Betting wisely

November 10, 2008

las-vegasI’m attending the annual ISOTECH conference, held this year in Las Vegas, where a conversation that’s come up repeatedly in my discussions with technology companies exhibiting at the show is what impact the current economic situation might have on insurance industry IT investment.

It’s understandable to think that in the face of current economic challenges, companies might be unwilling to take on sizable expenditures.

But, it seems a case can be made for wise investments in areas that are ultimately likely to reduce costs such as claims systems.

Several recent studies have shown that in fact insurers do seem to recognize that rather than representing a prudent cost cutting strategy, not making necessary IT expenditures because of the current economic climate is actually a bad bet.

In particular, studies from the Property Casualty Insurers Assn. of America and Gartner Inc., Datamonitor P.L.C. and Celent have shown companies directing their IT spending to areas that support business growth, risk management and compliance and in technology that helps them reduce costs, increase revenue and make better use of data.

That sort of selective IT spending seems like the smart play.



October 16, 2008

I wrote a couple of years back in my Industry Focus column about the fact that the insurance industry seemed to be slowly intersecting with the world of blogs. I received further evidence of that development today, by way of a release from Westfield Insurance announcing that it had created two new blogs.

As part of the redesign of the Westfield, Ohio-based insurer’s Web site, the company launched the two blogs, one on information security, and the other on loss control.

Mike Rossander, corporate information security manager at Westfield, will be the author of the information security blog, leading discussions on security issues of interest to both businesses and individuals, including tips for maintaining the security of private information.

Lisa Mundt and Jay Gumbrecht, senior risk control representatives at Westfield, will be responsible for the loss control blog, covering a variety of risk management and loss prevention topics aimed at helping businesses manage and reduce risk.

Earlier this year, San Francisco-based Technorati Inc. indicated it was tracking more than 110 million blogs. In the column I referred to at the top of this post from November 2006, the number was 60 million, so the blogging trend is obviously still quite healthy.

With that in mind, it’s good to see a 160-year-old company like Westfield embrace current technology to better serve its customers.

Immigrants vs. natives

May 23, 2008

Of the many meetings I had at this year’s ACORD conference last week in Las Vegas, one theme that came through in many of them was the impact a new generation of employees and consumers will have on the insurance industry from a technology perspective.

Mark W. Lewis, general manager, global insurance industry at IBM, described the issue as one of digital immigrants vs. digital natives. As a Baby Boomer who’s come to embrace information technology in my professional and personal lives, I fit into the immigrant category. Folks like my daughter and others just getting started on their adult lives and careers–who’ve grown up with personal computers and can text message like the wind–are the digital natives.

“In a few more years you’re going to have far more people who don’t even think about technology,” Mr. Lewis said. For the digital natives, IT is just a fact of life, not something that catches their attention.

“The most important part about that is you truly think differently,” he said. “The fact is the business world is being changed and it will continue to be changed by people like that.”

That everyday familiarity with technology will manifest itself in many of the decisions made by the next generation of business executives, Mr. Lewis said.

“One of the advantages that the digital natives will have is the more the business executive knows about technology, the better decisions he’ll make about what is possible,” he said.

The subject was at the heart of a meeting with Bill Hartnett, U.S. insurance industry solutions director at Microsoft Corp., as well. He and others from Microsoft were noting the impact the next generation’s expectations and experiences will have on the insurance industry, and promoting solutions to help address them.

A survey the company conducted earlier this year of adult “Millennials”–those 18 to 27 years old–show the issue cuts both in terms of the industry’s meeting its talent needs and in serving the next generation of insurance buyers.

The survey showed 91% of those questioned saying access to newer, innovative technologies would make them more likely to consider potential job opportunities.

Survey respondents also indicated they see the industry’s adoption of various technology-based customer service tools is an important issue, with 89% saying they think it’s important insurance companies provide Web-based customer support, 86% saying it’s important that insurance companies offer customers personal Web portals on which they can view their accounts and 76% saying it’s important they offer live online chats with agents.

They also are believers in blogs, according to the Microsoft survey, with 69% saying it’s important to them that insurance companies offer company blogs on which customers can post their questions or concerns. 



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.

Common interest

June 7, 2007

As information technology becomes ever more important to the insurance industry, more and more companies in the IT sphere are seeing opportunities in insurance. It’s interesting, then, that a number of big money investors seem to be seeing investment opportunities in both.

Talk of the growing influence of private equity funds continues across various business sectors. As you may or may not recall, a couple of weeks back I posted an item here (Follow the Money, May 17) regarding the impact the new capital that’s been entering the insurance business in recent years might have on the way the industry does business.

The upshot, according to the group discussing the issue at the annual Harold H. Hines Jr. Memorial Symposium in Chicago, was that the new capital coming from private equity funds and others in the capital markets generally bodes well for the insurance business.

Regardless of the likely impact, the fact is private equity funds are being quite active in the insurance industry, and likely will continue to be so as long as it’s to their benefit to “play the cycle,” according to many industry insiders.

There are people with money to invest, and they’re looking to invest it where they see the possibility of strong returns. When those returns start to go away, so, presumably, will much of the private equity capital.

There are, obviously, always other places the private equity funds can put their cash. And apparently, in addition to the insurance business, the tech sector is one where they’re currently eager to invest.  Stories this week from the San Jose Mercury News and Reuters both addressed private equity funds’ recent interest in tech sector firms.

I spent a few days earlier this week at the annual conference of the Insurance Accounting & Systems Assn. in Minneapolis, where the trend evidently was much in evidence. More than one company among the various tech firms on the conference’s exhibit floor indicated they’d been visited during the gathering by representatives of private equity firms scoping out potential investment opportunities.

Go I-Dawgs!

April 26, 2007

I’m back in Chicago today after a couple of days in Mississippi to moderate a panel at the annual MSU Insurance Day at Mississippi State University.

This year’s gathering was the 20th anniversary of the event, presented by the Risk Management, Insurance & Financial Planning program at MSU. It was a solid program, and very well attended.

Among the various presentations at the MSU I-Day, Paula Rosput Reynolds, president and chief executive officer of Seattle-based Safeco Corp., raised a number of interesting issues in her presentation on “Disruptive Forces in Insurance.”

Ms. Reynolds suggested there is a technology “arms race” between insurance and the banking industry, with insurance “a little behind.” The banking industry tends to be more customer facing with its technology investments, she said, though adding that she feels there’s no reason the insurance industry couldn’t follow suit.

“You have to know how to deploy smartly and you have to have a vision around the future,” the Safeco CEO said. With that in mind, the insurer plans to include some of its product development folks in upcoming meetings with Microsoft. “It’s really important to us to try to program ahead rather than be programming in the rear view mirror,” Ms. Reynolds said.

Ms. Reynolds also talked about changes in the way insurers are positioning themselves in the marketplace. The large companies who represent the bulk of insurance industry advertising spending have moved away from simply “talking about their product in a feel good way,” she said. With so much advertising bombarding consumers through various media these days, companies are focusing less on brand-based advertising and more on emphasizing product features and convenience, she said.

Ms. Reynolds raised a potential regulatory issue associated with insurance companies making more of their products available to buyers online. As companies offer consumers more and more self-service options, she said, it’s likely that at some point regulators may face the question “should the consumer have been allowed to do this transaction unadvised?”

Thanks to Edwin H. Duett, Peter K. Lutken chair of insurance at MSU, for offering me the opportunity to participate in this year’s I-Day (and for the chance Tuesday night to enjoy a strong performance  by the Mississippi State Bulldogs baseball team as they dispatched Southern Mississippi 11-2).

The apocalypse starts at 12:20 Thursday (11:20 Central)

March 14, 2007

Or maybe not. At least there doesn’t seem to be quite as much panic preceding the tipoff of today’s NCAA men’s basketball tournament games–or specifically the live online coverage of the contests–as there was last year.

Last year, as you may recall, CBS Sports’ announcement that it would provide NCAA tournament coverage online for free prompted numerous gloomy predictions of the negative impact such an act was sure to produce in terms of lost productivity. On top of that was the anticipated impact on companies’ IT systems as millions of crazed hoops junkies used company computers to get their fix.

Well, not having been barred by Congress from engaging in activities posing such an obvious threat to the well-being of U.S. business, CBS is at it again this year, having doubled its bandwidth to accommodate the anticipated increased demand.

CBS Sports says last year’s free online coverage produced 19 million video streams and five million site visits. This year, in addition to a video player 50% larger than last year’s, CBS again will include a “boss button,” allowing basketball fans to switch the image on their monitor to a benign looking spreadsheet with a single keystroke should the boss happen by.

Why would anyone be concerned about a threat to productivity?