The insurance industry is in the midst of unprecedented change. Repeal of the Glass Steagal Act in 1999 has allowed new competitors to enter the marketplace; the Internet has created a powerful new distribution tool; and the financial effects of a prolonged soft market have caused industry-wide combined ratios to climb to unacceptable levels. Carriers and brokers are looking for opportunities to become more efficient and relevant to their clients.

Figures through year-end 2000 from ratings and data provider A.M. Best show an average industry-wide loss ratio of 117 percent with expenses accounting for 36 percent of the total. For insurance providers to compete in this new era, they must get costs out of the supply chain, become more efficient, and focus more on the customer. They also need to take a new approach to using technology. By integrating Web-based technology into their business strategies, they can reduce costs, increase efficiencies, drive top line growth through existing and new distribution channels, and improve system and data capture capabilities.

Overcoming the Legacy

Technology has always been a major expense and initiative for the insurance industry. Sadly, though, most of the expenditures have gone to support outdated systems. The technology companies that develop legacy and commercial insurance systems (CIS) for carriers bring a technology perspective, not an insurance industry point of view. As a result, the systems are not user friendly, creating a data rich yet information poor environment.

The carriers' IT employees have a vested interest in keeping old systems alive for job security among other reasons. And to make matters more complicated, generally speaking, CEOs do not understand technology and often believe that it costs too much and takes too long to implement once a strategic decision has been made.