All the automation in the world cant change thefact the insurance industry still is a people business. But thecarriers that are improving their bottom lines today are doing soby reducing some of those people costs to make jobs more efficient.Insurance companies are saying, If our largest single cost area ispeople, what can we do to make these people more efficient so wecan get more revenue per dollar from every worker weve got, saysAndrew Bartels, an analyst for Forrester Research.

The days of the quick fix in insurance are over, according toBartels, author of a Forrester Planning Assumption entitledImproving Business and IT Efficiency Tops Priority List for NorthAmerican In-surance Company CIOs. He explains, One of the keybusiness conditions we are finding is its a little tough to growrevenues, he says. Theres a concern about underwriting risk, so thedecision of a lot of carriers is not to take on new business.Obviously that hurts revenues.

If revenue growth is not available as an option for improvedprofitability, Bartels says, insurers have to look at the otherside of the income statement. Clearly, the major thrust of what[insurers] are doing lies in the areas of being more cautiousaround underwriting and better claims management, he says.
An important factor in that profitability is a better alignmentbetween the business side and the IT department, particularly forproperty/casualty insurers, which are facing newer threats, such asterrorism. Bartels believes insurance IT departments have beenpioneers in adopting IT best practices. Things like dedicatedpeople in the IT shop whose role is to work constantly with thebusiness side to understand [the business] issues, anticipate [thebusiness] problems, oversee the projects, and identify where IT canbe of value to problems [business] already is dealing with.

One misperception insurance carriers have corrected over thelast few years is the belief electronic sales would transform theinsurance industry and do away with agents. It comes back to theold truism about insurance, which is that insurance has to be sold,its not bought, says Bartels. In the late 1990s, insurers believedonline sales were the wave of the future, but since then they havefound the nature of insurance is such that it doesnt lend itself aswell to online activity, he says. Carriers have realized theprincipal channel for now and the foreseeable future for sellinginsurance is the agents. Carriers have backed away from investingin online e-commerce sites for selling insurance. They are morefocused on [online] customer service. Thats viewed as more of anopportunity.

Carriers also are focusing on the agent/carrier interface, suchas AMS TransactNow and Transformation Station from IVANS. Ascarriers have recognized the agents are the most important channelfor selling products and servicing customers, [carriers] havelooked at how to make that interface more efficient and effective,and that means moving it online, says Bartels.
How best to run the IT department appears to remain up in the air,though, as Bartels reports he has seen activity on both sides ofthe issue regarding centralizing or decentralizing the ITdepartment. Some carriers have turned to separate departments fordifferent business lines, he notes. Insurers that have gone thedecentralization route have found the business units like thealignment, but the cost of such an operation can be high. He adds:I think the trend is away from the decentralized group because itis too expensive. ROBERT REGIS HYLE