Mobile Commerce.

The hottest new technology is pushing insurers toward a more advanced computing infrastructure.

Insurers that use the newest technology to get better acquainted with their customers will achieve a competitive advantage that translates into greater market share. But the advances that are spurring e-commerce are accompanied by growing pains.

"We're moving into the second wave of insurance dot-coms," said Andy Williams, IBM's general manager for the global insurance industry. "We saw over the last two or three years a set of people who were predominantly electronic intermediators--such as InsWeb--which were between the client and the carrier trying to do some sort of managing from the Internet. What we have seen is that trying to do this on the Internet only is not a winning proposition."

Instead, insurers are now using increasingly sophisticated business Models--a blend of the Internet, call centers and agents--to electronically enable multichannel distribution and comparison shopping with real-time quotes, Williams said. For example, Zurich Financial Services is building such a global e-business exchange through an alliance with IBM and ChannelPoint. Through this marketplace, Zurich will expand its offerings to include products from other insurers, Williams said.

Anywhere, Anytime

Mobile commerce, the use of wireless telecommunications to give users access to information anywhere anytime, has emerged as a force with the potential to significantly change how insurers sell and serve customers.

"Wireless is going to be so pervasive that it is going to be a way people will be contacting us and the way they wish to be contacted as well," said William D. Friel, chief information officer, Prudential Insurance Company of America. "It will allow us to go much further in touching our customers, as well as making information much more available to employees and ourselves."

Wireless especially lends itself to applications where immediacy is desirable, such as for policyholders to check the value of their mutual funds and annuities, the value of which constantly changes, and to transfer funds between accounts, Friel said.

Progressive.com is a bellwether in wireless adaptation for insurance, said Gates Ouimette, a partner with LaunchTechnology, a Massachusetts-based technology start-up consultancy. In September, Progressive--the fourth-largest auto insurer--made the "Find an Agent" feature of its Web site accessible from Web-enabled cellular phones and handheld devices through wireless application protocol (WAP) technology.

Consumers can use Find an Agent to find out about the independent agents who represent Progressive, ranging from the Progressive products an agency sells to detailed maps to an agent's office.

Mobile commerce is gaining momentum, because of its potential to expedite business transactions. Using the Internet, enterprise application integration and wireless, it supports the forward progress of the business transaction from outside the office.

Personal digital assistants, such as Palm Pilots, are being adapted to multiple functions, Ouimette said. For example, a variety of gadgets can be attached to Handspring's Visor Phone so the user can access home-office applications, record witness statements during claims investigations and digitally photograph property damage.

The expensive optical networks that telecommunications companies are building also will aid insurers. Optical networks provide greater bandwidth and the opportunity to transmit more information in multiple media. For example, a full-motion video that provides a personalized rehabilitation-treatment regime could be beamed right into the home of someone who is out of work recovering from an injury, Ouimette said.

Bandwidth is going to become less expensive and a richer user experience, Prudential's Friel said.

Advances in speech recognition and new smaller wireless communication devices work hand-in-hand to fuel the growth of mobile commerce. Speech recognition has been used with call-center interactive voice-response systems for years. It will increasingly be used to initially capture, "index" and retrieve client information, Ouimette said. For example, a diabetic soon will be able to record and transmit personal daily-monitoring information verbally.

To expedite the use of speech-recognition devices, standards such as VoiceXML (voice extensible markup language) are being defined and adopted. VoiceXML converts the spoken word to a format that computers understand. "We're making significant strides in voice recognition, but we're still not there for authentication," Friel said.

Wireless is one facet of what IBM refers to as "pervasive computing," to describe the plethora of devices that have computer chips in them that will inform insurers. For example, such chips in cars could change the nature of car insurance to insurance on demand, Williams said. The chips will detect when, how fast and how far the car is being driven. At the end of the journey, the policyholder would get charged a certain amount, Williams said. Or, a chip in a refrigerator/freezer could notify an insurer when it was about to break down so the policyholder could be advised to get it repaired, thus preventing a claim for spoiled food.

Intelligence Gathering

As technology advances make it possible for data to be analyzed faster, insurers that have all their data interconnected will be able to develop a sales pitch five minutes into a call from a customer asking about an existing policy, Williams said. For that to happen, all the information about customers who have bought multiple products--such as home, auto and life insurance--should be melded into one comprehensive file. Typically, those policies are housed in three discrete computer systems within the company with different policy numbers, Williams said.

That melding is important, because customers don't expect to start from ground zero every time they contact a company, said David Annis, group senior vice president and chief information officer of information technology for Hartford Financial Services. And, he said, it is important to maintain the quality of response from the last time the company made contact with that customer.

One trend in information technology is that insurers are more inclined to buy and customize software, such as a customer relationship management package, rather than build it themselves, Annis said.

"A better understanding of the customer base means insurers are better able to provide solutions," Annis said. For example, an insurer might use its data warehouse to identify customers whose policies are coming up for renewal and identify additional product features or other changes that might be of interest so the insurer can proactively contact such customers, Annis said.

Customer Relationships

As the privacy requirements of the Gramm-Leach-Bliley Financial Services Modernization Act and the Health Insurance Portability and Accountability Act take effect, customer relationship management will become more critical. That will drive the growth of data warehousing as more companies look to this technology to store individuals' financial and other personal data, with business rules on who can access what data, said Patricia Saporito, senior industry consultant, national accounts, NCR Corp.

Implementation is expensive. Privacy compliance systems to meet HIPAA requirements are expected to cost 2.5 times the amount insurers spent to upgrade their computer systems for the transition to the year 2000, she said.

Great Expectations

Customers want to do business at their convenience any hour of the day or night. That means "having bulletproof systems that perform well and are highly available," Annis said. Insurers no longer have the luxury of downloading information in the middle of the night; it has to happen throughout the day as well. That means building new systems and redesigning old ones that were built to perform for the company's employees only during normal business hours.

"Ten years ago, running an IT department was a lot easier," he said. "Our system had to perform well for 25,000 employees. Now it has to perform well for thousands of distributors and millions of customers.

"Customers are absolutely more demanding," Annis said. "We all have less time and, probably for that reason, less patience. Our expectations are set by every company we interact with for service. When we set out service targets based on what our industry is doing, that leads to one set of conclusions; when we set them based on what the customer is used to in other industries, we have a whole other set of conclusions." For example, customers who are accustomed to instant stock transactions expect to be able to do insurance transactions in real time, too, Annis said.

Digging Deeper

Deeper computing power allows insurers to analyze patterns of human behavior, geography and other factors to perform advanced risk modeling that leads to more accurate underwriting, Annis said.

Williams cited State Farm's decision in November--after analyzing the claims history of millions of vehicles--to give discounts to drivers of the 36 vehicles it determined to be the safest. "Insurers that use the technology tools more intelligently than their competitors will gain a competitive advantage," Williams said. "How well they use these tools will determine their ability to attract and retain more customers."

Data mining also is being used to expedite claims handling, including the allocation of resources. Insurers can use the information to identify their most profitable customers and then push the lower-profitability customers to lower-cost channels. For example, lower-profitability customers might be encouraged to report a claim to a call center or via the Internet, rather than to phone an agent, Saporito said.

Software Solutions

There is a new generation of directory and security software--the nuts and bolts insurers need to be able to use their systems effectively in a Web based environment. "It lets you track everybody who is going to use your services over the Web," Annis said. "They all get identified in the directory: who they are, what kind of functions they are allowed to do, their security clearance--these are the tools that let you efficiently implement your security policies."

As Corporate America moves more to an Internet-based economy with its speed of sales and other business transactions, business interruptions will cost insurers more. For example, if an ATM goes down, the loss of business is between $15,000 and $26,000 an hour, Ouimette said. But if Ebay, Cisco Systems or Dell Computer Corp. goes down for an hour, those companies are likely to chalk up losses of $26 million to $30 million, he said. Evergreen-data.com, which has developed software to identify data continuity plans, enjoys a vote of confidence from the federal government. The Federal Emergency Management Administration chose the company to help develop federal disaster-management plans.

Enterprise Integration

With the rise of Internet-enabled business models, more insurers will outsource portions of their business process, such as claims management, Williams said. But technology systems must be in place to make the outsourcing of functions such as adjusting and repair approvals transparent to policyholders, Williams said.

Storage also can be outsourced. IBM has added storage and storage management of electronic files to its "IT-on-demand" service. IBM will deliver storage services through a number of Internet-based service providers.

Operating Efficiencies

More and more insurers also are using technology to curtail costs and achieve consistent claim adjusting. Two new products are examples of how insurers are tackling this challenge: Computer Sciences Corp.'s @Fault and Cyber ASP Inc.'s Claims XL.

CSC, Austin, Texas, designed @Fault to provide a consistent way to investigate auto liability claims. It leads adjusters through the claim investigation with online guidelines for obtaining statements from insureds, claimants and witnesses. This tool, which establishes liability assessments in auto accidents involving two cars, is scheduled for a February launch. It also will help target subrogation opportunities, said Susan Dauler, CSC's sales and product marketing manager. The next version of the product will provide a consistent way to investigate premises liability such as slip, trip and fall accidents, Dauler said.

Claims XL, produced by CyberASP Inc., Norcross, Ga., is designed for claims adjusters to manage imaged claims files in real time and link to third-party information sources. The Claims XL platform includes an autoclaims module, with future releases planned for workers' compensation and property and liability. For information, visit www.claimsxl.com. corn.

Connecting with Agents

Agents continue to be an important distribution channel for most insurers.

Insurers are using technology tools to help agents work more effectively. For example, Hartford offers agents a secure Web site where they can get product information and quotes, look at their existing customers who have policies with Hartford and check on the status of their claims or billing information. Hartford has a major business-to-business e-commerce initiative with agents that allows them to initiate a transaction through their agency-management system or through their Web site and send it to the carrier. "That's where XML technology comes to bear," Annis said.

XML (extensible markup language) is the standard computer language that enables business-to-business transactions to occur over the Internet. XML creates tags for each piece of information on a Web page. A new XML standard was recently published by Acord, a nonprofit developer of technology standards for the insurance industry. That standard deals with homeowners, commercial auto, business owners policies and workers' comp.

XML is the catalyst for single-entry multiple-company interface (SEMCD, something long sought by agents who will be able to enter information into a system once, submit a coverage request to several insurers and receive quotes back quickly.

Hartford has led the way in SEMCI processing for its agency partners since 1997, when it became the first insurer to introduce commercial SEMCI as a batch upload-download operation. Last summer, Hartford was one of four companies that began implementing Applied Systems' Warp Central, a translation engine that allows for real-time processing of insurance transactions. The other three companies that are "Warp-enabled" are Heritage Mutual Group, Sheboygan, Wis.; Safeco Insurance Cos., Seattle; and Travelers Property Casualty, Hartford, Conn.

Whether they focus on getting wired or going wireless, insurers are set to explore how to use cutting edge technology to gain a competitive advantage.