On Groucho Marxs long-running quiz show, You Bet Your Life, a scruffy duck dropped from overhead with a $100 reward in its beak if a contestant said the magic word. The audience was clued in to the word from the start of each show.

The magic word in the insurance industry at this juncture is transparency, and if Grouchos program were on now, the audience could consist of any insurance customer. Each one would be clued in to the need for transparency, especially after watching the misconduct of industry behemoths, including Marsh & McLennan, Aon, and AIG, and the rise of regulatory requirements, such as Sarbanes-Oxley. The contestants would be the insurers themselves, playing for their continued existence.

With all that has transpired, however, insurers should be clued in, too. Their future could depend upon iteven more so in todays growth-oriented environment that relies on customer relationships and favors initiatives to broaden distribution (see Best of Both Worlds, p. 16, for the technology that supports this). In fact, although a TowerGroup 2005 spending forecast predicts relatively flat insurance IT spending overall, most of the action, the firm asserts, will reside on the P&C side, with distribution taking one of the top three IT investment spots for the year.

So, future prosperity is riding on maintaining trust, and the business world knows it. A recent AMR Research study anticipates the cost of compliance over the next five years in business in general will reach $80 billion; the estimate for 2005 is $15.5 billion. Although technology spending is a major part of the compliance investment, ranging from 28 percent of overall SOX spending to 42 percent of overall HIPAA spending, investment on internal staff is the largest budget item in compliance, reports AMR. SOX remains the most expensive initiative, accounting for 39 percent of all compliance spending.
While in 2004, 35 percent of companies had a specific budget for compliance initiatives, two-thirds had to take money from other areas to fund projects, AMR adds. In 2005, more companies (40 percent) will have a specific budget for compliance.

Much of this spending and activity might well have been lost on Groucho, whose notable quotes include, The secret of success is honesty and fair dealing. If you can fake those, youve got it made. But has the industry learned its lesson?

It would be nice to think so, especially given all the humble pie thats been consumedthe honchos of Marsh and Aon have offered mea culpas; chief executives from Marsh and AIG resigned.

But concrete proof the industry has learned from its mistakes is essential. Most of these kinds of problems stem from human, rather than technical, deficiencies. Therefore, companies continually must boost customer confidence and strengthen their market position by honest management and implementing the tools that help them stay honestor perish.

Time wounds all heels, quipped Groucho, and recent events have proved him right. Transparency will help avoid future events. Lets do what is necessary to achieve it so that time also can heal all wounds.

Sharon S. Schwartzman
Editor-in-Chief