On Groucho Marxs long-running quiz show, You Bet Your Life, ascruffy duck dropped from overhead with a $100 reward in its beakif a contestant said the magic word. The audience was clued in tothe word from the start of each show.

The magic word in the insurance industry at this juncture istransparency, and if Grouchos program were on now, the audiencecould consist of any insurance customer. Each one would be clued into the need for transparency, especially after watching themisconduct of industry behemoths, including Marsh & McLennan,Aon, and AIG, and the rise of regulatory requirements, such asSarbanes-Oxley. The contestants would be the insurers themselves,playing for their continued existence.

With all that has transpired, however, insurers should be cluedin, too. Their future could depend upon iteven more so in todaysgrowth-oriented environment that relies on customer relationshipsand favors initiatives to broaden distribution (see Best of BothWorlds, p. 16, for the technology that supports this). In fact,although a TowerGroup 2005 spending forecast predicts relativelyflat insurance IT spending overall, most of the action, the firmasserts, will reside on the P&C side, with distribution takingone of the top three IT investment spots for the year.

So, future prosperity is riding on maintaining trust, and thebusiness world knows it. A recent AMR Research study anticipatesthe cost of compliance over the next five years in business ingeneral will reach $80 billion; the estimate for 2005 is $15.5billion. Although technology spending is a major part of thecompliance investment, ranging from 28 percent of overall SOXspending to 42 percent of overall HIPAA spending, investment oninternal staff is the largest budget item in compliance, reportsAMR. SOX remains the most expensive initiative, accounting for 39percent of all compliance spending.
While in 2004, 35 percent of companies had a specific budget forcompliance initiatives, two-thirds had to take money from otherareas to fund projects, AMR adds. In 2005, more companies (40percent) will have a specific budget for compliance.

Much of this spending and activity might well have been lost onGroucho, whose notable quotes include, The secret of success ishonesty and fair dealing. If you can fake those, youve got it made.But has the industry learned its lesson?

It would be nice to think so, especially given all the humblepie thats been consumedthe honchos of Marsh and Aon have offeredmea culpas; chief executives from Marsh and AIG resigned.

But concrete proof the industry has learned from its mistakes isessential. Most of these kinds of problems stem from human, ratherthan technical, deficiencies. Therefore, companies continually mustboost customer confidence and strengthen their market position byhonest management and implementing the tools that help them stayhonestor perish.

Time wounds all heels, quipped Groucho, and recent events haveproved him right. Transparency will help avoid future events. Letsdo what is necessary to achieve it so that time also can heal allwounds.

Sharon S. Schwartzman
Editor-in-Chief