The frustrating part is that no one is arguing (publicly, anyway) against the development and adoption of industry-wide standards to ease and speed up the sharing of data. Standards lower costs. They increase efficiency. They improve service. The “question” about the need for standards is moot (or should be).

So, why don't we have universal standards? Fear, I believe, is the biggest obstacle–the terror of carriers who wonder whether they can compete if their agents are truly free to shop accounts in nanoseconds, rather than waste time and money re-keying applications.

Myopia is another factor. Insurers have never been known for their vision. Indeed, they often opt for short-term gains over potential long-term benefits.

Ultimately, agents may be the only ones who can decisively turn the tide in favor of standards, because they are the ones choosing where to place business.

In a hard market like this, with fewer choices than agents would like, it would take real guts to put the quest for standards ahead of the more immediate need to place a client, no matter how technologically-challenged the carrier.

However, the market won't be hard forever, and once competition heats up among carriers, agents will once again be in the driver's seat, able to place accounts where it makes the most economic sense. A carrier that stubbornly clings to a proprietary system is going to be at a distinct disadvantage.

It will take leadership to get agents aboard the standards bandwagon. Agency management system user groups (working alone and in tandem via AUGIE) as well as the Agents Council for Technology have already spoken out, but they must continue working with ACORD to keep the heat on carriers until resistance to standards melts away.

This battle will not be endless (it only feels like it), because free market forces will not permit insurers to waste time and money while ignoring the needs of their distributors and customers forever. The insurance industry's Tower of Babel is doomed to collapse from the dead weight of its own inefficiencies.

***

Some other observations from the ACORD conference:

Everything old is new again.

Legacy systems may be dinosaurs, but they're far from extinct. Indeed, many of the ACORD speakers noted that most carriers are taking an extension approach–pushing techies to modify their systems, rather than junk them. Part of the problem is concern over the cost of a complete overhaul; but once again, fear is also involved.

“We're hearing some say that 'we know the legacy system is killing us, but we can't bring ourselves to crack open our chest and take it out,'” said Matthew Josefowicz, insurance group manager at Celent Communications in Boston.

Show me the money.

There was grousing at the conference by techies about the end of the technology gold rush. The days when all chief information officers had to do to get funds was say “Web” or “Y2K” are over.

Insurance company tech spending fell 8 percent last year and is only expected to grow by a paltry 1.6 percent in 2003, according to a study by IDC, a market intelligence firm based in Framingham, Mass. This means CIOs have to prove to their non-tech superiors that every major IT project is going to improve service and efficiency and deliver a return on investment, sooner rather than later.

This new ROI reality should not be a shock to insurer CIOs. I was the one astonished to hear that “70 to 75 percent, even as high as 90 percent” of the tech projects at some carriers are “challenged,” meaning “they are late, over budget or non-functioning,” according to John Thorpe, a consulting fellow at Fujitsu, a multinational IT solution firm based in Tokyo, Japan. Is it any wonder techies have a credibility gap?

Don't cut off your nose to spite your face.

It's one thing to demand ROI from tech projects when times are tough, and to cut spending on questionable initiatives, but it's quite another to “short the future,” stressed ACORD's keynote speaker, Larry Downes, a “technology strategist.” He noted that tech keeps advancing whether or not insurers spend to keep up, and warned that carriers sticking with outdated systems to save money in the short term will be left behind in the long term.

He has a point. Carriers must spend limited tech dollars wisely, but they cannot afford to stop investing altogether. In the insurance industry's version of the tortoise racing the hare, the slow (but never steady) insurance tortoise always loses. It would be nice to see insurers ahead of the tech curve for a change.

Sam Friedman is National Underwriter's publisher and editor-in-chief. He may be reached at [email protected].

Reproduced from National Underwriter Edition, June 9, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.