comparable cost and less risk than offshore alternatives.

I am aware of at least one small-but-growing company that has begun to succeed through utilizing this approach, and whose proprietor believes the model can be replicated across the country. And a study commissioned by the Information Technology Association of America includes recommendations for government, academic and public sector cooperation that can only have a beneficial effect not just for competitive outsourcing alternatives but for the quality of the American IT and business workforce in general.

Personally, I like the idea of the economic interdependence between countries like the United States and India and rejoice in the greater well-being the business of outsourcing can bring for people in less prosperous countries. But I also like the idea of creating more opportunity for domestic students to make a buck and gain invaluable experience. It is also pleasant—as we hear ad nauseam about the aging population of the United States and the West in general—to envision our nation’s superannuated IT experts rocking on, like the Rolling Stones, and making a novel contribution to the nation’s competitive capabilities, both for now and as the foundation for a better future.

Posted by Anthony O'Donnell

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Why You'll Respond To This Editor's Note

Posted on August 14, 2007

When Anthony O'Donnell's editor's note, Spitzer Schadenfreude, from our last Insurance & Technology newsletter led to some debate between readers, it got me thinking about how the emergence of the Web as a medium for news and information has increased the direct interaction between readers and content producers like editors and reporters. In fact, if recent developments from Google News are any indication, soon the subjects and sources contained within our articles could even get in on the act.

I, for one, welcome the increased interaction between a writer and his audience. And, knowing Anthony's appreciation for healthy debate, I'm sure he feels the same. The informal character of blogging lends itself to increased writer-reader interaction, perhaps more so than more traditional news writing. Writing as bloggers and not reporters, we're able to interject our thoughts a little more, which, of course, means there's more content for readers to agree or disagree with. An Editor's Note is an opinion piece and one of the few opportunities we have to step outside the insurance industry with our writing. So, I guess it's no surprise that it's also the place where we're most likely to elicit a strong response from our readership.

Today though, rather than ruffle a few new feathers, I thought I'd share with everyone some feathers that I previously ruffled. It shows what happens when a less intelligent readership than that of Insurance & Technology provides a writer with "feedback."

Back at my old job as a reporter at a weekly newspaper, I wrote a story about the Ultimate Warrior, a former professional wrestler who now spends his time as a very controversial right-wing flamethrower. The gentleman, who legally changed his name to Warrior, got himself into some hot water at the University of Connecticut when, during a speaking engagement, he caused a near riot after making anti-homosexual remarks and sending a few vague insults towards a disagreeable student he believed was of a particular ethnicity.

In response to an article I wrote on the aftermath, I was called many names by wrestling fans near and far. My favorite came from a Warrior supporter who declined to give his name, but -- using poor grammar and circular logic -- had explained that I was, in fact, the prejudiced one and not Mr. Warrior. He finished off his comment by exclaiming, "SEE, IT IS YOU WHO ARE THE ONE WHO IS THE RASISTS!!!"

OK, so maybe all feedback isn't good feedback. Still, I implore you to comment away in the I&T blog. I'm looking forward to engaging readers in dialogue, especially when that dialogue has little to do with retired professional wrestlers.

- By Nathan Conz

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How Much Is Insurers' Tech Awareness Behind The Push For An OFC?

Posted on August 03, 2007

Not surprisingly, there has been a lot of official support and approval from both carriers and industry groups for the bipartisan House version (H.R. 3200) of the 2007 National Insurance Act that was introduced last week by Representatives Melissa Bean (D-Ill.) and Ed Royce (R-Cal.). With the presentation of this companion legislation to S.40, authored by Senators Tim Johnson (D-S.D.) and John Sununu (R-N.H.), which was introduced in May, it seems clear that the momentum for an Optional Federal Charter (OFC) is growing in Congress, although of course it remains to be seen whether insurance regulation reform will be a front-burner issue when the legislators return from summer breaks.

The official statements that came out from entities such as Nationwide, Allianz of America, ACLI, The Council of Insurance Agents & Brokers and Agents for Change emphasized the by-now-familiar arguments that an OFC will bring efficiency to the market and benefits to consumers in terms of lower rates. Only time will tell if these benefits actually ensue from an OFC, should it eventually be approved. Obviously carriers wouldn't be able to take advantage of the reforms without improved internal processes and infrastructure that also enable efficient operations and speed-to-market.

While there's obviously corporate self-interest behind the push for an OFC (no matter how much companies talk about helping consumers) one hopes that the movement also signifies objective recognition among insurance executives that the business is changing –- especially in terms of who the customers are and how they are going to do business with insurers and other financial services providers.

That's why the official statement that came out yesterday from Des Moines-based Principal Financial Group was particularly interesting to me. Larry Zimpleman, president and COO of The Principal, stated in the release: "E-commerce and globalization of financial services brings an added dimension to an already complicated industry."

It's encouraging to see senior-level recognition of the fact that technology is transforming the business.

Posted by Kathy Burger

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Skywire Software/Whitehill Deal Makes Sense in Today's Insurance Technology Environment

Posted on August 01, 2007

The insurance software landscape keeps changing, with the August 1 announcement that Frisco, Texas-based Skywire Software will acquire Whitehill Technologies. Although I had not heard any previous hints or rumors about this deal, the news was somehow unsurprising and logical.

Skywire has emerged as an aggressive player in the insurance software space, positioning itself as a provider of "best-of-breed components to assist insurers managing the life cycle of an insurance policy," according to a company statement. In a press release, Skywire explained that the acquisition "will solidify [its] position as a dominant, vertically focused software company." Whitehill itself has gained market share through acquisitions –- specifically, its 2006 purchase of InSystems and 2005 purchase of the technology assets of Metaserver.

The deal beefs up Skywire Software's capabilities in the document and content automation/management space, an area that, while not new technology, has been the focus of a considerable amount of insurance IT investment recently. These initiatives have been driven not only by the age-old quest for operational efficiency, but also by a range of customer experience, regulatory compliance, operational risk and channel integration requirements and opportunities.

At the same time, concepts such as value chain, straight-through or end-to-end processing, and enterprise connectivity are moving beyond rhetorical or buzzword status in insurance and becoming realities. This is not only because of advances in connectivity, integration and flexible architectures (read SOA), but also because a growing number of solutions providers are able to cover all the operational bases, so to speak -– either through partnerships (a la Microsoft Insurance Value Chain partners) or via branded solutions that they have developed or acquired. With more insurers opting to buy rather than build, it's smart for a company like Skywire Software to expand its capabilities and offerings with strategic acquisitions such as the Whitehill deal.

Posted by Kathy Burger

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Chubb Impresses With CAT Response

Posted on July 31, 2007

If I've learned one thing in my first six months here at Insurance & Technology, it's that there is an excellent pizza place on 5th Avenue, just around the corner from my office. If I've learned two things though, the second, after pizza, would be that big-time insurers consider their catastrophe response efforts a top priority.

Companies like Travelers, State Farm, Safeco and Farmers have all made news recently by innovating in the area, as they consider CAT response as place where they can establish competitive differentiation. After all, you can't underestimate the value of one neighbor -- frustrated by his insurance company's slow response to a claim -- looking over the fence at another neighbor that's insured by a competitor and has already been visited by a mobile technology-equipped claims adjuster and [possibly] issued a check on the spot.

Leveraging Technology at Chubb

Warren, N.J.-based Chubb Group of Insurance Companies ($14 billion in revenue, 2006) is the latest carrier to tout its CAT response capabilities. Last week, the insurer announced that 95-percent of its insurance customers affected by strong April storms in the Northeast United States were “very satisfied” with how their claims were handled, according to a survey. More than 29 percent of Chubb claimants from the April storms responded to the survey, which assessed promptness, service, claims submission ease, damage assessment satisfaction and settlement fairness.

“The integration of our service center, field resources and preferred vendor networks enable us to quickly assess the level of expertise needed to assist the customer and engage resources that can help mitigate loss, minimize customer inconvenience and move forward with repair and restoration,” says William Turnbull, Chubb senior vice president, claims.

Turnbull credits Chubb's two call centers, located in Chesapeake, Va. and Phoenix, Ariz., with jump-starting the response process by effectively handling the dramatic spikes in claims activity that accompany a catastrophe. When a catastrophe can be anticipated, a dedicated catastrophe manager helps ensure that Chubb-trained field adjusters are among the first on the scene by pre-positioning them just outside of areas likely to be affected.

In the field, Turnbull says recent technology purchases are helping to mobilize adjusters and make them more efficient. New to Chubb field adjusters this year are GPS units and cellular modem cards. Approximately two years ago, the organization equipped its adjusters with pen tablet PCs. The company declined to discuss the specific vendors or products it uses.

Previous to the tablet PCs, adjuster used laptops, which proved too cumbersome for catastrophe response situations.

“Imagine walking around a loss site with a laptop,” Turnbull explains. “It's like walking around with an open pizza box. It's difficult to balance, measure a loss and enter data via the keyboard.”

The laptops forced Chubb adjusters to operate in two worlds at once -- a electronic world for data entry and a paper-based world for diagrams and note taking. “The pen-based tablet PCs enable adjusters to electronically capture text, data, handwritten notes and diagrams by writing directly on the computer screen with an electronic pen. It further enables the utilization of software that takes advantage of the streamlined nature of drop down menus for easy point and click entry of information,” Turnbull says.

At the end of the day, Turnbull says that the technology Chubb has deployed helps field adjusters process claims more efficiently, which in turn enhances the company's retention rates and creates new customer acquisition opportunities.

And that brings me back to my original point: big insurers are making catastrophe response a priority, you need only to search the recent issues of I&T to find that to be true. Yet while there are many large insurers innovating in this space, regional carriers are making less noise. So, I guess I'm wondering if CAT response is less of a priority for smaller companies, because I don't think it's an issue of capability.

Plymouth Rock Assurance, for instance, is a Boston-based auto insurer with $302 million in annual written premium with an impressive mobile claims operation. Checks are issued on the spot and appraisers can upload images and appraisals back to office-based adjusters in a matter of minutes. If Plymouth Rock can do that, then a similarly sized insurer that offers a wider array of P&C products should be able to compete with the big guys when it comes to CAT response.

So why don't I hear about it? Maybe it's a matter of priorities. Or maybe I just need to spend more time looking for smaller carriers innovating in CAT response and less time at the pizza joint around the corner.

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Spitzer Schadenfreude

Critics of Eliot Spitzer have had the pleasure of watching the former New York Attorney General and now Governor get a dose of his own medicine.

Current New York Attorney general and fellow Democrat Andrew Cuomo found that Spitzer’s office misused state power to discredit political rival, Joseph L. Bruno, the Republican New York State Senate majority leader. As a result, the State Ethics Commission has begun a preliminary review of Spitzer’s administration.

As the New York Times reports:

Mr. Cuomo’s report concluded that the governor’s staff had broken no laws but misused the State Police to gather information about Mr. Bruno in an effort to plant a negative story about him. The governor, a Democrat, has maintained that he was misled by his staff and knew nothing about the effort to discredit Mr. Bruno, the state’s top Republican.
He has also said his staff was fully cooperative, even though two of his top aides, Mr. Dopp and Richard Baum, the secretary to the governor, refused to be interviewed at the direction of the governor’s counsel, instead providing brief sworn statements.

Many commentators have referred to the matter as evidence that Spitzer can no longer vaunt a “squeaky-clean” image, but most call attention to what they characterize as Spitzer’s cynical dealings on campaign-finance in which he allegedly “exchanged pork and pay raises” for desired legislation, along with a laundry list of questionable behavior, including sweet deals and sinecures for campaign sponsors in the real estate industry, in which the Spitzer family is a player.

In some cases when a figure with the reputation of a reformer is seen to go bad, the narrative is one of goodness souring into corruption. But in the case of Spitzer, his most vehement critics see his actions as more of the same: an arrogant man, full of himself, above the limits placed on others, taking himself as his own exemplar, identifying his ego with his office(s) and blithely abusing power on the rationale that when he does it, it’s for the good.

Spitzer, such critics might assert, could be adduced as Exhibit A in an American legal system where prosecutors are granted extraordinary powers to intimidate to a degree verging on blackmail, undermining the traditional protections of the accused under common law. By gaining the cooperation of the intimidated, decent people can be cast as criminal villains and careers can be destroyed, critics argue. Even if such maneuvers are done in the interest of the public good, such abuse of power is more sinister than much of the trimming and petty corruption it pretends to address. If it is done in small or great measure to advance the careers of prosecutors, it is perhaps more sinister still.

Spitzer has been very effective intimidating his victims and potential victims to get results without necessarily uncovering any law breaking. In cases where his victims do gain some measure of vindication, it’s a case of too little too late, and it certainly doesn’t get the same media attention as the charges that soiled their reputations.

Now, to some extent at least, the worm has turned, and it is Spitzer himself who is under scrutiny and subject to imputations that call his professional and personal character into question. Consider the following characterization in the deck of a piece in Investor’s Business Daily entitled “Richard Milhous Spitzer”:

New York Gov. Eliot Spitzer and the one president ever forced to resign seem to have a lot in common. But at least Nixon waited a little while before using the tools of state against his political enemies.

Now the onus is on Spitzer to demonstrate that he is as clean and virtuous as billed and not given to abuses of power limited only by the resources of the office he happens to hold.

Posted by Anthony O'Donnell

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Does Ergonomics Matter?

Posted on July 24, 2007

By Nathan Conz

Because I'm Insurance & Technology's "new products czar" (a title-bump that will be news to my editors when they read this entry), a lot of technology solutions come across my desk every day. Until very recently however, none of those products were also, in fact, about my desk.

That all changed recently when I was briefed on the offerings of WorkRite Ergonomics (Petaluma, Calif.), a provider of height-adjustable and otherwise reconfigurable work stations -- a science known to lowly cubicle-dwelling associate editors like myself as "servant-oriented architecture."

Here's some research findings the company forwarded to me, some of it conducted by the company, some of it by an independent firm:

Height adjustable workstations favored by workers
* Nearly 500 office workers, more than half of the respondents (57 percent) would prefer to spend at least part of their time standing, if provided the opportunity
* More than 89 percent reported feeling muscle tension or fatigue at least occasionally at the end of their workdays
* A full 16 percent feel this distress on a regular basis
* The majority of respondents (92 percent) also favor a desk or workstation that allows them to make minor adjustments in height, or be adjusted to sitting or standing positions.
Source: "How Long Can You Stand to Sit" survey, WorkRite Ergonomics, Inc. www.workriteergo.com.

Productivity increased by flexible design
* Research indicates an overwhelming 90 percent of U.S. office workers believe that better design leads to better overall performance
* Respondents said, on average, they could increase their work output by 21 percent if their office environment were better designed
* Nearly half of the respondents noted that better workplace design would make them amenable to longer workdays.
*Source: The 2007 U.S. Workplace Survey was commissioned by Gensler Architecture, Design & Planning Worldwide. The independent research firm D/R Added Value in Los Angeles, conducted the research. The full U.S. Workplace Survey can be found online at: http://www.gensler.com/news/2006/07-20_workSurvey.html

Dual-monitor usage results in productivity increases
* Helped by WorkRite Ergonomics, Inc., the New Jersey based insurance firm The Durkin Agency moved 20 of its claims adjustors, data entry clerks, and IT employees to a dual-monitor setup using 19-inch flat panel displays. This resulted in a 10 percent increase in the number of insurance claims the firm processed each day and increased employee satisfaction
* Companies and consumers looking to replace their 20-inch screen can expect to pay approximately $500
* For $30 dollars more, however, two 17-inch screens can be purchased for a dual-screen set-up, increasing productivity up to 42 percent
* Nearly anyone who works with more than one program, or more than one source of information, will find common tasks far easier and more productive with more screen space
* The largest productivity gains, up to 50 percent, have been observed from work that involves cutting and pasting between windows.
Sources: WorkRite Ergonomics, Jon Peddie Research

Benefit of avoiding worker injury
* A single case of workers' compensation can cost an average of $50,000

You can feel free to be skeptical of ergonomics research conducted in part by an ergonomics solutions company, but if you've ever slaved over a keyboard all day, you know there's at least some truth to it. And, take it from a guy who spent two years in a chair literally held together by old newspapers and duct tape at his previous employer, higher quality workstations can make a big difference regarding workplace culture and morale.

Putting all that aside though, the only thing that matters is what you -- the I&T readers, with buying power and decision-making ability at your respective insurance organizations -- think. How do you view "workstation technology?" Is it a waste of time and money, or a simple way to improve the quality of life for your employees while they're at work? Is it a purchase that'd be difficult to justify to the business? And, most importantly, have I asked too many questions at the end of this post?

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Summer of Change at MetLife, State Farm, The Hartford

Posted on July 17, 2007

Before the industrial revolution, summer tended to be the time for campaigning -- the military kind, not the political kind which now lasts multiple years, let alone seasons -- and intense agricultural activity. No doubt the farmers are still on a more demanding schedule this time of year, but when it comes to the insurance industry, summer is a time of relative repose. It doesn’t rival the last couple of weeks in the year for quiet, but with the spring trade show cycle past and vacations depleting staff, it’s a close second.

That’s not to say the summer isn’t a good time to pick up some insurance technology-related activities. Last year we saw a rash of M&A activity among industry vendors, and we may yet see a smaller spike before the autumnal equinox. This year we’ve seen some shifts in leadership at some of the bigger carriers.

MetLife’s Jeff Stoll has retired from his Individual Business CIO role to be replaced by Larry Blakeman, who formerly held the CIO job for MetLife Auto & Home, the carrier’s personal lines P&C division. Blakeman has been replaced in turn by Rich Calogero.

A recent e-mail exchange with State Farm's Dick Shellito resulted in his informing me that he had stepped down as CIO. My media relations contact Dick Luedke explained the shift. "Dick Shellito has taken on a new role involving integrated business strategies over a wider area of our company than just IT," he said. "Mark Oakley will now head up the IT area."

Replacing Ken Auman, who retired earlier this year, Gary Plotkin has become CIO of The Hartford’s P&C company. Plotkin sees his new role as a progression from his last, as expressed during a phone conversation with Insurance & Technology yesterday. “As the CTO, responsible for infrastructure, architecture and support functions over the last two-and-a-half years, I’ve been able to develop a solid foundation as well as an overall architectural strategy and delivery the bulk of the components of that strategy,” he said. “Now as CIO I can help to deliver against those, to take a lot of that strategy work and actually move it into implementation and align it with the business’ vision in an early fashion.”

Posted by Anthony O'Donnell

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The Evolution of Personal Health Records

I shattered my right pinky finger a year ago last March in an ice hockey game and the most difficult part of the whole ordeal -- well, aside from the surgery that reconnected the appendage and the subsequent metal pins protruding just above my knuckles -- was trying to coordinate communications between my hand surgeon and my physical therapist.

Despite having offices on the same floor of the same building, collaboration was severely lacking. When it came to designing casts and splints or setting therapy timetables, the two always had differing opinions. One never knew what the other was doing. And I wasn't much help, jumbling and confusing bits of information they had communicated to me.

I'm currently working on a news analysis story for an upcoming issue of Insurance & Technology on personal health records (PHRs), and whenever I sit down to interview a source for the story, I can't help but think back to my poor, and now slightly deranged, pinky finger:

How would treatment have been improved had a web-based record been available?

Would I have had a better understanding of my own situation if I could have accessed and reviewed that information online?

Why didn't the referee call a penalty on the player who almost slashed my finger off?

And I've come to this conclusion: Right now, PHRs can be sources for competitive differentiation for a health insurer by aggregating data from different sources such as surgical centers, hospitals, insurance claims and primary care providers and then presenting it an easy accessible way. However, the real value will come when the industry settles on a basic set of standards, making it possible for individuals to bring their PHR with them when switching health plans and/or networks, maximizing savings by reducing medical errors and redundancies.

Rich Gunza, executive director for the Dayton Region at Anthem Blue Cross Blue Shield, says that PHRs are an evolutionary cut above more traditional electronic health records. Anthem recently launched the Individual Health Record (IHR) program in Dayton.

“If you look at an electronic medical record, those are primarily in a doctor's office, but it stays within those four walls. It's a stand-alone record,” Gunza explains. “The individual health record looks more like a bicycle wheel with a hub and spoke. It's a collector of different pieces of medical information. What an IHR does that's different is it takes those very technical pieces of information and synthesizes it. It takes those thousands of pieces of information, extracts what's important and makes it available for the physician and patient to use.”

Anthem's IHR initiative and many similar projects from other organizations are good news for consumers looking for more efficient and less complex health care. However, the surge in separate PHR projects can also be viewed as stumbling towards the end goal -- a unified digital health grid that transcends a particular hospital network or healthplan. After all, what good is a robust and easy-to-use PHR if a consumer can't take it with them if they switch jobs and thus switch health insurers?

Gunza, for one, says that it's yet to be determined how things will play out. He compares the current state of things to the VHS vs. BetaMax and HD-DVD vs. BluRay video format wars.

“There are a lot of different methods out there that are being developed and that are, frankly, competing for the same end game, which is how do you provide a member or a patient with easy to use, practical information for them and their doctor?” Gunza says.

InformationWeek Editor-in-Chief Rob Preston touched on this recently when he wrote about the challenges and complexities of setting up a digital health care grid, urging all the players involved to get down to business.

Preston's piece points to a journal study that questions the effectiveness of e-health records and an e-health record collaboration (involving Wal-MART and other big name companies) that is currently on shaky ground. Still, Preston comes to the same conclusion I did after staring at my right pinky finger:

“It's almost embarrassing to still have to argue that medical e-records are critical. They eliminate prescription errors caused by illegible handwriting; they make it easier to follow a patient's care over time; they alert doctors and pharmacists to dangerous drug combinations; they keep doctors apprised of new tests, treatments, and drugs; they put more information at the fingertips of patients; and they reduce costs, just as the conversion of any supply chain process from paper to digital does. Get on with it.”

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MetLife's Jeff Stoll Retires

Posted on July 11, 2007

Jeff Stoll has retired from his job as CIO of Individual Business (IB) at MetLife. Larry Blakeman has moved from his role as CIO of MetLife Auto & Home to take on the IB CIO job. In a phone conversation Stoll said that he was tired and that it was time for a change, so he decided to take some personal time.

Stoll has certainly earned a rest. Before becoming IB CIO, Stoll drove MetLife’s massive ProjectLESS consolidation effort that eliminated 53 legacy systems. As IB CIO, he played a critical role in MetLife’s rapid integration of Travelers’ systems, which must rank as one of the great M&A technology achievements of recent time. These and other accomplishments influenced Stoll’s being elected one of I&T’s Elite 8 for 2006.

Stoll told us that he looks forward to the coming days, “with a smile on my face!” He says that currently he has no plans to re-enter the insurance technology fray and that it’s at least as much a question of “if” as “when” he will return.

No doubt he’s earned a permanent break, but it’s hard to imagine a man of such drive staying out of the game. Stoll is energetic even in his pleasures, which include whitewater rafting down the likes of Oregon’s Rogue River and fishing for billfish off the Central American coast. Maybe he’ll stay retired. For a while. After reflecting, toward the end of our conversation, on the pleasures that await him on his more relaxed schedule, he said, “let me know if you hear about anything…”

Posted by Anthony O'Donnell

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London & Glasgow: The World Gets Riskier

Posted on July 03, 2007

With every risk comes an opportunity for the insurance industry, which is another way of saying it’s an ill wind that blows nobody any good. That’s small recompense for living in a world where cruel fanatics are increasingly driven to attack civilians – men, women and children – for the sake of their perverse beliefs.

The failed bombing attempt in London and the not-very-successful attack on Glasgow Airport brought home that sad truth once again. The bell may toll for us all whenever atrocities are committed, but as with the World Trade Center attack, the latest round struck closer home.

I was based in New York in September 2001, and my boss Kathy Burger was actually in the basement of the North Tower of the World Trade Center when the first plane struck. The three cities that have been most central in my life have been London, Glasgow and New York. I was born near the first, and as the son of parents from the West of Scotland, I have spent a great deal of time in the second, including many trips through the airport.

I traveled between the U.S. and the U.K. quite a lot in my early adulthood, and back in those days I remember getting perhaps a little more attention than my fellow passengers because (I speculated) of the combination of my Irish surname, British passport and American residence. Youth, attire and tonsorial factors probably played a role. If indeed I was profiled, rather than be offended I was rather grateful that the security people would take the trouble when so much was at stake.

My fear, as I walked down the streets of New York or through the Port Authority in the wake of September 11, was that we would see low-level atrocities like those committed by the IRA in Britain and elsewhere. Such attacks never materialized, thank goodness. But now we’ve seen several attacks in the U.K. that might be so described.

One hopes that the attacks might lead to the means of preventing future ones, both in Britain and abroad. For the time being there is much speculation and little clarity as to the correct interpretation of the attacks as to how they bear on the future.

However, there is abundant clarity in the comparison of those who commit these attacks and those who endure them. The difference is stark between, on the one hand, a culture that takes tremendous pains to avoid harm to civilians during warfare and, on the other hand, a culture that seeks to maximize harm to civilians.

To my original point, the creation of a business opportunity out of sadistic attacks against people and property may be cold comfort but it presents, perhaps, another contrast between the civilization of the jihadists’ targets and the barbarism of the jihadists themselves.

By Anthony O'Donnell

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Will Wal-Mart Be Competing With Insurance Companies?

Posted on June 29, 2007

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

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

Posted by Kathy Burger

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RMS/Florida Reconcile, Sort Of…

Posted on June 27, 2007

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

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

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

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

Posted on June 18, 2007

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

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

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

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

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

Posted by Kathy Burger

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