Good investment

October 23, 2007

The results of a recent study by the Property Casualty Insurers Assn. of America and information technology researcher/consultant Gartner Inc. might seem intuitive, but I guess the real point is that the findings quantify that intuition.

The survey of 35 PCI member companies found that information technology investments better position insurers in the marketplace.

Companies surveyed in the second annual joint  IT spending survey by the Des Plaines, Ill.-based PCI and Stamford, Conn.-based Gartner averaged $371 million in revenue and 434 employees, with IT expenses as a percentage of revenue of 3.0% vs. a 4.1% industry average. The survey found that companies’ revenue increased an average of 5.1% from 2005 to 2006. In planning for 2007, the companies surveyed increased IT spending plans 11% from 2006.

In a statement announcing the survey results, Stephen Forte, a principal research analyst with Gartner’s Insurance Industry Advisory Service, said the increased spending is going towards aggressively replacing legacy IT systems.

“In order to try to understand how this spending might impact the bottom line for these companies, the study also looked at the relationship between IT spending on management of claims and the overall expense of processing a claim,” Mr. Forte said. “The next generation claims management systems will reduce the total cost of processing claims, reduce the cycle time of end to end claims processing and provide greater customer retention.”

The survey participants’ average total cost to process a claim was $584, of which 12% was attributed to IT costs such as hardware, software, and applications development, and the rest was dedicated to non-IT functions such as salaries for claims management personnel. The study found that an average increase of 1% in the portion of claims processing dedicated to IT correlated with a decrease of $180 in total cost per claim.

Companies spending less than peers on IT activities may actually find themselves at a competitive disadvantage, according to the PCI and Gartner, while companies making significant IT investments may find those investments helping them transform their business.


Nobel thoughts

October 12, 2007

I’m not sure that the awarding of this year’s Nobel Peace Prize to Al Gore and the United Nations’ International Panel on Climate Change for their work raising awareness of global climate change is going to do much to sway the opinions of some folks on the climate change issue.

But, it’s quickly becoming obvious that in the short term anyway, it’s going to raise some hackles.

There will no doubt be some discomfiture among those who challenge suggestions that global climate change is a cause for concern, and those who suggest that current changes in world weather patterns represent no more than natural cyclical phenomena and are not related to man-made causes.

And there are, I’m sure, still some who simply don’t like the former vice president. Still a bit tetchy over that whole messy 2000 presidential election thing, perhaps–and the inconvenient truth that Mr. Gore did win the popular vote, some would probably have preferred he disappear from the public eye. Unfortunately winning an Oscar and a Nobel Peace Prize don’t do much to promote one’s fade into obscurity.

My wife’s initial take this morning was that the selection was ridiculous as the prize should honor someone who fights for human rights. I think my suggestion that one could make a case that a habitable planet could be considered a basic human right convinced her that the Nobel committee was probably on task in giving the issue of climate change some thought in considering this year’s winners.

The impact of the Nobel committee’s announcement on popular discourse aside, though, I’ll be looking to see how today’s news and the latest high profile attention given to the climate change issue  plays in the insurance industry. As I’ve noted previously in this space, it’s interesting to me that many in the industry have been willing to put aside political considerations in order to look objectively at the business considerations posed by climate change and the associated exposures.

Insurance industry companies and their trade groups have come forward in recent months to study the issue, offer “green” products, reduce their own carbon footprints and provide Web sites offering information on climate change. Today I got a release from risk modeler Risk Management Solutions Inc. calling the recognition of the IPCC’s efforts “deeply deserved” and congratulating Mr. Gore as well, and noting that Robert Muir-Wood, the company’s chief research officer, has contributed to the IPCC’s work.

It will be interesting to see whether this latest bit of attention to the climate change issue draws responses from other industry companies as well.


October 3, 2007

Insurance is often thought of as a rather staid industry, and its marketing efforts are often assumed to be in keeping with that buttoned-down image.

That’s not always the case, obviously. Cavemen and geckos and rabbits who’ve been recently reunited with their “lucky” feet are among the recent examples of the insurance industry’s marketing creativity that have reflected a sense of humor (we’ve written a bit about them in past issues of Industry Focus).

Then there are the ads for the Pacific Northwest’s Vern Fonk Insurance agency, first brought to my midwestern attention courtesy of  Safeco Corp. President and CEO Paula Rosput Reynolds, who showed video of this ad during her presentation at the eInsurance Symposium last month in Dallas. Now that’s marketing.

And they get better, like this one. Or this one.

Even Napoleon and Pedro aren’t safe from the Vern Fonk treatment. And Kip and Uncle Rico get in on the act, too. That’s what I’m talkin’ about!

Honk for Fonk.