A.M. Best Special Report: Technology Today: Now, It's Everywhere

Business Wire, March 28, 2005

OLDWICK, N.J. -- The past two decades have marked the migration of information technology from its narrow application within specific disciplines to widespread adoption throughout the United States. The Internet, automated work-flow processes and Web-based data interfaces, as well as sophisticated data warehousing and data mining, now are widely accepted tools with applications for virtually every sector of industry within the United States.

In a recently released special report, A.M. Best Co. looks at how these technology changes relate to the insurance industry, and more specifically, to the assignment of an A.M. Best financial strength rating.

Many in the insurance industry predicted the revolutionary takeover of systems technology with regard to the way insurance companies, agents, brokers and reinsurers would do business in coming years. In fact, some went so far as to postulate the end of the independent agent. Under this scenario, all insurance purchasing would take place over the Internet, thereby allowing companies to enjoy tremendous expense savings, while granting the consumer the convenience of buying insurance products without leaving home. Insurance executives spent millions on information technology consultants who drove home the idea that without Web-based selling capabilities, a company soon would fall immeasurably behind in the all-important race toward technological supremacy.

As we now know, these IT theorists were more than a little off base. Clearly, the independent agent remains a critical component in the distribution of insurance products in both the personal and commercial lines sectors. Most consumers like having a relationship with their agent or broker. And similarly, business owners continue to feel the need to enlist an adviser whom they believe best understands their specific risk characteristics.

Most can agree that a revolutionary shift in the way insurance business is conducted did not occur and is unlikely to transpire in the future. Nevertheless, over the past five years, the insurance industry has come a long way in its utilization of information technology and automation to streamline business processes, reduce costs, improve ease of use and speed to market and enhance the quality of its data and data-mining capabilities.

The benefits of many IT initiatives include cost savings; sophisticated pricing and tiering algorithms that better match price to risk; and the elimination of duplicative data entry. These strategies, when used effectively, have the potential to improve overall profitability.

A.M. Best recognizes that insurers operate in a highly competitive and cyclical market. Through the development of flexible IT platforms, some insurers have distinguished themselves and created a sustainable competitive advantage.

BestWeek subscribers can download a PDF copy of all full special reports at no additional cost or a combination of the PDF copies plus all related spreadsheet files of the report data at no additional cost from our Web site at http://www.bestweek.com.

Nonsubscribers can download a PDF copy of the full special report (8 pages) for $55 or a combination of the PDF copy plus the spreadsheet file of the report data for $140 from our Web site at http://www.bestweek.com.

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A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.