North American carriers are taking a variety of approaches to supporting new initiatives in Asia. Some are partnering with local financial firms and some are processing the business in North America to avoid building new data facilities.

Gail McGiffin, associate partner at Accenture, said that global companies can realize savings by using applications in more than one country. An insurance claim, or an underwriting process, is pretty much the same from one country to another, allowing for differences in language, local customs, and regulations.

“Companies are coming to the recognition that insurance isn’t all that different globally. There is great commonality of data and business process,” McGiffin said. “Now companies are beginning to appreciate the potential to re-use technology that may have been developed in London or Australia in other markets.”

Allianz’s US property and casualty arm - Fireman’s Fund - uses Accenture’s underwriting workstation, said McGiffin. The underwriting solution was designed to improve the efficiency of underwriting systems through diagnostics and rules-based technology. Built on Microsoft .NET, the underwriting system has been implemented at several leading insurance companies around the globe.

“The parent, Allianz, is looking very closely at what Fireman’s is doing in implementing the underwriting technologies because it would like to leverage that internationally,” McGiffin added.

Accenture has built claims and underwriting applications on Microsoft’s highly flexible .NET Framework, which would facilitate adaptation to local demands. For carriers, using a single system provides lower costs and a better view of the organization’s processes, which can help with meeting regulatory requirements.

McGiffin said that Accenture’s underwriting workstation provides a more consistent structure and business process within carriers. “The technology support for underwriting and claims makes companies less subject to the fluctuations in the experience and skills of their people,” she said.

Five years from now, she expects a few of the leading carriers will have migrated to a single system for underwriting or claims. The industry is getting a push from aggressive regulators who are insisting on more electronic processing to make processes like settlement more efficient.

In England, the Financial Services Authority (FSA) has focused its efforts on process, transparency, compliance and auditing – a lot like what Elliot Spitzer has done in the US, said Mark Birrell, CEO of Wildnet, a pioneer in electronic processing of commercial policies.

“Look at how the other markets transact business and then look at the insurance market – it is archaic,” noted Birrell.

Speaking to a New York conference organized by the law firm LeBoeuf, Lamb, Greene & MacRae, the FSA’s chief executive John Tiner noted a strong link between major business problems within the insurance industry and the technology the industry uses.

“While it is estimated that some $40 billion of capital has flooded into the insurance industry during the last three years, the market infrastructure has not kept pace with market developments. The industry has underinvested in technology and in process improvement,” he said. Tiner added that the error rate on policies remains at 35 percent, much the same as it has been for several years.

“Automation is a key factor, but process simplification, integration, and discipline are needed badly if this significant problem is to be resolved,” he said.

Regulators are beginning to understand the importance of standards for the insurance industry, said Beth Grossman, assistant vice president, industry relations, at ACORD, but in the press of legislative demands, standards often get forgotten. To help keep standards on the agenda and illustrate the role they play in regulatory compliance, ACORD recently completed a strategic regulatory assessment that addresses the impact standards can have on regulations.

“It wasn’t a mandate, but it was a very strong suggestion that to avoid barriers to trade it is important to use voluntary consensus standards built by the industry,” said Grossman. “In the US, the Office of Management and Budget (OMB) recently issued a directive to all branches of the federal government requiring that they consider using voluntary industry standards rather than building their own proprietary methods for procurement, data collection, and industry monitoring.”

The World Trade Organization (WTO) agreement regarding Technical Barriers to Trade (TBT Agreement) supports a similar position on voluntary consensus standards as part of its "code of good practice” for preparing, adopting and applying standards.

The FSA has set a two-year deadline to solve issues such as incomplete documentation (“Deal now, detail later”) and back-office logjams by advocating for more electronic processing. This is welcome news to many in the London insurance market where technology vendors have grown frustrated with initiatives that have come and gone with little lasting impact. The newest, and one with strong backing from Lloyds and technology support from HP and Microsoft, is Kinnect. This London insurance processing hub supports the London market, is planning to support the North American property market, and expects to expand into other areas of coverage such as international property and terrorism in the future.

Its CEO, Toby Davies, thinks that carriers around the world will support a higher degree of electronic processing if it reduces their costs and is aligned to their business processes. “Carriers will need to address cost as the climate hardens,” he said.

The Kinnect hub is gradually picking up industry participation from brokers Hiscox, Liberty Syndicates, and Marsh and Willis; and underwriters ACE European Group, Amlin, Ascot, Beazley, Markel and Wellington. The savings from an electronic marketplace don’t really kick in until most of the participants belong – something like the Metcalfe's Law in networking which states that the utility of a network equals the square of the number of users.

“The industry recognizes that we cannot go backwards. Enough initiatives have failed in the insurance industry. There is a recognition that we have to make this work for London and for Lloyds in particular,” Davies said.

Because Lloyds conducts much of its business with overseas markets, it has a long distribution arm, Davies added. “It has to be more efficient because the business it is processing is more complex.”

“The regulators are demanding transparency of pricing and process, contract certainty and clear audit trails,” said Alex Letts, chief executive of global reinsurance infrastructure provider ri3k. “Electronic systems are the only way to achieve this, and time is not on the side of the industry to meet the regulatory demand.”

Picking up on this trend, Microsoft’s Maroney added, “This is an industry facing a remarkable array of challenges simultaneously – expansion, cost reduction, regulatory requirements, and a desire to understand and serve customers better. From high performance core systems to delivering useful and timely information to customer service reps, Microsoft and its partners have highly flexible, cost-effective solutions that can meet the known demands of today and the unpredictable demands of the future.”