Orlando

The struggling economy will spur mergers and crimp insurerprofits in the short term, but not far down the road there will beopportunities to achieve greater efficiency and profits, accordingto the head of LOMA, Robert Kerzner.

Meanwhile, it's critical that backers of standards developmentand implementation don't take support for their cause within theindustry for granted, warned the leader of ACORD, Gregory A.Maciag.

The pair assessed the state of the market from their respectivepositions here last week during the annual ACORD LOMA InsuranceSystems Forum.

“The world has changed pretty dramatically since we met at thistime last year,” noted Mr. Kerzner, president and chief executiveofficer of both LOMA (formerly known as the Life Office ManagementAssociation) as well as the Life Insurance Marketing and ResearchAssociation. “The final quarter of 2008 is something none of uswould want to live through again.”

He remarked that life insurance sales fell 14 percent in lastyear's fourth quarter, which is the worst figure reported since1951, while the property-casualty industry's net income “fell by awhopping 96.2 percent” in 2008.

Thanks to the “financial meltdown” which continues to cripplethe economy, “a transformation is underway in this business, andwhen the dust settles this industry is going to look extremelydifferent,” he said.

For one, he predicted, “there are probably going to be fewercompanies, as there no doubt will be consolidation down theline.”

However, he added, because of the credit market crunch, thetoxic assets on the books of many carriers, the fact that someinsurers are taking Troubled Asset Relief Program funds fromWashington, and “the game of chicken going on” in terms of whomight want to acquire which company and at what price, “theconsolidation is not going to happen as quickly as some mightexpect.”

He predicted that “we'll see the first big deal in the nextthree-to-six months, and then see consolidation activity accelerateafter that.”

In addition, he said health care reform will presentopportunities for insurance carriers, as federal initiativesinclude a “major information technology component–thecomputerization of medical records,” an effort bolstered by theObama administration's commitment of $17 billion from the economicstimulus package.

“Once we overcome the major concerns about privacy, this systemwill improve our ability to serve consumers,” he said.

Pointing out that “the current underwriting process can befrustratingly long in terms of getting necessary medicalinformation,” he asked the audience to “imagine how much faster,more efficient and more accurate we'll be able to work if we canget that data at the touch of a button.”

He added that payment of both health and medical disabilityclaims would also be greatly facilitated by having medical recordsavailable electronically.

“As we return to 'normal,' whatever that turns out to be,” heconcluded, “IT will be the enabler of greater efficiency andproductivity,” whether that involves underwriting, research, sales,claims or continuing education.

ACORD'S TAKE

Although the development and widening adoption of communicationand business process standards have promoted efficiency andimproved the insurance industry's bottom line, those committed tothe cause cannot afford to become complacent, cautioned Mr. Maciag,ACORD's president and CEO.

“Standards don't run on electricity–they run on commitment. Theydon't come in a box–they come in people whose persistence makesthem a success,” Mr. Maciag said.

While hailing the hard work of all those who participate in themany committees and working groups that create and help implementstandards throughout the industry, Mr. Maciag reminded everyone howcritical it remains to keep telling co-workers and seniormanagement about what standards mean to a company's efficiency,productivity and profitability.

“It's not only decision-makers whomatter when it comes to standards, but influencers as well,” hesaid. “When it comes to influencing decisions on adoption andimplementation of standards, everyone's involvement iscritical.”

He said an ongoing drive to educate company personnel about theimportance of standards is especially important, given the“revolving door in our business,” with people leaving and enteringon a regular basis. “We can't assume that everyone knows what ACORDdoes or how standards contribute to operational efficiency and thecompany's bottom line,” he said. “You must keep spreading theword.”

Mr. Maciag said the challenge is “how do we bake standardscompliance into your everyday process? How do we raise awarenessthat without much fanfare, standards deliver a tremendous return oninvestment?”

One way cited by Mr. Maciag is his group's education initiative,culminating in the creation of a new designation–ACE, which standsfor ACORD Certified Expert.

“Part of our goal is to create a community of ACORD expertsaround the world who can serve as standards advocates at theirorganizations and increase the rate of standards adoption,”explained Mr. Maciag.

Another is by collaborating with other industry associations–thelatest being the announcement here that ACORD and the AmericanAssociation of Managing General Agents have joined each other'sorganization.

Mr. Maciag also cited development of e-forms and the new ACORDFramework initiative to facilitate progress on standardsintegration.

In addition, Mr. Maciag released his second book here–”TheReal-Time World: Enabled By ACORD Standards”–which, he said, canserve as “a tool to educate and stimulate discussion about thevalue of ACORD standards.”