The Industry Is Playing Catch-Up In Integrated Document Management
By John B. Bennison
In contrast to manufacturing companies that transform raw materials into entirely new finished products, the raw material and finished product for insurance companies are one and the sameinformation.
A printed insurance policy is merely a representation of a pure information transactionalbeit with major financial implications. Because the industry is completely information-based, and information has historically been recorded on paper, terminology like “holding paper” or “writing policies” is still common today.
Given the benefits to be gained from automating information transactions, you would expect the insurance industry to be a leader in adopting modern electronic document management systems, yet others (like financial services) are clearly more advanced.
Signs are appearing, however, that this reluctance is now fading. This hesitancy may, ironically, provide late adopters some unique opportunities. As a result, insurance companies could soon remind us of the time-honored maxim, “He laughs best who laughs last.”
So, what has slowed information automation in the insurance industry?
First, insurance is heavily regulatednot just nationally, but by insurance commissioners and regulations that differ from state to state. This situation has created a cautious, conservative environment in which insurance companies are hesitant to embrace new approaches that could have a legal or regulatory impact, and regulatory review itself slows change.
Secondly, insurance is long-terma home insurance policy may last more than 30 years, and a life insurance policy lasts (obviously) a lifetime. The long-term nature of insurance has discouraged and delayed changes in business practices, and people have generally accepted a more paper-bound, slower pace of technological change than in other industries. New processes are constrained by the need to accommodate old transactions.
But the tide of change cant be stemmed for long. Although changes have been slow, the floodgates are opening.
The question is, why now?
Todays hypothetical, but typical, Amalgamated Universal Insurance Company often contains 30-year-old records from the myriad companies it purchased in the last decade. Locating, accessing, and managing documents in this Tower of Babel environment is expensive and the risk of lost transactions is high, so insurance companies are seeking better ways to manage their information.
The repeal of the Glass-Steagall Act is also forcing change. For more than 60 years the act separated the insurance and banking industries, but its repeal has removed the barbed wire fence between the cattle and sheep, so to speak. When the range skirmishes are over, those organizations with better IT infrastructures will own all the livestock and all the grazing rights, so insurance companies are fast improving their technology base.
Next, companies face a conflict between increased privacy legislation and increased information access.
Internet business models raise expectations for convenient access to information, but consumer-driven legislation protects information privacy. To serve this dual role, companies must invest in new technologies.
Finally, insurance companies have simply recognized that some of their business practices are outdated and expensive. A printer with a built-in shredder provides an appropriate image of how insurance companies often churn out paper on high-speed printers while downstream somewhere a high-speed scanner changes it right back into electronic data.
To meet these challenges, insurance companies are revamping their flow of information, both internally and externally, by realizing that electronic delivery is not an option, its the option. Insurance is all about information transactions, and the speed at which the transactions are conducted depends on efficient document delivery. Efficiency means you can begin collecting premiums sooner, managing risk more effectively, and saving on the bottom line.