Revenge of the Bricks.

Bricks-and-mortar insurers are using technology to cement customer relationships, while saving money and time.

A little more than a year ago, fledgling dot-com companies were the favorites of investors and the big brokerage houses that arranged their initial public offerings. The stock of traditional insurance companies languished, and online sales were going to make traditional distribution channels obsolete.

But a funny thing happened to the high-flying dot-coms and online insurance sales. Many of the former, lacking profits, shriveled and died. The latter hardly materialized. And that stodgy insurance industry--the old-fashioned part made up of insurers, agents and brokers--quietly went about investing in dull, utilitarian, behind-the-scenes Internet capability.

The applications won't merit a mention on many news and entertainment outlets, but they are revolutionizing the way the insurance industry works. If anticipated expense reductions are realized, they will save the industry tens of billions of dollars. They also should spur business by speeding the ponderously slow application, claims and account-information processes. Customers, meanwhile, have come to expect to manage their insurance products and benefits electronically.

Several insurers have stepped up to the plate with online services for customers.

* Manage accumulation accounts. Minnesota Life Insurance Co., St. Paul, Minn., which provides group life and disability insurance, defined benefit plans and 401(k) plans, allows plan participants to transfer their assets among funds and change allocations in their retirement accounts funded with variable universal life products. "We're not a mutual fund, but the (expectation now among policyholders is that they can manage their 401(k) plans and variable universal life contracts like they do with a mutual fund," said Maria O'Phelan, director of customer service and technology. (See "Tinkering in 'Fourth Channel' Pays Off for Minnesota Life," page 31.)

* File claims. AIG Claim Services Inc., a member company of American International Group Inc., New York, allows small-business owners to file workers' compensation and property/casualty claims online. (See "AIG Insureds File and Track Worker's Comp Claims Online," page 34.)

* Track claim status. Blue Cross & Blue Shield United of Wisconsin, Milwaukee, allows enrollees to check claims status, view deductible and out-of-pocket amounts and track hospital inpatient and outpatient authorization status and eligibility, and download claim forms. (See "Cybering Into Claims Status," below.)

* Conduct business with producers. Brokers and agents can apply online to CNA Corp., Chicago, to get quotes, to track their business with CNA and to participate in live online monthly chats with company product specialists. By fall, they will be able to file claims, make renewals, change endorsements and bind online. (See "One Face," page 32.)

Refocusing on the Customer

"The dot-com craze got brought back clown to earth, but many of the technologies are here to stay and are changing the way companies are engaging in their processes," said Dick Roby, director of the insurance group at the TowerGroup, a consulting firm in Needham, Mass. "The really savvy insurers have realized that competitive advantage is defined by an organization's ability to share information internally--so that one business unit knows what the other is doing--and with partners."

The information-technology world is still complex, confusing and fluid. It seems to be in a kind of experimental flux, with both insurers and their technology partners trying numerous and different approaches in their parts of the insurance business. But it is still based on the shift in power to consumers from marketing organizations. According to Ray McKenzie, author of a recently published book, The Relationship-Based Enterprise, the "Four P" paradigm from the 1960s--product, price, promotion and place--changed to a customer focus in the 1990s. The change originated in northwestern Europe, and it has become universally embraced. "With the amount of information and choice available, customers are really in the driver's seat," he said. "For the most part, there aren't any enterprises around that don't have something going in customer relationship management, something to support marketing and sales, to manage and operate call centers or to manage databases and customer information."

Providers of technological solutions still see great potential for improving the work processes of insurers. In group lines alone, the industry wastes $59 billion on time-consuming paper processes, said Robin Raina, president and chief executive officer of Ebix.com, an online insurance exchange based in Atlanta. If a large corporation wants to shop among brokers to find the best deal on some type of group coverage, it may take 40 days to receive quotes, because there is no real-time process, he said. Instead, a brokerage agency might send overnight packages to carriers, and each carrier may require a variety of workers to key in the same data with very little project management and barely any audit trails. If an application is incomplete, a carrier might send the proposal back by fax for additional information.

Ebix reduces the process for a broker to a single data entry on the Internet, Raina said. Many people in the agency are able to work on it at the same time, and it leaves a trail that can be audited. Some workers can add data to the project, while others can only look. Carriers get the proposal next and have the same abilities. The Internet process cuts time and costs by 70% or more, Raina said. Other tech providers offer some version of time- and cost-saving procedures.

Insurers have invested substantially in the technology of customer relationship management. Insurers last year spent more than $12 billion on technology, or about 3.5% to 4.5% of net premiums written, Roby said. "That represents about 16% of their controllable expenses, a significant outlay for a major carrier," he said.

Building a New Model

Of the three financial-services sectors--banking, securities and insurance--the argument for transacting business online is the least compelling for insurance, Roby said. "The purchase of insurance is much less frequent, and the product is often a much more complicated instrument." Another reason for consumer reluctance to buy insurance online, he added, is that buyers "want to be absolutely sure" when covering homes and autos, which are the primary assets of many consumers.

So while insurance Web sites under-performed--and many floundered--insurers poured money into their internal processes and those they share with their distribution partners. They also improved the educational content in their public Web sites. Recent or significant examples include insurers such as:

* Allstate Insurance Group, Northbrook, Ill. In the past year and a half, the giant writer of property/casualty and life products changed its agent force from captive to independent and committed substantial resources to improve its Web site and Internet technologies. "It is the most dramatic and outstanding example of sweeping change and changes in business strategy using Internet technologies," Roby said. "It ran the risk of alienating its entire field sales force, but its agents are still responsible for over 90% of its revenue stream."

In January, New York-based eMarketer, a provider of statistics online businesses, rated Allstate's Web site the best in the insurance industry, citing easy claims reporting and payment options online. April Eaton, an Allstate spokeswoman, said the company redesigned its Web site in July to make it more "customer-centric," including the ability to review policies and deductibles, track the status of a claim and add an auto to a policy. The site still helps policyholders contact their agents.

Other Web sites cited by eMarketer for their attention to customer service were MetLife, Guardian, New York Life, Ghubb, Prudential, State Farm, John Hancock,Travelers and Liberty Mutual.

Roby said the 'jury is still out" on Allstate's bold strategic shift, and he estimated that it would take five years to know whether the new business model is a success. But in terms of stock price, the company has benefited from assuming the leadership position, and the rest of the insurance community has taken a "fast-follower" type of approach, he said.

* Progressive Corp., Mayfield Village, Ohio. In 1998, Progressive offered customers the ability to access and manage their policies online. Agents can access, manage and update their customers' policies via a password-protected Web site, www.foragentsonly.com.

In February, Progressive received payment from a customer using a wireless personal digital assistant device. Progressive's main Web site, www.progressive.com, is the first auto insurance Web site available on the Sprint PCS Wireless Web. To make a payment, a customer connects to Progressive's site using a Web-enabled cellular phone. Last year, the company claimed to have been the first auto insurer to offer real-time insurance sales for motorcycle, boat and personal watercraft.

* Principal Financial Group, Des Moines, Iowa. A major 401(k) plan provider, Principal signed in October with 40l Konnect, an online market-place based in Palo Alto, Calif., which automates the marketing and sales of retirement products for 401(k) brokers and vendors. The agreement provided brokers and advisers with direct online access to products and services offered by Principal, which are targeted for midsize businesses. A few keystrokes allow brokers to send requests for proposals to plan vendors.

* John Hancock Life Insurance Co. In March, the Boston-based company made current and historical policy data on its most popular life products available online to intermediaries. Proclucers may download data into Excel spreadsheets from the site.

* Northwestern Mutual Financial Network, Milwaukee. In March, the company's subsidiary, Strategic Employee Benefit Services, entered a strategic alliance with Online Benefits Inc., Uniondale, N.Y., to deliver benefits information over the Internet to employees of new and existing customers with up to 1,000 employees.

* Farmers Insurance Group. In March, the Los Angeles-based insurer said it would work with Cofiniti Inc., an Austin, Texas-based software developer, to extend the group's needsbased selling from property/casualty insurance to financial management. The new software will facilitate online collaboration between registered representatives and their customers. Initially, only a select group of registered representatives will be able to use the program.

* Erie Insurance Group, Erie, Pa.

The company in March announced its first steps into e-commerce, a three-year plan to improve service to customers, enhance access via the Internet for policyholders and agents and to provide tools to employees to "further streamline" the claims process.

Erie, with $1.17 billion in net premiums through the first half of last year, expects to spend $150 million to $175 million over the next five years on the e-commerce program. "We will realize our e-commerce vision by leveraging the Internet to enhance our exceptional personal service, thereby increasing sales and retaining hard-won business ," said Stephen A. Milne, Erie's president and CEO.

Reaching Small Businesses

Cost keeps many small insurers from building their own information technology systems, said Don Martin, founder and CEO of ePolicy.com. Large and midsize insurers, meanwhile, often are trapped in their legacy systems. "But now we're seeing companies recognize that they need to have IT or to go outside their legacy systems," he said.

EPolicy.com's goal is to help property/casualty insurers reach small businesses and professionals, a market that Martin says brokers often don't tap because they don't want to waste resources on clients that are too small. But with ePolicy.com's help, brokers will be able to rate, quote, bind and issue policies--all online. The online sales process takes about an hour, a significant reduction in time compared with the 60 days that the typical broker system takes, Martin said. What's more, even good brokers will sell only three of 10 prospects they quote, and ePolicy.com can help eliminate that wasted effort, he said.

EPolicy also can save money for insurers, Martin said. Typically, insurers' operating expenses are 32% to 33% of premium, but ePolicy.com can knock them down to 21% to 23%.

Martin co-founded the company with Lou Kwiker in 1999. Martin founded the Orange, Calif-based Cal-Surance Cos. in 1962 and built it into one of the largest privately held brokerage firms in the state. More recently, ePolicy.com has gone into the enabler business through a contract with a major company that will result in an operating system by May 1. Negotiations are under way with 12 other companies.

EPolicy.com was originally an aggregator, but it has changed its emphasis to information-technology enablement of companies, co-brokering, affiliating with associations to provide professional liability products and affiliating with other companies such as United Parcel Service, Staples, OfficeMax, Intuit and Master-Card, which send their customers to www. epolicy. com. Martin said the greatest immediate return comes from the enablement activity.

At least one producer organization has joined in the act of creating an information-technology system that insurers can tap into. InsureHiTech, Princeton, N.J., has created an insurance portal (www.insurehitech.com) designed for middle-market technology clients. In March, it announced that the first of its major carriers, St. Paul Cos., had launched its Web-based application process using extensible markup language technology, or XML. Integration projects also are under way with American International Group, Atlantic Mutual Cos., Chubb, Kemper and Royal & SunAlliance USA.

The system submits client applications online to the carrier's automated rating and underwriting system. That system returns quotes to InsureHiTech within minutes, and it allows several carriers to return quotes with a single online application.

"There is nothing wrong with the current insurance client-broker-insurance carrier model," said Richard A. Maloy Jr., company founder and CEO. A unified Web-based standard to apply, quote, change policies and report claims, however, provides lower costs and speedier handling. "We still provide consultative risk management for our clients, only now the information exchange is done via the Web," Maloy said.

A Common Language

XML is "a new standard for transmitting information," said Gregory A. Maciag, president and CEO of Acord, a 30-year-old nonprofit, industry-funded association that created XML. Maciag said it doesn't matter whether the insurer or the producer organization provides the Internet-based system. "The bottom line is... if everybody employs it, we can exchange information," he said.

Maciag said most legacy systems don't work with XML, and most don't even work with the Internet. But insurers can get around the problem by purchasing a special kind of software that acts as a conduit between the segregated systems.

Insurers that lag on c-commerce applications for intermediaries and customers could find themselves in trouble a few years from now. "What will happen will parallel what happened in the banking industry," said TowerGroup's Roby. "The lagging spenders on tech became acquisition targets and were consolidated. It will be slower in insurance, because there are so many mutual forms of ownership. But it's a general trend."

Roby sees potential for selling simple, commodity-like insurance products online, but he says the "real carrot" for the insurance industry is to allow customers to service themselves online, particularly in renewing contracts. "It's time to get the administrative glop off the desks of agents" and others who currently handle it, he said. "Self-service online costs a fraction of handling customers through call centers or agents."

Cybering Into Claims Status

Blue Cross & Blue Shield United of Wisconsin was among the first U.S. health insurers to offer customer service and sales via the Internet. In September, it launched Service Direct, and now, nearly 3,000 customers log on to www.bluecrosswisconsin.com each week to file and track claims online.

Service Direct works with the Blue Cross & Blue Shield Association's mainframe claims processing system. All information accessed on the site is real time.

In addition to checking claims status, users are able to log on to the site and view deductible and out-of-pocket amounts, and track hospital inpatient and outpatient authorization status and eligibility. Downloadable claim forms also are available online. Service Direct, designed for enrollees of Blue Cross & Blue Shield United of Wisconsin and its HMO subsidiary CompcareBlu, was developed by Companion Information Management Resources, a wholly owned subsidiary of Blue Cross & Blue Shield of South Carolina.

"We receive about 200 new users each week and between 2,000 and 3,000 weekly unique visitors," said Cathy Harvey, senior vice president of marketing for United Wisconsin Services. "It is growing rapidly, and people are very enthusiastic about it." As of March, about 3,000 users were registered to the site. Blue Cross & Blue Shield United of Wisconsin is an affiliate of United Wisconsin Services.

First-time enrollees entering the site are asked to create a member profile--their name and password. Then, by entering a specific date or range of dates, users can access claims-status information, such as service and process dates; determine whether a claim has been paid, both billed and total amounts paid; and find out the patient's liability for the claim, including deductible, co-payment and coinsurance amounts. Subscribers can register their children, but they are unable to register spouses due to state privacy laws, Harvey said.

All Blue Cross & Blue Shield United of Wisconsin medical claims can be accessed online, but dental claims are not yet part of Service Direct. "Dental is on a different membership system. However, we are now looking at a number of operational issues with the intention of further growing our dental business. Depending on our systems strategy, we may put these claims online in the future," Harvey said.

Users can e-mail questions directly to a customer-service representative. All inquiries or questions that cannot be answered immediately by the customer-service ream are responded to within 48 hours. "However, nearly 85% of subscribers can answer their own questions once they are on the site," Harvey said.

The company's Internet Team is responsible for all the customer-service inquiries and sales generated from the site. The team, comprised of a manager, four customer service support staffers, two sales representatives, an underwriter, an associate underwriter and an administrative assistant, boasts a combination of more than 53 years of experience with Blue Cross and 97 years of experience in the health insurance field.

United Wisconsin Services Inc. and Blue Cross & Blue Shield United of Wisconsin take security seriously In 2000, United Wisconsin hired Ernst & Young LLP, a provider of services in assurance, consulting, corporate finance and tax, to perform an audit to evaluate the company's business practices, site security and customer information privacy. All information entered or accessed through the Blue Cross & Blue Shield United of Wisconsin site is certified secure by the audit.

Not all companies, such as some small regional provider-sponsored HMOs, will follow suit in offering customer service online. But companies with the necessary resources and plans for continued growth eventually will have to move into this area, Harvey said.

"I think, ultimately it may cause some further consolidation in the market, because it will become such a needed-to-play capability that people that don't have the wherewithal to invest in it are going to end up having to team up with someone who does," he said.

-Lori Cbordas

Blue Cross & Blue Shield United of Wisconsin

Headquarters: Milwaukee

CEO, Chairman and President: Thomas R. Hefty 

1999 Assets: $382,008[*]

1999 Revenue: $642,683[*]

E-commerce Highlights: Launched its Web site (www.bluecrosswisconsin.com) in May 2000. In September, it created Service Direct, a section of its Web site that offers complete online customer service for all Blue Cross subscribers. In October, the site began offering online quotes and sales to employers. Then in February, it began online sales to individuals. The site attracts 2,000 to 3,000 users per week. Total sales currently stand at $620,000 (as of March 2001). Almost 3,000 customers are registered to access online customer service through Service Direct.

(*.) These are unaudited Blue cross & Blue Shield United of Wisconsin figures as of Dec. 31, 2000--not figures for cobalt corp. (Wisconsin Blues is a wholly owned subsidiary of the Cobalt Corp.)

Insurers Install Self-Service Online

One recent survey's findings show the insurance industry is making strides in developing Web sites that improve customer service.

The Ivans 2001 Web Site Survey of 110 property and casualty insurance companies, conducted semiannually since 1999, notes the increasing importance of the Internet to the $420 billion insurance industry.

Data show that online insurance sales comprised less than 1% of sales last year, and by 2004, online insurance sales will make up a $10 billion to $15 billion market--only 2% of all insurance sales, according to analysts.

But the insurance industry is "taking giant leaps in investments and sophistication, given the rise in XML programming, the need to integrate legacy systems and the proliferation of customer-centric Web sites," Clare DiNicola, vice president of Ivans, said in a statement.

The dominant trend among insurers, according to the survey, is the rise in a variety of self-service features at insurance company Web sites--from agent locators to online claim reporting--making insurance a 24/7 Operation for consumers. And agents are playing a prominent role in insurers' Web strategies.

Outsiders often criticize the insurance industry for lagging other financial-services industries in using the Internet to sell directly to consumers, "but these transactions are still incredibly complex," DiNicola said. "We in the industry see the Internet as a tool for our agents and our customers--not a sales vehicle--and these results certainly bear that out."

Among the survey's key findings:

* An increasing number of Web sites--71%--are steering consumers to agents through locators that list an agent closest to the consumer. "The role of the agent appears to be bigger than ever, as Web sites direct consumers to agents to obtain more information or buy policies," DiNicola said. "The Internet--initially thought to bypass agents--has, in fact, enhanced their role by steering business to them."

* More than 85% of Web sites provide customer-service information; 16% allow customers to check a payment; 16% allow policy updates and changes; and 20% offer online claim reporting;

* Some 64% of the sites provide access to industry information such as research, and another 34% include links to industry Web sites;

* Only 18% of insurance company sites offer online quoting, and only 5% of the Web sites are selling directly to the consumer.

Web Sites also are being used to connect agents with company applications and legacy systems. "An October study of agents by Ivans found that 97% of agents have Internet access--a 26% increase from a similar study conducted two years ago," DiNicola said.

The survey found that 38% of insurance companies surveyed had focused on providing their agents access to their legacy systems through an agent intranet on their Web sites. "As insurance carriers stay committed to providing customer service via the Internet, expect an explosion in the amount of agent intranets carriers provide online," DiNicola said. "Otherwise, agents will want to do their business elsewhere."

Fran Matso Lysiak

[Graph omitted]

Keeping Up With the Competition

European insurers that keep pace with the Internet revolution might not reap huge financial rewards, but the modest payoff will be far preferable to the harsh penalties awaiting those that fall behind. That is the assessment of a recent study that examined what the Internet age means to an industry not known for being on the cutting edge of technology.

The capital markets to date have had trouble measuring the impacts of European insurers' e-business strategies, which often aren't visible, says a joint study by McKinsey & Co. and Goldman, Sachs & Co. But despite the high upfront costs, the benefits in terms of expenses, customer service and product development are clear, the study says.

Beyond keeping pace with the competition, Internet technology allows insurers to experiment with new business models, which the report likens to "options" that give flexibility to meet changing conditions. And finally, Web-based "big bets" can cost dearly if they fail, but they can yield enormous benefits if they succeed, the authors say.

The report recommends five steps for management in planning an Internet strategy:

* Set an e-business goal based on the insurer's assessment of itself and its reading of financial-services trends.

* Decide what to offer online to each customer segment, based on the insurer's understanding of online-purchasing behavior.

* Seek partners for outsourcing, alliances and acquisitions that will speed implementation of the chosen strategy.

* Set priorities, beginning with the projects that have the greatest potential and best fit with the overall business strategy.

* Communicate the strategy clearly to the capital markets.

Most European insurers have trailed other financial-services players in getting online, according to the report. The reasons include the relatively greater pressure banks feel from new competitors, the perception of insurance as being sold rather than bought and the lag in European customers' acceptance of direct insurance sales.

The most crucial element for insurers is what the authors call Web-enabling--that is, linking the insurer with customers, suppliers and partners for "seamless access via all channels." For policyholders, this means convenient, swift customer service, which will come more easily as bandwidth and wireless communications improve, the report says. This will reach areas such as online binding of policies and electronic claims handling. Meanwhile, insurers can use online reinsurance transactions to cut their premiums, get a clearer picture of their overall exposures and structure their reinsurance more efficiently.

The greatest reward will go to the "first movers," the study concludes, in the form of a 45% to 55% differential in valuation over the laggards. But most of this won't be in the form of valuation gained, but valuation not lost.

The report also notes that Europeans' receptiveness to online insurance purchases varies widely by country. The United Kingdom, home to Internet pioneer Direct Line, is the best-developed market, with 22% of people who researched insurance online actually making a purchase online, according to one survey. The comparable figure for the Netherlands was 13%, while the lowest was Germany at 4.5%.

Europeans, in general, however, were much more inclined to buy offline, using their online research. The survey found that 51.4% of Germans who researched insurance online then bought it offline. This figure was followed by the Netherlands at 44.1%, Sweden at 40.7%, France at 37.3% and the United Kingdom at 26%.

"The consumer is using the Internet to get information and will use the traditional agent to close the deal," said Simon Foessmeier, an analyst with Bank Julius Baer in Frankfurt, Germany. As the hype surrounding the Internet settles, three major uses for the technology are emerging, he said: as an information provider that steers customers to a company's agents; as a tool for cutting back-office costs; and--only as a third priority--as a business generator. The potential for the latter "was greatly exaggerated in everyone's imagination," Foessmeier said.

He cautioned against underestimating the Internet's importance, however. "You need to use all the distribution channels that are available," he said. Foessmeier dismissed many forecasts of what percentage of business will be done online in the future. "It will not be 20% as some studies have suggested." It would be unwise to overspend on e-business, he said, but at the same time, "You cannot afford not to be there."

Brendan Noonan

Tinkering in 'Fourth Channel' Pays Off for Minnesota Life

Less than a decade ago, insurers depended upon three communication channels: face-to-face, mail and telephone. When the Internet began to emerge as a new channel, a small group of employees at Minnesota Life Insurance Co. (then Minnesota Mutual) took notice.

"The emergence of Prodigy and America Online indicated there was something different out there, a fourth channel of communication, the only one we've added in our lifetime," said Conrad Rossow, strategic technology consultant at the company.

After meeting with executives, Rossow and a small cadre of colleagues received permission and minimal funding to explore the Internet, to "tinker" with it and decide what it might mean to Minnesota Life's business. "It was a fairly early time," he said. "We didn't even have access to the Internet. We had to choose a service provider and go out there and browse. We were sharing and learning and brainstorming what we might do with it."

Since then, Rossow and his group have helped Minnesota Life build electronic systems that provide information and support to agents, employers and employees. "We've spent a lot of money, but we have a lot of capital," said spokeswoman Maggie Jensen. "Clearly, we feel it's been worth it for both our group business and pension units. Our clients literally rave about what we do for them."

Online capability really took off in 1999, when Minnesota Life offered a technological solution to the state government of Virginia in the form of an extranet system for its employee benefits. "When they saw it, they were excited," recalled Maria O'Phelan, director of customer service and technology. "They asked for access to things like claims, underwriting information, the status of checks going out and call-center statistics." Minnesota Life now has systems like that in place for 15 such clients, with nine more expected up by mid-May. In March, the company won a contract with the state of Illinois.

Minnesota Life provides group life and disability insurance, defined-benefit plans and 401(k) plans. The group business is mostly with large employers, while the pension unit is with small ones. Employers like it, because the system eliminates paperwork and because employees can enroll online. Employees can manage accounts such as variable universal life products through a Web site, where they can change beneficiaries, transfer among funds and change allocations. "We're not a mutual fund, but the expectation now among policyholders is that they can manage their 401(k) plans and variable universal life contracts like they do with a mutual fund," O'Phelan said.

The company has group universal life and variable universal life business with 137 customers. Another 488 customers have group term plans, but O'Phelan said they don't require the "bells and whistles" that the cash-value plans do.

After the tinkering stage, Rossow's group conferred with executives from many parts of the company--marketing, customer service, law and compliance--to develop a strategy. "At that point, we could get commitments for the significant investment it would take," he said. "By then, we knew what we were dealing with. The value of tinkering was that you don't set an expectation, only to fail from not knowing what you're getting into."

In 1999, the company hired more people for technology and used consultants as needed. Its Web team currently numbers about 10. O'Phelan said the company now stands at about a break-even point on its technology investment and return, and she expects that Minnesota Life now can add clients to the system at minimal expense.

The system benefits Minnesota Life in a couple of ways. One is that it's a selling point. "We're using the Internet to make sales, not making sales on the Internet," she said. A second is that when people enroll online, they tend to take more coverage than they would if they were enrolling on paper. "When they're in there playing with the online tools, they're making a decision based on more facts," O'Phelan said.

In the next couple of years, Rossow said his group will listen closely to hear what customers want in value-added services, and it will probably look for ways to expand distribution, but not at the expense of existing distribution channels.

"There was no established road map for doing this when we started, so we winged it by getting the right people involved," he said. "The right people is probably the reason we've been successful, and we're still on the journey."

Ron Panko

Minnesota Life Insurance Co.

Headquarters: St. Paul, Minn.

CEO: Bob Senkler

1999 Assets: $18.4 billion

1999 Revenue: $1.7 billion

E-commerce Highlights: Focus on online customer service for employee-benefits plans. As of March, 52% of the company's group universal life plans are Internet-based (by premium), 40.6% of term life plans, 31.2% of long- and short-term disability and 13.5% of variable group universal life insurance.

One Face

CNA Financial Corp.'s new online insurance resource portal is a tool for agents to do business, but it's pegged as being no different from a telephone or a fax machine, according to the leading commercial insurer. "In talking to our audience--agents and brokers--we felt they were ready to embrace technology. The Internet is more than a flash in the pan. We can use it to do more for them," said Thomas Ishikowa, executive vice president and chief marketing offer for e-business for CNA.

The online initiative, CNA Central, marks the insurer's first step toward presenting a common face representing all of CNA's products to agents and brokers. "We responded to what they were asking us for. CNA Central was built by agents and brokers for agents and brokers," Ishikowa said. It also was fully embraced from the top clown and allocated a $150 million-plus budget, Ishikowa said.

The evolving business tool is an online site accessed through the company's main Web site, www.cna.conr. CNA Central is a combination public/private site providing general information about the company's products as well as the ability for agents and brokers to conduct business directly with the company via the Internet.

Michael Chuber, president of Selective Associates Inc., a property/casualty agency in Merrick, N.Y., calls CNA Central "fantastic." "It gives me the opportunity to cross-sell and know what products are available. CNA brought it all under one roof. Now I can research products I'm not familiar with and sell them when my clients have a need."

CNA is joining other leading insurers, such as Farmers Insurance Group, in providing an online-selling and business-management tool for its agents. Last summer, Farmers rolled out its Agency Dashboard containing nine sections that include billing, sales leads and descriptions of Farmers products.

CNA has joined other U.S. companies in using the Internet as a tool to get closer to producers and restructure the way business is conducted. CNA is one of the leading commercial lines insurers, writing 14% of ocean marine, 5.3% of commercial auto and 6.3% of commercial multiperil, as well as 5.7% of workers' compensation, according to A.M. Best statistics. Business Week reports that AMR Research shows 87% of corporate executives will either sustain or increase their spending on Internet initiatives for sales growth and customer management this year. Forrester Research also projects worldwide business on the Internet to grow to $6.8 trillion in 2004, with the United States leading the way.

CNA Central was the end result of a brainstorming session of the company's Broker Agent Advisoiy Council that was held last October. "The council was a reality check--a way to bring identification and intrafunctionality to the way we do business," Ishikowa said. The common-face presentation of CNA's products replaces the old silo Web site setup. "It was difficult for brokers and agencies to do business because they weren't aware of our other products the way our Web site was set up. The centralized presentation of products brings everything together so agents and brokers can see what other lines we are offering and allows them to conduct business directly with different units," Ishikowa said.

CNA rolled out the sales/marketing site in January, with subsequent online capabilities to be added in June and October. Right now, brokers and agents can apply online for quotes, track their current business with CNA and participate in live online monthly chats with company product specialists. The summer and fall rollouts will allow agents and brokers to file claims, make renewals, change endorsements and bind online.

Lynna Goch

CNA Financial Corp.

Headquarters: Chicago

CEO and Chairman: Bernard L. Hengesbaugh

2000 Net Income: $1.2 billion

2000 P/C Net Premiums Written: $6.8 billion

E-commerce highlights: Recently rolled out CAN Central, an Internet-based resource portal for its agents and brokers.

AIG Insureds File and Track Workers' Comp Claims Online

AIG Claim Services Inc., a member company of insurance giant American International Group Inc., is in its second year of operating First Notice of Loss, a Web-based function that allows customers, including small-business owners, to file workers' compensation claims online. This system also handles property and casualty claims.

Anthony J. Galioto, president of AIG Claim Services, said his company put the claims-reporting service online early in 1999 at www.aigcs.com and at www.aigdirect.com, the parent company's Web site. The goal was to make it faster and easier for customers to report a claim by eliminating time spent on interaction over the telephone or through the mail. In making the change, AIG Claim hoped to provide better service, differentiate itself from its competitors and use the Internet technology that people already had as the foundation for a better communications vehicle, Galioto said.

Customers "don't have to make a phone call, wait on the line, write the information down and then pass it on verbally to someone else," he said. "It's a lot quicker, and more accurate, because that information goes directly into our claims system without anyone but the customer having to touch it." The system instantly transmits the information to the appropriate service center, where it is fed directly into the claims system. Within seconds, the customer receives confirmation of the claim report, along with a reference number for tracking purposes. An adjuster is assigned and contacts the customer within 24 hours. "So you automatically get feedback from the system without having to make phone calls or wait for phone calls," he said.

The new approach has benefits for the company as well. "By not producing paper and by not having handoffs, we become more efficient and we can provide a cheaper service to our customers, so we are actually able to lower our prices," Galioto said. "It's really a win-win situation. Although Wall Street doesn't show it in the performance of technology stocks, technology has delivered for us."

Once a claim is made, insureds can track its progress through another product that AIG Claim calls IntelliRisk Netsource. This is the company's Internet-based, risk-management information system, which gives the policyholder access to the financials on the claim as well as the adjuster's notes. Medical records, however, are not accessible because of confidentiality laws. If a policyholder has questions on the status of the claim, those can be answered by corresponding with the adjuster via e-mail.

Producers have access to the same AIG Claim products that the large- and small-business owners do. "Just about all of our producers have IntelliRisk Netsource in their offices," Galioto said. "If their customer gives them access to this information, the producer then can manage the information, acting like a risk manager for the insured."

AIG Claim also provides customers and producers with loss runs through IntelliRisk Netdata, its Web-based service that provides loss runs via e-mail, eliminating the sometimes cumbersome and expensive practice of issuing loss runs in monthly or quarterly hard-copy formats, Galioto said.

AIG Claim has had lntelliRisk up and running for eight years, but it was PC-based until 18 months ago, Galioto said. "We had to rewrite it based on the capabilities of the marketplace now to access to the Internet," he said.

Generally, the transition has been smooth, notably on the First Notice of Loss site. "The reason is because the customer is putting the data right into the system," Galioto said. "You're actually prone to make more mistakes when you call someone on the phone, because you have that translation--34 becomes a 43 and the ZIP code gets reversed--and that's when you have more problems. When the customer puts the data straight into the machine, it's actually pretty easy."

The only wrinkle during the changeover has originated on the policyholder's end, he noted. "When a customer is coming to you through their own network--an intranet--you sometimes have issues that are tough to identify because you're not having problems on your site, but they are having problems on their site," Galioto said. "Some larger customers have to find better ways of getting out of their intranet into the Internet,"

Since its inception, AIG Claim's online claims-reporting service has handled more than 5,350 workers' comp claims.

About the same time that the revamped IntelliRisk emerged, AIG Specialty Workers' Compensation, a division of American Home Assurances Co., introduced its e-COMB. This is a Web-based system that enables brokers to obtain quotes and bind primary workers' comp coverage. Both the First Notice of Loss site and e-COMP provide customers with renewal information.

In the first quarter of 2001, e-COMP was attracting about $2 million a week in new business--double the amount of a year earlier. So far, this online operation, which deals only with brokers, has about 14,000 small-business customers, with a premium range of $5,000 to $100,000, said Jim Roberts, president of AIG Specialty Workers' Compensation.

"Needless to say, the demise of some other specialty workers' comp carriers has certainly helped us, particularly over the last six to eight months," Roberts said. "Essentially, some other players that were in this marketplace have either gone out of business or withdrawn. So we believe we are one of the few companies out there that can actually (to this on a national scale."

Despite this early success, additional work is needed, Roberts said.

The product was designed primarily as a new business mechanism and allowed a producer to go in, obtain a quote over the Internet and then be able to bind. This was geared primarily toward simple- or single-state risks, Roberts said. Currently, if a producer wants a multistate account, that person may have to submit additional information manually. But AIG plans to change that this year by expanding the criteria to include multistate accounts.

The company also wants to beef up the stability of its platform, a necessity highlighted by the significant increase in usage of the site over the past five months.

"If you're going to be 7-24, you've got to be and running 7-24 and that hasn't always been the case, particularly the last several months," Roberts said. "We had one producer on Dec. 31, a Sunday, who was binding about five accounts an hour. And he can do that on a Sunday, but during the week right now there are some high peak periods when there is just too much traffic." He said the company hopes to make these changes by June.

Barbara Bowers 

American International Group Inc.

Headquarters: New York

CEO: Maurice "Hank" Greenberg

1999 Assets: $268 billion

1999 Revenue: $40.66 billion

E-commerce Highlights: Focus on online customer service for personal lines and small-business insurance coverages; instant quoting for workers' compensation, property, general liability, professional liability and international coverage; first notice of loss, loss runs and claims management.