The insurance industry has withstood hard markets and failing economies before. But one year ago, the attacks on America combined with market forces to create the greatest challenge this industry has ever faced. There has been no magic formula for recovery, but smart insurers are focusing on their systems to help them overcome hard times. Since September 11, insurers have become much more diligent about analyzing their claims history and much more diligent about understanding risk exposures, says Henry Schweppe, partner and lead of the financial services integrated analytics practice at PwC Consulting. Weve seen an increase in interest on the part of our clients to look at more sophisticated analytics.

While an emphasis on managing claims and risk exposures has increased since 9/11, the problems of the insurance industry cant be pinned solely on the terrorist attacks. Dennis Chookaszian, retired president and CEO of Chicago-based CNA Insurance, thinks the industrys woes go back to the last decade when the market was highly competitive. Companies had the product priced too low in the past because they didnt understand some of the loss development that would occur and, in part, because it was just competitive trying to hold share, says Chookaszian. Companies had bad operating results, and they are now trying to regroup.

He feels the best way to regroup is through the IT department. Regrouping really means getting better systems, improving underwriting, all these kinds of things, he says. In many ways, it is not unlike the kinds of cycles you saw in the 70s and 80s when things got bad. People got their resources together, and things improved.