A Slow-Moving Industry Picks Up Speed

The most vital assets of Kemper Insurance Cos.' casualty business--its 225 employees--safely evacuated their offices on the 35th and 36th floors of One World Trade center last Sept. 11. The $4.8 billion parent company began restoring the casualty division's backed-up data within hours of the attack, enabling most of those employees to get back to work in just a few days. But Kemper Casualty Co. couldn't recover the thousands of paper documents, including countless insurance policy applications, that were lost in the disaster.

"Anything electronically stored was quick to be recovered, but paper-based information wasn't," says Ron Roecker, CIO of Kemper Casualty, who was at his desk when the first plane crashed into the building. To recreate the lost information, teams of people from various business units went back to customers and Kemper agents, at an as-yet undetermined cost; so far, about 80% of the data has been restored. The loss of those documents has highlighted the need for the division to accelerate plans to digitize paper-based information and automate data handling, Roecker says.

Two other Kemper business units implemented a project three years ago, using IBM Content Manager, to digitize some paper documents, but laws and stubborn tradition have bound the insurance industry at large to using manual, paper-based procedures to conduct business. The laws that once required insurance companies to have "wet signatures"--ink-on-paper copies of important documents such as insurance policies--are changing. The Electronic Signatures in Global and National Commerce Act gives E-signatures the same legal status as handwritten ones. While analysts say some insurance companies have moved further ahead of Kemper in embracing digital imaging technologies, including E-signatures, the former Trade Center tenant has plenty of company.

As the casualty division completes its move into its new, yet-to-be-refurbished Manhattan offices at 30 Rockefeller Plaza, it will be making a break with many of its old ways. Earlier this month, the group launched its own digitization pilot using IBM Content Manager's imaging software. "We want to get all key information into an electronic format," Roecker says. The group deals not only with two-page applications from individuals for casualty insurance but also with applications from large companies that total from 150 to 1,800 pages, including accompanying documents. The goal, Roecker says, is that "as soon as that paper hits our door, it gets scanned in, becoming a digitized image."

The division isn't ready to make the move to a completely paperless environment by letting applicants fill out electronic forms and digitally sign them, but by digitizing the paper documents it receives, the company expects to eliminate the time-consuming process of shuttling paperwork among staff members and offices during the underwriting process. Initially, about 15 Kemper Casualty underwriters will use the system, but Roecker expects that hundreds of underwriters eventually will be able to access the digital images over the network from their PCs, as well as annotate them with risk-analysis comments. At some point in the future, the casualty division will add Web capability so that underwriters in the field or claims adjusters can access the images from the road. Images will be stored on mainframe systems at Kemper Insurance's Long Grove, Ill., headquarters but copied locally on servers in New York for better performance, he says.

The high cost of imaging forces the traditionally conservative insurance industry to select its digitization efforts carefully. For the most part, digitizing paper documents that are seldom used doesn't have great appeal, says Lauri Ingram, a Meta Group analyst. However, paper that gets shuffled frequently as part of a business process, such as underwriting, is a good candidate for digitization.

Still, when insurance companies must decide where to spend their IT dollars, digitization efforts and Web-based projects are often focused on deployments that are more visible to customers, Ingram says. For instance, being able to track a claim via the Web tends to be more satisfying for customers--and potentially more profitable for insurers--than Web-enabling or digitizing back-room work like underwriting.

But Kemper Casualty says there's underestimated value in IT efforts that may not be used by customers but do affect them. The division also has accelerated the deployment of a Web-based accountant's point-of-sale system, previously planned for mid-2002. Set to go live this month, the application for agents selling policies to accountants and small accounting firms will let Kemper "shrink down the decision process from two to three weeks to minutes," says Roecker--a clear benefit to customers.