Insurers Turning Corner In Recession, Analyst Says

Insurers may be turning the corner in this struggling economy as we enter the second half of the year, one of the industry's top technology analysts says.

"What we see in the results of our second quarter study is the consensus seems to be the worst is over," according to Craig Weber, senior vice president for the insurance practice with Celent.

Indeed, there is a good deal of evidence emerging the recession may be behind insurers, and some of the market performance issues are definitely turning in the right direction, he observed.

"How fast we get back, if ever, to the kinds of performance we saw three or four years ago is not exactly clear, but I think we have basically turned the corner," according to Mr. Weber.

He was one of three industry analysts taking part in a webinar last week on "State of the Market: Where We Are, Where We're Going," run by Tech Decisions--part of Summit Business Media's Property and Casualty Magazine Group, which includes National Underwriter.

"In terms of how that affects technology and other types of project work with insurers, we believe things are definitely moving again. People are looking for [technology] solutions," said Mr. Weber.

When asked by panel moderator Sharon Schwartzman, editor in chief of Tech Decisions, about what insurers need to be concerned with in terms of customer-facing technology such as social networking, Matt Josefowicz, director of the insurance practice at Novarica, issued a warning to insurers.

"There's a little bit of a danger of insurers approaching Web 2.0 the way they approached Web 1.0," he said. "There was an incredible amount of hype [around Web 1.0], and companies wasted money on things that were not strategic. A number of other companies hid their heads in the sand."

As the Internet took center stage, particularly in the relationship between distributors and carriers, the companies that avoided any significant Web initiative missed out on the value being created by the Internet, according to Mr. Josefowicz.

"We think companies should pay attention to the impact of social networking and think about it in relation to their own online marketing strategy," he said. "It's a very important component of that strategy. But I don't think they should budget a quarter of their IT budget on social networking."

Meanwhile, with the focus on regulatory compliance increasing of late, Maurice DiMeo, a partner with Ernst & Young, specializing in technology and security risk services, feels some smaller insurers may not be prepared for what they are facing.

"A lot of smaller insurers are not ready, especially given there hasn't been the strongest oversight [in the past] from a regulatory perspective," he said.

"Smaller insurers haven't had to deal with all the compliance issues, but now they are going to have to," added Mr. DiMeo. "The Office of National Insurance--the White House's plan to have the Treasury Department regulate insurance--is the wild card."

For larger insurers, the issue around compliance involves complexity, according to Mr. DiMeo.

"[Insurers] are complex organizations, and the geography comes into play," he said. "The ability to regulate that is challenging. It comes back to issues such as data integrity. If you lack data integrity, it is hard to build systems to manage risks."

To listen to the entire archived July 30 discussion, go to www.tech-decisions.com and click on "Web Seminars."

(Robert Regis Hyle is an associate editor at Tech Decisions, part of Summit Business Media's Property and Casualty Magazine Group, which includes National Underwriter.)