theinterpreter PROFICIENCY CAN BE AN OPPORTUNITY AND A CHALLENGE p. 8 Making Dumb Data Smart: See Inside! CONFERENCE PREVIEW SUPPLEMENT

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1 A publication of the Insurance Accounting & Systems Association SPRING Vol. LXXXIII Issue IV theinterpreter Making Dumb Data Smart: PROFICIENCY CAN BE AN OPPORTUNITY AND A CHALLENGE p. 8 See Inside! CONFERENCE PREVIEW SUPPLEMENT CONFERENCE PREVIEW 86TH IASA ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW in indianapolis, indiana! President Bill Clinton To deliver the Keynote Address on Tuesday, June 10 INDIANAPOLIS IMPRESS INSPIRE IGNITE 2014 Educational Conference & Business Show June 8 11, 2014 Indianapolis Convention Center, IN Join IASA in Indianapolis, Indiana June 8-11, 2014 REGISTER TODAY! June 8 1 #IASA2014 President s Message I Want to Thank the Back-Up Band p. 6 Feature Story How to Generate Net Investment Income p. 12

2 The industry s most trusted source of insurance education for over 80 years For only $565 annually for a company membership, IASA members receive a wide array of educational products, services and events, primarily focused around the core knowledge areas of accounting/finance and systems/technology, free or at greatly-discounted prices. Plus, with over 1,000 member companies and over 12,000 affiliated individuals, IASA offers members more networking opportunities than anywhere else in the insurance industry. EDUCATIONAL EVENTS ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW June 8-11, 2014, Indianapolis, IN EXECUTIVE EDUCATION PROGRAM EVENTS Chief Financial Officer Roundtable Chief Information Officer Roundtable Chief Investment Officer Roundtable Chief Operating Officer Roundtable Executive EDGE Conference IASA & RR DONNELLY INSURANCE ACCOUNTING SEMINARS P & C Statutory Accounting Principles LOCAL IASA CHAPTER EVENTS Check the IASA web site and 26 local chapters for meetings near you! PRODUCTS & SERVICES TEXTBOOKS Property & Casualty Insurance Accounting Life & Accident Insurance Accounting Health Insurance Accounting PUBLICATIONS the Interpreter the einterpreter newsletter FINANCIAL REPORTING PRODUCTS State Filing Express State Checklist Manager DISTANCE LEARNING & ONLINE RESOURCES Targeted Web Seminars Industry Pulse ADDITIONAL BENEFITS CPE Credits Volunteer Participation Networking Opportunities About IASA The Insurance Accounting & Systems Association, Inc. (IASA) is a qualified 501 c-3 non-profit, education association, and one of the insurance industry s largest, and most well-represented trade associations. IASA membership includes insurance companies of all types (Property & Casualty, Life, Health, Fraternal, HMO and others) as members, as well as companies serving the insurance industry, regulators and organizations more broadly representative of the financial services industry, including banks and investment brokerage firms. GET INVOLVED AS A MEMBER AND START RECEIVING BENEFITS TODAY! Contact Sheila White-Smith, Manager of Member Services for IASA at x 206 or ssmith@iasa.org for more information! Or, connect with IASA via social media!

3 contents SPRING 2014 x Vol. LXXXIII x Issue IV PUBLISHED BY INSURANCE ACCOUNTING & SYSTEMS ASSOCIATION, INC. (IASA) 3511 Shannon Road, Suite 160 P.O. Box Durham, NC Phone: (919) Fax: (919) info@iasa.org VICE PRESIDENT MARKETING & COMMUNICATIONS Rod Travers The Robert E. Nolan Company Rod_travers@renolan.com EDITOR Jennifer Overhulse St. Nick Media Services jen@stnickmedia.com ART DIRECTOR Julie Schauer DesignMark, Inc. designmarknow.com SUBSCRIPTION INFORMATION Tricia Stillman Director Member & Volunteer Services IASA International Office (919) x202 tstillman@iasa.org PUBLICATION INFORMATION IASA s Interpreter is published quarterly, plus one additional special conference issue, and is available at the general subscription rate of $35.00 per year for members and $45.00 per year for non-members. REPRINT INFORMATION No part of this publication may be reproduced without written permission of the publisher. Reprints of Interpreter articles are available from the publisher and may be coordinated through the editor of this publication. cover story p. 8 The Lowdown on Analytics: The Unvarnished Truth about Making Dumb Data Smart by MARK ANQUILLARE Insurers realize analytics proficiency can be both a competitive opportunity and a challenge. While large insurers with more resources may have an advantage in analytics adoption, they also face the difficulties of analytics implementation on a larger scale: The bigger the project, the greater the risk. Special Supplement Conference Preview Supplement Get a look at the 2014 IASA Annual Educational Conference & Business Show before you arrive in Indianapolis through this special preview supplement. Featuring a floor plan, a complete listing of exhibitors to date, articles and announcements from exhibiting companies, this supplement is your ticket to planning a great show! feature stories 12 How to Generate Net Investment Income with Bond Forward Transactions Insurance companies naturally look for opportunities to increase investment income and with it the company s operative income. Since realized gains from investment transactions belong to the non-operative income of an insurance company, a shift from gains to income is a welcome scope of design, especially in the field of financial derivatives where the possibilities are limited. 14 Coordinating the Chaos of Insurance Customer Communications Twenty years ago, communications generated by insurance companies occurred over three channels mail, fax or call center. Fifteen years ago, and web entered the mix as major disruptors. In 2007, smartphones burst onto the scene as a game changer, quickly followed by tablets in It should be no surprise then, that over the next year, 70 percent of insurance companies are estimated to be evaluating ways to improve their customer communications management (CCM) process. columns 6 President s Message I Want to Thank the Back-Up Band 16 Analyst Insights Future Shock Ready, Set, Innovate! Copyright 2014 by IASA. All right reserved. Note: The news expressed in Interpreter articles and columns reflect the opinions of individual authors and should not be construed as carrying the endorsement of the Insurance Accounting & Systems Association (IASA) or its staff. Additionally, use of this publication, the name IASA, or the name Insurance Accounting & Systems Association, for personal promotion or recruiting purposes is strictly forbidden. Violations will be prosecuted or reported to the National Association of Personnel Consultants and appropriate licensing authorities as deemed warranted by IASA. Violations will be published for the information of our member companies. A publication of 7 From the Executive Director Serving the Education Needs of Solution Providers departments 4 Editorial Opinion 6 About IASA 6 Members Only Benefits 18 Technology Virtual Roundtable Is Core Systems Transformation a Distraction? 22 Association News Session Previews Committee Spotlight Member Company Spotlight National Volunteer Profile The Lighter Side Calendar of Events

4 What We Don t Know Since March, I admit to being somewhat transfixed, and horrified, by the disappearance and subsequent search for Malaysian Airlines Flight 370. Part of what keeps me interested is a feeling of sincere disbelief. In a day and age when I can be pinpointed at any minute anywhere on the planet based on smartphone data, social media posts, GPS on my tablet and the like, how do you lose an entire Boeing 777 with 239 people on it? It just doesn t seem possible. Like many of you, I watched first the Malaysian officials, followed now by a parade of experts from other nations stumble through lists of plausible (if not slightly unbelievable) scenarios about what MAY have happened. Hijacking? Rapid decompression? Alien abduction? Then, just this week, the remotely operated vehicle (ROV) that was deployed in the Indian Ocean after possible pings from the plane s black box were detected aborted the search and returned to the surface after only six hours. Not because they found the plane mind you, but rather because the ROV hit its depth limit at 2.8 miles and it still hadn t detected the ocean floor. Seriously? I don t know about you, but I m literally scratching my head on this one. While I feel fairly well-read and informed, I am happy to acknowledge I haven t been keeping a close eye on ocean floor cartography. Apparently I missed a memo, or maybe I m just naïve, but I guess I assumed we knew how deep the Indian Ocean is. I don t recall anyone saying, We think it s about three miles deep here. Sort of. Probably. All this brings me back around to insurance technology and what we don t know. There is a virtual explosion of technology and solutions being developed around data and analytics in our industry. Companies across the country and around the world are scrambling to be the first to find and implement new tools that will help them take advantage of the opportunities this data presents. For now, it s clear personal auto 4 Spring 2014 EDITORIAL OPINION writers (followed closely by their commercial counterparts) are first out of the gate with telematics and usage-based insurance. But, why should the pay-as-you-go model apply only to auto? What about other types of coverage and insurance products? Could they not be adapted to cover spur of the moment lifestyle choices made by consumers/ policyholders? And, what about social data? How can this willfully shared information be incorporated into rating algorithms so insurers can produce more accurate pricing on-the-fly? Don t even get me started on the possibilities, both good and bad, presented by cloud as a delivery model for insurance technology. No more multi-year implementations, no more spending the bulk of IT budgets on maintenance of legacy systems? But, fears about losing control of data stored in the cloud are hindering its march through insurer ranks. We do live in interesting times. Who knows what is literally right around the corner. Stitched into the center of this issue is a 32-page Conference Preview Supplement to which I hope you pay special attention. The upcoming 2014 IASA Annual Educational Conference & Business Show is a great place to get new information on how your peers and competitors are re-configuring insurance products to meet the needs of modern consumers, explore emerging technologies, and get up-to-the-minute details about legislative and regulatory changes that may impact your accounting processes, investments and operations. Don t get caught off guard by what you DON T know. Take steps now to be better informed. Not only will I be keeping this supplement handy and attending IASA 2014 to soak up as much information as possible, I m going to study up on ocean cartography as well. See you in Indy! Jennifer Overhulse is the principal owner of St. Nick Media Services and editor of IASA s Interpreter. She can be reached for further comment via at jen@stnickmedia.com VOLUNTEER MANAGEMENT TEAM PRESIDENT Beth Mercier The Travelers Companies PRESIDENT-ELECT Forrest E. Mills, Jr. Guaranty Income Life Insurance Company CHIEF FINANCIAL OFFICER Celeska Fredianelli North Pointe Insurance Company CHIEF INFORMATION OFFICER Mary Ellen Freyermuth Catholic Relief Mutual Insurance Company VICE PRESIDENT BUSINESS SHOW Carlos Correa Liberty International Underwriters VICE PRESIDENT CHAPTERS Billie Midgett-Gordon Gateway Insurance Company VICE PRESIDENT DISTANCE LEARNING Beech Turner Assurant VICE PRESIDENT EDUCATION Darby O Neill Princeton Insurance VICE PRESIDENT INDUSTRY RELATIONS Laurie Macklosky The Travelers Companies VICE PRESIDENT MARKETING & COMMUNICATIONS Rod Travers The Robert E. Nolan Company VICE PRESIDENT MEMBERSHIP Dottie Augustine AON Benfield, Inc. VICE PRESIDENT SEMINARS Tim Morgan Republic Insurance VICE PRESIDENT VOLUNTEER DEVELOPMENT Chuck Gunkel Swift Print Communications of St. Louis LLC GOVERNING BOARD PRESIDENT Beth Mercier The Travelers Companies PRESIDENT-ELECT Forrest E. Mills, Jr. Guaranty Income Life Insurance Company BOARD CHAIR Louise Ziemann State Farm Insurance Companies (Retired) CHIEF FINANCIAL OFFICER Celeska Fredianelli North Pointe Insurance Company CHIEF INFORMATION OFFICER Mary Ellen Freyermuth Catholic Relief Mutual Insurance Company AT-LARGE BOARD MEMBERS C. Rex Bagwell Ed Kruger Salient Commercial Indiana Farm Bureau Solutions Mutual Insurance Company Sonia Cliffel Brian Ollech First American The Warranty Group Equipment Finance Thomas B. Ewbank Linda Paolucci TIAA-CREF The Ewbank Group P.C. ASSOCIATION STAFF EXECUTIVE DIRECTOR Joseph P. Pomilia VICE PRESIDENT BUSINESS DEVELOPMENT Mark F. Roth VICE PRESIDENT CONFERENCES & EVENTS Margaret M. McKeon DIRECTOR OF EXHIBITS Kim Morris DIRECTOR OF MEMBER & VOLUNTEER SERVICES Tricia Stillman DIRECTOR OF OPERATIONS Gina H. Jolly MANAGER, MEMBER SERVICES Sheila White-Smith RECEPTIONIST/SECRETARY Angie Gurganus

5 MEMBERS ONLY BENEFITS IASA provides a wide array of products, services and education events primarily geared toward our core knowledge areas of accounting/finance and systems/technology. While some IASA products are available only to members, other products may be purchased by nonmembers. IASA members receive discounts on products, services and event registrations which are typically 20 percent to 50 percent less than the non-member price. Here are some of the key benefits available to member insurance companies, associate member companies and the professionals within these organizations: Discounted admission to one of the best educational events in the industry the IASA Annual Educational Conference & Business Show. Complimentary access to the IASA Knowledge Exchange, an Internet-based information exchange where IASA members can easily network, ask questions, get answers and search data files based upon each person s unique interest profile. Complimentary or steeply discounted registration for web-based seminars jointly sponsored by IASA and industry partners on timely topics of interest to our members. Access to the industry s leading source of information and guidance on statutory accounting issue - the IASA Property & Casualty and Life & Health Accounting Textbooks at a 20 percent discount. Up to six free subscriptions to IASA s quarterly magazine, the Interpreter, which includes industry news, information and important details about association activities. Reduced admission costs for the Insurance Accounting Seminars offered by IASA, in affiliation with RR Donnelley, regionally throughout the year, and at the IASA Annual Conference. Quality financial products such as the State Checklist Manager, the State Filing Express, and the Annual Statement Database, which assist in the tracking and completion of state supplemental filings at a member-discounted price of 20 percent off the non-member price. A discount on exhibit space at the IASA Annual Educational Conference & Business Show for IASA member and associate member companies. Plus, great networking opportunities with peers and colleagues in the insurance industry IASA Management Team This year s IASA Management Team is led by President Beth Mercier of Travelers Companies (pictured third from left in the front row), and drives tactical projects designed to achieve the association s critical operating goals. About IASA The Insurance Accounting & Systems Association, Inc. (IASA) is a non-profit, education association that strives to enhance the knowledge of insurance industry professionals, and participants from similar organizations closely allied with the insurance industry by facilitating the exchange of ideas and information. IASA is one of the insurance industry s largest, and most well represented trade associations. IASA membership includes insurance companies of all types (Property & Casualty, Life, Health, Fraternal, HMO and others) as members, as well as companies serving the insurance industry, regulators and also organizations more broadly representative of the financial services industry, including banks and investment brokerage firms. Learn more about the IASA by visiting our website at or by calling (919) IASA members enjoy many exclusive benefits. To find out if your company is a member, or to start using your benefits, visit BECOME A MEMBER TODAY IASA company membership is established on an annual, calendar year basis at a rate of $525 per company per year. Licensed insurance companies are classified as regular IASA members, and all other organizations (including solution providers, associations and regulatory bodies) are classified as associate IASA members. Membership for licensed insurance companies may be purchased at the holding company level for the main/parent organization and all affiliated entities at a rate of $1,575 per year. Organizations with affiliated entities or regional offices that do not opt for a holding company membership can purchase an individual membership on a company and/or location basis. Once a membership is established there is no limit to the number of individuals that may be involved with IASA from each member company, and we encourage all professionals that might benefit from our products and services to participate. To find out more about IASA, or to apply for membership, visit Tricia Stillman, Director Member & Volunteer Services at tstillman@iasa.org, or call the IASA International Office at (919) x202. SHARE twitter theinterpreter x Spring

6 PRESIDENT S MESSAGE I Want to Thank the Back-Up Band by BETH MERCIER In the past several issues of IASA s Interpreter, I have proposed ways for you to (let s blame it on testosterone) are more confident than women overall, but many of us still get in touch with your inner undervalue ourselves by short- rock star. Now, I realize that selling our skills and talents. not everyone aspires to celebrity I have been very privileged status as a musician. But, for for the last year to serve as IASA all of us, it s being recognized President. In part, it was my as a rock star at SOMETHING confidence (and my inner rock - accountant, actuary, claims star) that got me here. Don t ever manager, project manager, believe you can t do something technologist or underwriter that you want or need to do that is makes the difference. the first road block that has to be What I have been trying to overcome sometimes. Having the say all along though, is that every confidence to walk into a room single individual who is a part of full of IASA volunteers I did not this association has a particular know the first time I attended a strength or talent. My dream was planning meeting put me on the to be a rock star, literally, but if path to success. Make no mistake singing in the shower doesn t when I tell you it can do the give you the same delusions of same for you. grandeur, it s important that As we near the time for the you find something that does IASA Annual Conference Diversity makes us all stronger in Indianapolis, I am reminded when we use our differences to that no rock star ever got to work toward a common goal. the Top 40 singing a cappella. Recently, Katty Kay of the And, as IASA President I have BBC and Claire Shipman of had the best back-up band in ABC released a book called The Confidence Code. While the research on which this book is based is largely focused on women and why they, typically or generally, feel more comfortable taking the proverbial back seat instead of the driver s seat, some of the statistics paint a picture of under-confident men as well. It s almost understood that men the world. There are so many dedicated volunteers serving on committees, on the association s management team and on the board that I couldn t possibly recognize everyone individually by name, but my most sincere thanks go out to all of you. From the accounting and financial folks slaving away to produce A.R.F. sessions, the CFO Roundtable and the Chief Investment Officer Roundtable to those stepping outside their comfort zone to craft meaningful Career Skills Development sessions that will benefit IASA Annual Conference attendees as they build careers, and over to the operations-focused insurance professionals plot out content and a solutions challenge in the COO Roundtable to the technologists rocking Tech Program and the CI-TO Roundtable we re all in this together and you are ALL rock stars. Again, it has been a very great privilege to serve as IASA President for the last year. I look forward to seeing all of you in Indianapolis for an outstanding program that is designed to Impress. Inspire. Ignite. Until then. Beth Mercier is vice president, personal lines, for The Travelers Companies, and this year s IASA President. She can be reached for further information or comment via at emercier@travelers.com. 6 Spring 2014

7 Serving the Education Needs of Solution Providers by JOE POMILIA FROM THE EXECUTIVE DIRECTOR As a volunteer association, IASA constantly looks to the talents of industry professionals to help inform decisions, execute on important initiatives, and promote growth. One of the side effects of a continuous search for talented individuals is that new perspectives are always being brought into the IASA family, and in fact, being more inclusive than exclusive is an attribute that today has become a core value of IASA. When I stop and look at the place IASA occupies in the insurance industry ecosystem from a broad, holistic perspective, it is easy to see that the association often sits between insurance organizations and the service and solution providers that serve them. While both constituencies are important to the industry, and to the success of IASA, it appears that in the past the solution providers have been underserved in terms of educational opportunities. That is part of the reason IASA embarked on a program to provide targeted educational content and events to solution providers several years ago. IASA s initial foray into this area started small, with an exhibitor education session led by IASA Vice President of Business Development Mark Roth, held prior to the opening of the exhibit hall at the IASA Annual Educational Conference & Business Show. Originally, IASA s efforts in this area didn t have a name, a brand, or even a team to work the programs. And, as additional events were brainstormed, they were pulled off almost as a trial, organized by IASA staff and a couple of dedicated volunteers. As things sometimes go around IASA, however, one person s idea often become a core part of our mission. Educating solution providers, we surmised, about the ins and outs, as well as the day-to-day needs of the industry could have benefits for those on both sides of the transaction. The idea was to educate the solution providers, and not just the marketing and sales staff who go out to sell their product, but all levels within the company. It s just as important to teach the programmers and the upper and middle management types about the insurance industry, as a better understanding facilitates more informed products and better sales. Conversely, making deeper and richer products available to the insurance industry is to everyone s benefit. With that in mind, IASA formalized this focus area by creating the Solution Provider Enrichment Committee (SPEC). For the last two years, Phil Iaccarino, director of marketing for ISCS and a long-time national volunteer for IASA has chaired this committee, achieving notable success in the process. The committee s purpose is to educate and enrich professionals in all the various aspects of the insurance industry, and while the educational opportunities are mainly intended to solution The Insurance Game utilizes a game board and team competition environment to teach individuals about the inner workings of insurance companies. providers, IASA has realized those individuals new to the industry at insurance companies can benefit from some of the programs as well. Recently, the SPEC has built upon the success of the annual exhibitor education session at the IASA Annual Conference to include a Boot Camp program held in conjunction with the IASA Spring Planning Meeting each year. The Boot Camp program has expanded dramatically since the first event was held in Originally offering just a few classes on marketing and selling to the insurance industry, the event today is called the IASA Boot Camp+, and capably provides education on a wide-range Joe Pomilia is the executive director for IASA. He can be reached for further information or comment via at jpomilia@iasa.org. of industry issues, insurance product development, and even includes the popular Profit and Cash Insurance Game, designed to teach those new to the industry how an insurance company operates and how different roles within the organization impact success. During facilitated group sessions, the Insurance Game places participants in the various positions that run an insurance company and teaches them about the day-to-day workings of an insurer. Players learn how insurance companies operate and make money, in competition with other players. Along the way, fun and education mix, so that participants get the knowledge while being engaged and entertained. The reviews of the Insurance Game for the last two years have been glowing and enthusiastic. Most of the participants state they now have a greater understanding of the insurance industry and its needs. In 2014, IASA will offer the Profit and Cash Insurance Game twice at the association s Durham, North Carolina headquarters location. Registration details can be found on the IASA website at In the meantime, IASA continues to evolve and improve our educational programming. In the future, we will be offering even more specific and refined content to service the distinct segments of our very broad solution provider community. theinterpreter x Spring

8 FEATURE STORY The Lowdown on Analytics: The Unvarnished Truth about Making Dumb Data Smart by MARK ANQUILLARE Insurers realize analytics proficiency can be both a competitive opportunity and a challenge. While large insurers with more resources may have an advantage in analytics adoption, they also face the difficulties of analytics implementation on a larger scale: The bigger the project, the greater the risk. At the other end of the spectrum, small and mid-tier companies are coming up to speed through agile management. Personal auto seems to have the lead in analytics adoption, but homeowners has picked up momentum too. Even in commercial lines and non-standard products that will continue to require a more manual approach to underwriting, analytics can provide additional information to help make better underwriting decisions. Today, considerable resources and energy are spent collecting and storing data mainly because the industry produces a lot of it, and because the regulatory environment mandates storing much of it. The industry doesn t spend nearly enough effort, however, aggregating its data across functional silos, integrating internal data with thirdparty data, analyzing the data, and distributing the resulting insights to people who can take action on it. For example, imagine a claim for hail damage to an auto on a given day in Tulsa. Ask yourself: Would a claims adjuster at my company know the garaging address for the policy listed on the underwriting system? Let s say maybe. Would he or she know what the weather was in Tulsa on that day? That s another maybe. Would all these pieces of data come together at the same time and be presented to the adjuster in a way that s easy to analyze? That s highly unlikely. There are several steps insurers need to follow to achieve actionable insights from their data: 1. Data governance: Know the data available, its sources, and quality. Start managing rather than merely collecting and storing data. Identify data gaps: What data do you need but don t have? Acquire more data to fill the gaps. 2. Data integration: Break down the data silos within the company. Find a method that links and integrates data in a way that enables analysis. One common method is to extract relevant data from operational systems and create a common data warehouse or more task-specific data marts. 3. Analysis: Make the data marts accessible to power users, such as actuaries and business analysts. Give them tools for effective data exploration and interactive data visualization, statistics, and modeling. Encourage them to develop new insights from the data. 4. Data Visualization: Get the new information in particular, reports, dashboards, scorecards with drill-down capability, ad hoc analyses into the hands of decision-makers. Identify key performance indicators (KPIs), and the levers available to influence the KPIs. Unfortunately, following the steps isn t easy or linear. For example, identifying a KPI in step four may lead to the discovery of a data gap that will require a return to step one to start again at least for that data element. Also, it s not a once-and-done task; it s a continuing process. As the insurance industry and technology change, so do a company s information needs. Senior management will need to make a major commitment because the scale and scope of the impact on the company is so large. What Personal Auto and Homeowners Do Right Based on the 2010 U.S. Census (revised March 21, 2013), the Census Bureau s counts tallied 116,716,292 occupied housing units out of a total inventory of about 131 million. The census also indicated two-thirds of the 300 million people dwell in roughly 76 million owner-occupied housing units. The other 100 million people inhabit almost 41 million renter-occupied units. As for registered motor vehicles according to U.S. Department of Transportation, Federal Highway Administration, Highway Statistics 2011 roughly 250 million private and commercial vehicles are on the road. With more than twice as many vehicles as housing units, it could be reasonable to assume that personal lines insurers would try to be all things to all people but that assumption would be wrong. In 2012, about 500 insurers were writing personal lines policies (home and/or auto): 211 home only; 123 auto only; and 171 both home and auto. (See Figure 1.) FIGURE 1 TYPES OF PERSONAL LINES COMPETITORS AND MARKET POSITIONING* Competitor Type Company Count Total DWP Monoline auto ,525,914,623 Accommodators 22 14,728,510,691 Group model 18 42,121,403,895 Affinity model 15 41,407,538,727 Customer-driven 13 54,527,117,600 Selected-against 40 26,897,696,891 Home-heavy 63 18,650,167,766 Monoline home ,257,649,645 Total ,115,999,838 continued on page 10 8 Spring 2014

9 INSURANCE TECHNOLOGY ASSOCIATION The Community for Insurance IT & Business Professionals The goal of the Insurance Technology Association is to provide members with opportunities to collaborate, educate, network, share, and use knowledge related to insurance technology. The ITA serves the insurance technology community as a resource and is dedicated to serving this specialized sector of the industry. Publications and educational programs created by the ITA are geared to professionals interested in or charged with evaluating, implementing, and marketing insurance-specific technology systems or services. Visit to become a member, benefits include: K ITA Pro Magazine K ITA Pro App K E-newsletter to stay informed with trends and news K Insightful and compelling Web Seminars K Discount to live event To become a member visit ITAPro.org.

10 FEATURE STORY continued from page 8 As shown in Figure 2, many of the most successful competitors based on their share of the market and their ratios of auto to home premiums either specialized in an analytic niche in monoline auto or became customer-driven by placing more emphasis on the total insurance needs of a household. Companies specializing in households with high net worth intentionally became more housefocused, while accommodators took the home policy to get the car premium. Other companies portfolios changed when they lost the auto policies but retained the homeowners. Or worse, some insurers kept more of the underpriced car policies in their books of business as their more savvy competitors gained share through superior riskadjusted pricing strategies. As innovations build on prior successes, the clearest path to improved performance is finding the next piece of knowledge, or n+1. In homeowners, n+1 is found in a better understanding of how construction, occupancy, protection, and exposure can interact to predict prospective loss costs at the individual risk level. That knowledge improves risk-adjusted pricing decisions. And, dramatic improvements have been made when it comes to calculating the amount of insurance commensurate with a property s value. This is also the case in personal auto. Refined segmentation used in risk rating has been enhanced for territory, vehicles, class plan, credit, and other factors. The most advanced companies also include household characteristics, such as tenure of customer relationship, multi-policy discounts, and bundled product cross-selling. The pie chart shows insurer competitor segmentation based on homeowner/personal auto direct written premium ratios from 2012 A.M. Best data and ISO analysis. FIGURE 2 INSURER COMPETITOR SEGMENTATION Monoline auto Accommodators Group model Affinity model Customer-driven Selected-against Home-heavy Monoline home 11% 22% Total 2012 Direct Written Premium ($250 Billion) As Figure 3 shows, the top ten auto insurers accounted for 56 percent of the market in 1995, but now account for nearly 70 percent. Carrier numbers three through 10 have grown from 23 percent of the market to 39 percent. Not surprisingly, and as many industry observers can attest, most of the insurers in positions three to 10 were early adopters of sophisticated pricing analytics. But, they didn t limit their use of analytics exclusively to pricing; in fact, in many cases, they also used sophisticated analytics in marketing, underwriting, and claims. 6% 4% 17% 17% 6% 17% Market Share FIGURE 3 CUMULATIVE MARKET SHARE BY INSURER RANKING No. 1 Carrier No. 2 Carrier No Carriers No Carriers No Carriers No. 51+ Carriers How You Can Do Data Right All insurers should routinely assess their current analytic situation, stay abreast of what is happening in the marketplace, and determine current and future needs regarding analytics. Then decide how to proceed. Generally speaking, insurers have six options concerning how to proceed with analytics (see Figure 4). While some insurers might use only one option, most insurers choose to use more. The top ten market leaders and some mid-tier insurers will be able to leverage Option 1 (use in-house resources) most effectively, but they ll need to be aware of what information they lack. They then must consider buying or otherwise accessing the data they ll need to be successful. Option 3, 4, or 5 (engage a consultant, emulate another carrier, buy from a vendor, or some combination of the three) will most likely be employed in conjunction with Option 1. The mid-tier and smaller insurers that consider Option 2 (build in-house) need to be aware of the cost and time it will take to build and maintain an effective internal analytic team and the limitations that remain even after the team is in place. In the interim, while building their analytic team, they ll most likely need to employ Option 3, 4, or 5 (or some combination of the three). All insurers could choose to use Option 3 (engage a consultant). But typically, this is not a long-term solution due to the cost and laborintensive nature of an engagement. This option is usually employed as a way for insurers to learn what they don t know or as a way to take a larger, quicker leap forward. Option 4 (emulate another carrier) is most likely appropriate for some mid-tier and smaller insurers. This could be a cost effective way to enter a new market, a new business segment, or a new line of business (LOB) or gain intelligence in the short-term versus spending money to engage a consultant. But, it s hard to imagine that surrendering your destiny to another insurer could be an effective long-term analytics strategy Spring 2014

11 FEATURE STORY FIGURE 4 IMPLEMENTING THE RIGHT ANALYTICS SOLUTION - Advantages Disadvantages 1. Use In-House Resources Readily available data and staff Data is specific to insurer s book Possible data limitation for certain segments Don t know what you don t have Large, ongoing investment 2. Build In-House Controlled environment with improved tuning to the current book Ability to expand or reduce the team to suit the business need 3. Engage a Consultant Third-party perspective on industry landscape and competitor benchmarks Flexibility to engage and disengage as needed Limited data and book size Large, ongoing investment Slow speed to market One RFP at a time with high fee structure Internal actuaries not optimized New RFP and new search 4. EmulateAnother Carrier Possibility of riding the wave of a successful competitor Focus on other competitive differentiators (e.g., marketing) Mismatched risk profiles Update to book delayed until filings are made public 5. Buy from a Vendor Improved risk model from large data set Timely updates and recalibrations Expand focus beyond loss cost analytics 6. Do Nothing Continue to reap current market advantages Limited incremental investment over the short-term horizon Potential concern around viability of longerterm partnership Lack of updates to maintain model s superiority At risk for adverse selection Suboptimal long-term plan for sustainability Suboptimal marketing spend All insurers could choose Option 5 (buy from a vendor), since there are vendors that can offer stand-alone analytic solutions with regulator-approved models, as well as supplemental analytic solutions for Options 1 to 4. Vendor-provided analytic solutions can also be an effective way for an insurer to enter a new market, a new business segment, or a new line of business. For many mid-tier and smaller insurers, Option 5 may be the best way to level the playing field with their larger competitors for a reasonable cost, while the top ten market leaders can use it to maintain their advantage in the marketplace or, at a minimum, play effective defense against their competitors. The top ten market leaders are the only insurers that have the luxury of considering Option 6 (do nothing), but given the rapid advancement of technology and analytics, they do so at their own peril. Indeed, Option 6 may not be viable long term in today s competitive environment. Regardless of which option(s) insurers choose, they need to be aware of the resources available to them and what their competitors in the marketplace are doing. With the rapid advancement of technology, the increased sophistication of analytics, an ever growing number of data sources, and the untold number of terabytes of information that these sources have available, developing and implementing the best analytics solutions will not be a simple task, but it s a must have now. Mark V. Anquillare is group executive of Verisk Insurance Solutions Risk Assessment and executive vice president and chief financial officer of Verisk Analytics (Nasdaq: VRSK). theinterpreter x Spring

12 FEATURE STORY How to Generate Net Investment Income with Bond Forward Transactions by KENNETH FLORYAN AND JORG PAPPERT Insurance companies naturally look for opportunities to increase investment income and with it the company s operative income. Since realized gains from investment transactions belong to the non-operative income of an insurance company, a shift from gains to income is a welcome scope of design, especially in the field of financial derivatives where the possibilities are limited. In the following, a valid interpretation of bond forward transactions provides an accounting alternative. Theoretical Fundamentals and General Approach It is a principle of Arbitrage Theory for investment markets that when two alternative investments offer identical risks, those investments will offer identical yields. If their yields were to deviate, then buyers would prefer the choice that offers the higher yield for the same risk, and normal dynamics of supply and demand would bring down the higher yield to a level of equilibrium. Take, for example, these three alternative methods of investment which present identical risks: Purchase a bond using repo financing. The buyer gains the yield of the bond, which includes a spread that compensates for the risk that the bond may default or may lose market value if its risk of default increases or market appetite for that risk changes. The buyer also pays a financing interest rate on the borrowing that provided the funds to purchase the bond, and posts collateral to secure the risk on that loan. The yield to the investor is the net of the yield of the bond less the yield of the interest rate on the financing arrangement. Bond Interest Financing Interest Investor (Repo Buyer) Cash at spot date of the Repo Transaction Bond at spot date Counterparty (Repo Seller) Enter into a total return swap where one receives the total return on a named bond in exchange for a floating rate interest payment. The risk of this swap, and therefore the economics of this swap, is identical to the risk and the economics of the first approach. The receiver of the total return obtains the effective yield of the bond, including its change in market value, while paying the equivalent of a financing rate on the market value of that bond at inception of the swap. The swap is collateralized. According to Arbitrage Theory, the interest rate side of this swap would be identical to the yield on the financing side of a repo purchase of that bond. Investor (Total Return Receiver) Variable Interest as Financing costs Bond Interest and changes in market value Counterparty (Total Return Payer) Purchase that bond on a forward basis. The buyer assumes the risk that the bond may default between the date of the trade and the forward settlement date. The seller of the bond defers receipt of the proceeds of the sale, which is equivalent to loaning the proceeds of a spot market sale to the buyer for a term of a repo financing agreement equivalent in maturity to the duration between a spot market settlement date and the forward transaction settlement date. Arbitrage Theory says that in this construct the buyer is entitled to compensation equal to the yield of the bond less the going financing rate for a repo purchase of that bond. Investor (Buyer) Anticipated Fwd Price Implicit loan between spot and fwd date No cash flows between spot and forward (Fwd) date Counterparty (Seller) Whereas in the first two of these three identical-risk investment options there are discrete yields embedded in a stated interest rate and price for the bond as well as a stated financing rate, in the first case by a repo rate and in the second by the articulated paying side of the total return swap, in the third case the seller of the bond retains receipt of the bond s yield from the issuer until the forward settlement date and there is no articulated financing rate. Therefore, the market constructs a differential between the forward price for the bond and the spot price for that bond which transfers to the buyer of the bond the equivalent value of the difference between the yield of the bond less the financing rate for a leveraged purchase of that bond. Under Arbitrage Theory, that is the entire explanation for the differential between a spot price and a forward price. U.S. Generally Accepted Accounting Principles (GAAP) stipulates that when two alternative investment options offer identical risks for the same yield, accounting treatment of those two options should not create a bias that artificially favors one of the investment options over its market equivalent. In the absence of this principle, a company would have the license to construct a transaction pair that took a purchase position on one investment approach, while simultaneously taking a sale position on the other approach. For example, the company could purchase a bond on repo while simultaneously selling it forward. Such a transaction pair would have no economic impact to the company, and yet would artificially transfer value between nonoperating income and operating income on the financial statement, thereby making the company s financial statement look different than it should. 12 Spring 2014

13 FEATURE STORY Inherent income for a forward transaction implements the principle that the three methods of investment detailed above should all have the same accounting treatment. Inherent income takes the differential between the purchase price of the forward transaction and the spot price that would otherwise have applied, and recognizes that differential in net investment income on an accrual basis up to the forward settlement date. The forward purchase is then treated as a derivative contract until actual settlement. If the settlement is effected at the forward price (i.e., not terminated at market in lieu of settlement), then the GAAP basis of the bond becomes what it would have been had the bond been purchased at its spot price instead of at its forward price. The difference between that revised GAAP basis and its actual market value on the settlement date is recognized as GAAP Mark-to-Market, a non-operating income entry. This is identical to the treatment on that date which would also be made if instead of purchasing the bond on a forward basis, it were purchased at the spot price using a repo agreement that matured on the forward settlement date. Significance for Practical Use for Insurance Companies The idea is to use the concept above for deeming the price difference in a forward transaction as an (inherent) interest income/ expense. This inherent interest will then be posted into the net investment income on a regular basis (as a pro rata accrual/deferral, e.g. on a monthly basis). That means instead of posting realized gains/losses at the termination of the forward transaction periodic investment income is generated. Which forward transactions fall under the Arbitrage Theory approach? Generally, interest derivatives for those Arbitrage Models with identical risk-yield profiles and cash flow equivalents can be developed. In practice, bond forward transactions are seen which meet the requirements, e.g. Mortgage-Backed Security (MBS) Forwards/Long Settlement To Be Announceds (TBAs); Treasury Forwards; and even Treasury Futures. On the opposite side, an interest rate Future, such as the Eurodollar Future (with a money market deposit as a synthetic underlying), would not fall into this category. How does the calculation work? First, the implicit interest rate for the inherent income has to be calculated. This interest rate is also called Drop Price or Drop Rate. For Security Forwards, it is simply the difference of the Forward and the Spot Rate. For (Treasury) Futures, one further step is needed. For those instruments, the Drop Rate is calculated as the difference of the annualized cheapest-to-deliver (CTD) yield and the finance rate (e.g. the Repo Rate) multiplied with the strike price of the Future. Afterwards, the total inherent income amount is calculated for Forwards as a result of the notional multiplied with the Drop Rate or for Futures the number of units multiplied with the unit size multiplied with the drop rate respectively. Then the inherent income will be calculated as a normal accrual/deferral of the total inherent income amount as a pro rate portion of the overall derivative s term. Of course, in case of (partial) terminations, dissolutions are requested to transfer the non-accrued portion into the Realized Gain/ Loss. Software Support for Investment Accounting In order to achieve this feature, an insurer s investment accounting system must support the generation of arbitrary cash equivalent flows which can be included into the automated accrual/deferral process. The accrual/deferral flow then is posted as inherent income typically on a separate income account. Flexible systems check already at entry level which financial instrument is relevant for the inherent income process and create the cash equivalent flow automatically. This cash equivalent flow carries the information about the overall period, the applied drop rate and the total inherent income amount. Furthermore, the flow is already assigned to be posting relevant either for Statutory Accounting Principles (STAT) and/or US GAAP accounting. In doing so, the investment accounting system selects also this cash equivalent flow and runs it through the accrual/deferral process as other cash flows like coupons. Kenneth Floryan, Risk Management Expert and former Managing Director of Babson Capital Management LLC, and Jorg Pappert is CEO for Compiricus. Pappert can be reached for further comment or information via at jorg.pappert@compiricus.com. theinterpreter x Spring

14 FEATURE STORY Coordinating the Chaos of Insurance Customer Communications by SCOTT DRAEGER Twenty years ago, communications generated by insurance companies occurred over three channels mail, fax or call center. Fifteen years ago, and web entered the mix as major disruptors. In 2007, smartphones burst onto the scene as a game changer, quickly followed by tablets in It should be no surprise then, that over the next year, 70 percent of insurance companies are estimated to be evaluating ways to improve their customer communications management (CCM) process. The challenge for insurers is how to evolve from a disparate customer communications program that delivers a complex mix of scattered data and isolated systems into one that is cohesive, results-driven and cost-effective. To proactively manage customer communications, it is important to construct a CCM strategy for the entire enterprise that considers the perspective of your prospects, your customers and your employees, and is created with the input of marketing, operations, customer service and IT. Currently, most insurers manage these systems as separate efforts. Managing these communications through separate teams that use incompatible technologies for individual channels often multiplies the complexity and cost of your efforts while diminishing the returns. In the insurance industry, customer correspondence, statements, bills and payment notices, policy documents, claims, contracts, welcome kits and explanations of benefits need to exceed customer expectations to prevent churn. To create a cohesive CCM portfolio, it makes sense first to take inventory of the breadth of your customer communications. Examine how different channels at your company support different customer activities. Look at how all of the major events in the customer communication lifecycle (direct marketing, policies, welcome kits, claims materials, etc.) intersect with the various communication platforms print, web, , mobile, social and call center. An ideal communications portfolio will effectively manage discrete campaigns across multiple channels, paying attention to the limitations and opportunities offered by each. Once prospects become customers, your communications portfolio will experience its toughest trials. The onboarding experience generally involves multiple systems within the insurance business, and sets the tone for the entire customer relationship. This is often the moment when insurers transfer the communication from a hightouch marketing project to a costoptimized, IT-driven process. However, modern CCM Scott Draeger is customer communication strategist for GMC Software Technology. platforms offer documentrepurposing technology, which allows output from legacy systems that can be refreshed, updated and upgraded to bring state of the art features to older communications. Additionally, modern CCM offers thin client interactive solutions that can deliver correspondence, quotes and proposals quickly and more efficiently, allowing your expert front-line staff to bring context and intelligent content to smart templates that automatically access data from multiple systems. A cohesive communication portfolio that meets today s challenges and is ready for the communication challenges of the future not only improves the communication outcome for the customer, it delivers a positive outcome to the business. Download the 2014 IASA Annual Conference App! Available for download on iphone, ipad and Android, the IASA Annual Conference App will allow attendees to easily view event info (including the full conference schedule, agenda, session grids, exhibitor listings, exhibit hall floor plan, and speakers as well), receive instant alerts and more on almost any mobile device. Maximize your time at this year s event with the MyShow personalization tools, and enjoy award-winning TripBuilder city recommendations with advanced mapping functionality as well. Featured Functions on the App for 2014: Exhibit Hall Game Crack the Code will be played exclusively on the app. Download it and play for your chance to win one of 25 great prizes provided by our exhibitor game sponsors Voting for Best-in-Show booth contest AVAILABLE ON MAY 14! Check your app store to download.

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16 ANALYST INSIGHTS Future Shock...Ready, Set, Innovate! by ROB MCISAAC The pace of change is accelerating. Are you ready for it? Will your company remain relevant in a brave new world? The level and pace of change can be dizzying. From technology to demographics to economics, we ve seen remarkable shifts in the past decade...and can no doubt expect the pace to accelerate in the future. For many, this represents a significant set of challenges to balance. It is both exciting to think about the possibilities, yet daunting when considering some of the technical debt that has built up in recent years as CIOs and their teams grappled with the reality of, then the ensuing aftermath, of the Great Recession. Challenges create opportunities, however, and now is a great time to consider the possibilities. While it is true that the Baby Boomers are now reaching retirement eligibility at a pace of 10,000 per day in the United States, this means challenges with both managing workforce institutional knowledge and providing products and services that can respond to their needs in the next phases of life. Finding the right combination of capabilities can create significant advantage for properly positioned investments. To that point, a whole new cohort of consumers are now coming of age with different expectations for what they can gain from a relationship with an insurer, and demands that differ wildly from what their parents demanded in terms of how insurer interactions will take place. A business model honed in the 1960s won t work well in the immediate gratification, always connected, transparent evaluation of services space that characterizes this generation s operating paradigm. For those able to operate in a world where expectations are framed through engagement with things like Amazon and Google, competitive opportunities will be good. For those that can t, concerns about relevancy could be real. Once a tipping point for consumer expectations is reached, the slope for recovering can become very slippery, very quickly. Consider how Blackberry (RIM) moved from a market darling to also-ran in what seemed like the blink of an eye. And, of course, the pace of technology advancement moves ever faster. The typical smartphone of today has more processing power than the average desktop PC from 2005, and many people carry two of them! This is already causing a fundamental rethink for bringing products and services to market. Banks already talk about mobile first development models. This too shall be part of the near future state for insurers across multiple lines of business. All of this points to the need for more flexible technology deployments, shorter refresh cycles for deployed capabilities and a need for companies to look at themselves from the outside in in order to best understand competitive positioning and the threats which may ultimately impact results. While innovation may not be something typically associated with the insurance industry, pursuing it is something that many insurers increasingly recognize is part of preparing for the future. Maintaining or improving competitive positioning depends on it, particularly in a market that is characterized by continued slow growth, high levels of competition and low interest rates, making it unlikely that excessive investment income will offset challenges in other parts of the income statement. The good news is that we are seeing more emphasis on innovation now permeating management discussions across the industry. Novarica recently published an Executive Brief on this subject, IT Planning for Innovation, that describes some of the organizational structures and management tools that can help facilitate the process of getting good ideas framed, prioritized, sponsored, funded and implemented quickly. The effort to be innovative can cover a wide spectrum of insurer activities, from product development to channels of access, to deployment of interactive tools, to the improvement of handle times. Some companies are making big gains on things like dramatic reductions in underwriting cycle times (and the mitigation of the potential for buyer s remorse to set in), product time to market expectations and the more effective deployment of models that provide for better service at a lower price point. The reality is, this can be hard work that requires both commitment of time and talent and a willingness to take on what may be well-entrenched cultural resistance to things like experimentation and allowing ideas to rapidly evolve through pilots and prototyping. The rewards can be worth it. And, concurrently, failing to prepare now for a vibrant, changing, mobile and connected world may have notable downside risk! The future will belong to those that prepare for it. Rob McIsaac, FLMI, LLIF, is a principal in Novarica s insurance practice. He can be reached for further comment or information via at rmcisaac@ novarica.com. 16 Spring 2014

17 EvErything you need to make informed business decisions. PropertyCasualty360.com Access relevant technology news and in-depth analysis from our industry experts published in a variety of formats including timely blogs and educational webcasts. FREE Tech Digest enewsletter Stay ahead of the competition, get essential insurance technology updates delivered directly to your inbox weekly. PropertyCasualty360.com December 2013 Vol. 15, No. 5 NEW Tech Decisions Digital Magazine Attain critical information you need to determine what technology infrastructure best supports your company s strategic goals with the new quarterly digital magazine. Each issue includes an analysis of the latest research, trends, case studies and product news. Underwriting and Business Intelligence: Art Meets Science Automating underwriting with data-driven technology. Page 12 L In a Kingdom Full of Customers, Analytics Tells Insurers Who Deserves the Royal Treatment Page 16 L Addressing Drivers Telematics Concerns Key to Cashing in on Latent Demand Page 22 Visit PropertyCasualty360.com/eNewsletters to Subscribe Today!

18 TECHNOLOGY VIRTUAL ROUNDTABLE Is Core Systems Transformation a Distraction? by NIMISH SANKALIA AND THE EXPERTS WE FOUND TO ANSWER INCLUDE: When considering the end-to-end IT environment within any insurance company, one of the most important things to ensure is that the mix of core administration software, frontend solutions (CRMs, portals, etc.), and back-office systems (G/L, finance and investments) all hum in unison, are agile, and scalable. Reality is, that is an uphill battle in even the most modern environment. At first glance, it appears that more often than not, CIOs end up spending disproportionate amounts of time and budget on core systems transformation, relegating important back-office systems to whatever is left over. However, if not thought of holistically, the benefits of any transformation initiative will not be fully realized. To that end, we wondered if insurers are focusing enough on keeping important adjunct systems current both functionally and technologically. Dori Luke Senior Vice President of Financial and Compliance Solutions StoneRiver, Inc. Nimish Sankalia is head of marketing and alliances for MajescoMastek, and a volunteer for the IASA Marketing and Communications Committee. Prior to each issue of IASA s Interpreter, Sankalia solicits industry experts for opinions and insights into hot technology topics that are currently in focus for insurers. If you would like to suggest a topic idea, or potentially participate in a future Technology Virtual Roundtable, please contact him via at Nimish.sankalia@majescomastek.com. So, the question we asked solution providers is: With most IT spend and focus on core systems transformation, do you believe that adjunct, but critical, systems LUKE/STONERIVER With the exception of the rush of companies upgrading accounting systems for Y2K compliance in the late 90 s, this is rarely at the top of the priority list for insurers. Finance and accounting teams are usually left to patiently wait their turn, while the bulk of budget allocation goes to supporting core and front-end systems. There are many reasons why back-office initiatives fall down the list of priorities. Often, insurers take an if it isn t broke, don t fix it approach, or the benefits of upgrading are misunderstood. Sometimes, it s a failure to make a successful like G/L systems or finance/investment systems are getting their worth by insurers? internal case supported by a demonstrable ROI. Whatever the reason, our experience has shown that ignoring back-office systems can cause insurers to miss out on substantial benefits. The key is to be sure that decision-makers within an organization understand the benefits of upgrading these systems. Much of that is incumbent on solution providers, working with project champions inside the organization. Upgrading back-end systems, and selecting the right solution, brings a whole host of benefits to an insurer. The right G/L solution, for example, should offer efficiency gains from start to finish, not only speeding up the process, but reducing the potential errors that come with manual data entry. Enhanced reporting capabilities solve a need for detailed financial reports that give insurers realtime results, with reports that are easily designed by accountants, without IT resources. The right G/L solution should also bring with it deep and extensive industry knowledge on the part of the provider. This can add value far beyond the technology itself, and is a key differentiator among solutions in the G/L space. It is also something that organizations should look for Patrick Miller Managing Director, Primary Insurance msgglobal solutions, Inc. Gary Sherne EVP and Managing Director of the P&C/General Insurance & Reinsurance Division Sapiens Peter Witham Director of Commercial Sales UNIT 4 CODA 18 Spring 2014 theinterpreter x

19 TECHNOLOGY VIRTUAL ROUNDTABLE in their current provider when beginning to make the case for a system upgrade. MILLER/msg Unfortunately, modern accounting and reporting platforms are showing their age and lack of flexibility in understanding enterprise and product-level risk, keeping pace with regulatory change and comprehensive analysis of the business from sales and operational perspectives. To address these concerns, insurers are turning to agile financial transformation initiatives. Financial transformation starts with renovating the insurer s aging general ledger and investment accounting platforms while introducing the formal concept of an insurance sub-ledger for all regulatory and detailed accounting and reporting needs. Financial transformation focuses insurers on thin ledgers with greater access to the detailed accounting information that has historically been housed in insurance administrative platforms only. Today, insurers are standardizing and consolidating detailed accounting information across all disparate insurance administration platforms to achieve greater insight into assets (investments) and liabilities (policies and contract). This should foster improved line of business accounting practices, a more detailed understanding of risk and reserving requirements, established planning and forecasting, and analysis of profitability across the enterprise. The obvious goal of financial transformation is to create a stronger foundation upon which to build future business. Not having a strong foundation makes keeping up with industry challenges difficult, or even impossible. While insurers appears to be immediately focused on replacing policy, billing and claims systems, engaging in a core system replacement before looking at that all important foundation that accounting and reporting systems are integrated with can lead to problems down the road. Often, financial transformation is viewed as an all or nothing option, but the reality is that agile financial transformation is the new normal. Taking an incremental approach to garnering and building on successes is the best option for making steady progress. Frequently, insurers can leverage efficiencies or cost savings from one aspect of financial transformation to fund the next, making the improvement of the back office achievable without requiring a front office project budget. The key to this sort of success is creating a well-planned strategy, laying a solid foundation, and using each incremental success as an accelerator to the next. SHERNE/SAPIENS It s important for insurers to keep all aspects of the infrastructure and environment current, although many insurers don t give the ancillary back office or departmental systems like reinsurance, general ledger, compliance, investment and others the same strategic value they bestow up the core processing systems. There is certainly no argument that the biggest challenge when it comes to the legacy environment lies with the core systems, so it s no wonder core system modernization continues to get the lion s share of the attention and IT budget. The older these systems get, the bigger the problems become like inflexibility, lack of functionality, poor user experience not to mention the maintenance nightmares and the costs that come with them. The system limitations and excessive costs can have significant and even devastating business impact. That said, age and increased business complexity has had just as much of an impact on the supporting ancillary systems and the business. Since they are smaller in scale and are not customer facing, these systems are often overlooked when it comes time to prioritize transformation initiatives. Even when these systems make the list, they are often postponed time and again, even when a solid business case has been made and the benefits are substantial. Insurers should carve out a part of the IT budget each year and earmark the investment specifically for the transformation of the back office, departmental systems. Unless targeted only for investment in these systems, the funds will most likely find their way into the core transformation effort, once again postponing modernization of the back-office infrastructure. WITHAM/UNIT 4 CODA In today s fast changing business environment, insurance companies need to be a welloiled machine with business process integration from the front to the back-end. IT departments must ensure core systems work together to allow insurers the ability to open new lines of business, expand geographically and respond to regulatory requirements easily. When a disproportionate amount of time and money is spent on front end applications, businesses suffer by a lack of visibility to all sources of revenue, expenses, performance and statistical data for informed decision making. There are many companies that have manual, outdated processes running on legacy or home grown financial systems that aren t integrated with their other operational systems. This lack of integration prohibits insurers from gathering realtime, accurate data such as premiums, claims, cash, loss reserves and reinsurance, much of which is typically held in these other operational sub systems. Not having this critical data in the financial system prevents companies getting an accurate financial picture of the organization. This lack of an accurate financial picture results in information gaps between departments which can lead to missed opportunities and inefficiencies within the organization. Insurers need to choose a financial system that fits their IT strategy depending on their financial management requirements, operational needs and existing core business systems. But, whatever those are, it is essential to have strong financials in place so they can adapt to change simply, quickly and cost effectively. theinterpreter x Spring

20 Looking for Statutory Accounting Guidance? IASA Textbooks Deliver! Used by leading industry organizations, the IASA Property & Casualty, Life & Accident & Health, and Health Insurance Accounting Textbooks are the industry standard for statutory accounting information. Written by practicing professionals in the industry, IASA s insurance accounting textbooks provide a WEALTH of information for industry professionals looking to stay ahead of the curve. Property & Casualty Insurance Accounting Textbook 8th Edition This edition of IASA s popular Property & Casualty Insurance Accounting Textbook includes 18 chapters reflecting guidance adopted by the NAIC and a historical overview on all aspects of property and casualty insurance accounting. Topics incorporated include: Implementations of provisions contained in the SOX Act Developments on the international accounting standards Federal income tax guidelines Guidance on accounting for investments Health Insurance Accounting Textbook 1st Edition IASA s 1st Edition Health Insurance Accounting Textbook is the only resource that addresses the unique accounting information critically-important to health insurance entities. This new book also contains useful information about many aspects of insurance accounting pertaining to all types of insurance companies, such as: GAAP accounting issues, income taxes, annual statement information, and budgeting. Health insurance accounting-specific information in this new book includes detail on: Mergers and acquisitions Reserve issues Reinsurance for health insurance companies Life & Accident & Health Insurance Accounting Textbook 4th Edition The 4th Edition of IASA s comprehensive Life & Accident & Health Insurance Accounting Textbook includes 26 chapters of pertinent information on every aspect of life and health insurance accounting, as well as many other related topics, including important guidance on: Evolution of insurance Asset liability management Treasury Department management Strategic planning, internal controls and budgeting For more information, visit the IASA website today, or use the following order form to purchase your copies!

21 Get your copy of IASA s industry-recognized insurance accounting textbooks today! TexTBOOk OrDer FOrm - PurCHASe YOur COPY TODAY! Name: Title: Company: IASA Member# Address: City: State/Zip: Country: Phone: Fax: Method of Payment: q Check q Amex q MC q Visa q Discover Credit Card #: Expiration Date: Signature: Item Description Amount QTY S&H Total P&C Textbook & CD Property & Casualty Insurance $175 Member Accounting 8th Edition Enhanced $200 Non-Member $10 x qty. $ P&C CD Only Property & Casualty Insurance $150 Member Accounting 8th Edition Enhanced $175 Non-Member $5 x qty. $ L/A/H Textbook & CD Life/Accident/Health Insurance $175 Member Accounting 4th Edition $200 Non-Member $10 x qty. $ L/A/H CD Only Life/Accident/Health Insurance $150 Member Accounting 4th Edition $175 Non-Member $5 x qty. $ Health Textbook & CD Health Insurance $175 Member Accounting 1st Edition $200 Non-Member $10 x qty. $ Health CD Only Health Insurance $150 Member Accounting 1st Edition $175 Non-Member $5 x qty. $ TOTAL $ P.O. Box Durham, NC Web: info@iasa.org Phone: Fax: International shipping charges will apply to all orders outside of the U.S. Please contact IASA to get a shipping quote outside of the U.S. Allow 4-6 weeks for delivery.

22 ASSOCIATION NEWS Annual Conference Session Previews A Communications Strategy that Delivers Clarity, Compliance and Customer Engagement by LEE NAGEL Composing and delivering documents in a variety of formats (online, , SMS, print, mobile, social) is essential to meeting the evolving expectations of a customer base that is more technologically savvy and more reliant on electronic communications than ever before. With time constraints from work and family, being able to convey information to these busy customers in the format that is most convenient for them is an essential component for the continued growth and success of business. Within the insurance industry, the challenges to keeping up with the everchanging technological landscape are many. As systems age, vendors are less likely to support them, and the industry as a whole has been slow to adapt to advances in areas including e-delivery of invoices and other documents, content management, optimization of print and costs. Implementing effective outsourcing solutions benefits insurance providers in many ways shifting content management from IT staff to businesspeople in non-technology areas allows for an even quicker response rate to regulatory change and policyholder needs. In addition, insurers are finding it challenging to implement a solution that enables them to contact their customers through their preferred channel and support the seamless servicing of their accounts. Simplifying communications and making the purchase and service process easy for customers is essential in building long-term relationships and ensures that they won t jump ship and find a carrier who can better adapt and respond to their needs. On Monday, June 9th, during IASA Session #274, Deriving Consistent Value from CCM & SDO, Cindy Todoroff, director of infrastructure and client technologies, and Sharon Marburger, director of internal operations for Penn National Insurance will join Jeff Weldon, vice president of research and delivery for Madison Advisors to discuss the role of customer communications management (CCM) and strategic document outsourcing (SDO) and how, when deployed and managed properly these initiatives can greatly enhance the customer experience from onboarding to ongoing account service. In this informative session, industry experts will take an in-depth look at how SDO and CCM can: Lee Nagel is the vice president, insurance practice, for CEDAR Document Technologies, and a volunteer member of IASA s Technology Program Committee. He can be reached for further comment or information at lnagel@ cedardoc.com. Sharon Marburger Provide an opportunity to re-engineer communication workflows; Solidify the ROI of a core system replacement or modernization effort; and Bring about increased personalization and usability. As part of this session, Todoroff and Marburger will discuss their recent successful case study with CEDAR Document Technologies and the company s enterprise customer communications management platform. By utilizing this omni-channel platform, Penn National was able to enhance their customer communications strategy as well as focus their resources on critical business functions, capitalize on emerging communication mediums, and become more organizationally efficient and better serve its policyholders and agents. Hear more about how CCM and SDO can greatly enhance the communication strategy your organization currently employs to stay connected with agents and policyholders, and perhaps change the way your company manages omni-channel communications and service interactions as well. To learn more about performancebased tasks, vendor and solution selection, please attend these sessions in Indianapolis! Monday, June 3:30 PM Session #276: Performance-Based Software Selection Tuesday, June 10:30 AM Session #471: Core Transformation: Selection Register Now at 22 Spring 2014 theinterpreter x

23 INSURANCE ANALYSTS DEBATE! Join us immediately after the CI/TO Roundtable! Session 672 AROUND THE HORN Established by ESPN as a quick-fire, topic-driven panel debate, this session takes "Around the Horn" to the insurance analyst community. With only minutes to provide an initial response to the moderator's challenge points, clarity, focus and a defined point-of-view will be critical to this discussion. Speakers include: Whether weighing in on trends in the industry such as mergers and acquisitions, core legacy systems replacement, the emergence of best-of-breed or componentized suites, the move toward cloud computing platforms and the advantages and disadvantages of mobile devices for the insurance community, or providing perspectives on insurance technology topics such as the value of PMOs, legacy modernization strategies, implementation methods and best practices, look for these panelists to be both controversial and provocative. Mike Fitzgerald Celent Denise Garth SMA Chad Hersh Novarica Jamie Bisker Aite Group Plus, through a real-time polling feature, attendees will have the opportunity to rate analyst responses. It's a full-on race to the finish line and the course is charted by you! Moderated by Jack Calabrese of Liberty International Underwriters Don t Miss Your Chance to Vote! Session 672 AROUND THE HORN: Insurance Analysts Debate Tuesday, June 10 3:30 PM ET

24 ASSOCIATION NEWS Annual Conference Session Previews Vendor Selection What a Performance! by GEORGE GRIEVE The industry-wide march from legacy to modern core systems continues apace. Hundreds of millions of dollars are being spent in a once-in-a-generation shift to new and promising technology platforms. Strategies and speed of adoption vary from insurer to insurer. Larger insurers still tend toward the best-of-breed approach, buying a claim or billing system to integrate into an already function-rich, complex legacy environment. Smaller insurers saddled with less complexity, fewer scalability concerns and less money to spend, tend to opt for a full insurance suite replacement that includes policy, billing, and claims, as well as various support functions, such as document generation, reinsurance, portals and reporting. Regardless of the strategy and attendant scope, each insurer must still perform the critically important pre-requisite step of selecting the right vendor with the bestfit software solution for that company s needs. Vendor and software selection is a significant challenge for insurers. With the exception of claims people, insurer staff members do not frequently interact with vendors. Outside of their daily work environment, these folks may be cautious and tentative. They are not operating in their area of expertise, and they typically act accordingly by being somewhat reserved. Left to their own devices, they may not take control, press for answers, or dig for the details that are needed to accurately assess different vendor offerings. In fact, these individuals may be attracted by form over substance and wooed by professional sales people with proverbial silver tongues and large expense accounts. Unfortunately, it happens too much. The job of a consultant, should the insurer choose to retain one, is to not only propose the vendors that the company should talk with, based on knowledge of the insurer s business and IT operations and needs, but also to ensure that the insurer gets a realistic and complete picture of the vendor s capabilities and the scope and depth of their software solution. The consultant lives in the vendor s world, should be comfortable pressing for answers, digging for details and demanding performance. On the last point, too many insurers get to the end of a selection process and contract George Grieve is the CEO of CastleBay Consulting, and a regular speaker at the IASA Annual Conference. He can be reached for further information or comment via at George.grieve@castlebayconsulting.com. with a vendor without ever having seen the vendor perform on a relevant and meaningful task. Think about this for a moment: The insurer is ready to sign up for a mission-critical, multi-million dollar project where the vendor must perform key software configuration and integration tasks, without ever demanding that the vendor demonstrate its ability to perform! Isn t there something important missing here? The problem with introducing performance-based tasks into the selection process is they take time and effort. Such tasks must be defined and designed; planned and executed; and reviewed and scored. It s much easier, and a lot less confrontational to just ask the vendor, Can you do this? Putting a check mark in a box following the almost inevitable affirmative answer is not a difficult task, but ultimately it proves nothing. So, how do we get vendors to truly demonstrate they are the right choice? By giving them agreed upon tasks to perform in agreed upon timeframes with enough involvement or oversight by the insurer that we can verify what was done, how it was done and who did it for how long. Without this information how can you begin to know if a vendor is capable of doing what you would need them to do? Asking them is a waste of time, you already know their answer. Asking their clients is better, but still doesn t get to the issue of your particular requirements and business environment. A positive experience for Insurer A does not necessarily guarantee a positive experience for Insurer B. The only adequate answer is to build performance-based tasks into your selection process Scripted Demonstrations and Proofs-of-Concept that allow you to participate with, observe, and measure a vendor doing tasks that are familiar and important to you, that are representative of the kind of work that will be required on an implementation project and that can be reasonably taken as indicators of future performance by the vendor. These types of performance-based tasks provide a insurer with an important way of distinguishing between vendors; a vehicle for working with and assessing your comfortlevel with the staff, methods and culture of a vendor; some insight into the vendors speed of delivery that can factor into the implementation estimates that will be required for funding requests; and finally, insights into the vendors abilities which may help with negotiating the most beneficial contracts for software and services. Why would you ever choose to make such a strategic decision without these critical insights? 24 Spring 2014 theinterpreter x

25 PRESENTS EDUCATION DEDICATED TO GROWTH AND EXCELLENCE SAVE THE DATE SEPTEMBER 21 22, 2014 Hilton Chicago Chicago, Illinois EDGE stands for Education Dedicated to Growth and Excellence, which is precisely what this event intends to accomplish. The dedication to education is a singular focus for IASA and has been for years, but the way IASA delivers educational benefits to executives during this program is truly unique. The growth and excellence portions of the program are two-fold and will include benefits for both individual attendees and the companies they lead. Join us in Chicago and interact with peers to discuss innovation, technology, finance/ investments, operations and other key management themes. Our 2014 conference will again include the popular Industry Pulse Check that will feature opinions, predictions and perspectives from a diverse group of insurance industry leaders and, in accordance with IASA s longstanding tradition, we will be presenting a thought provoking keynote presentation. If you are an insurance executive in charge of financial, technology, operations or investments and would like to interact with your peers to discuss everything that keeps you up at night, then you will want to experience IASA S highly-rated EXECUTIVE EDGE Conference. PLAN NOW TO JOIN US SEPTEMBER 21-22, 2014 AT THE HILTON CHICAGO

26 ASSOCIATION NEWS Committee Spotlight Seminars by STEPHANIE C. LEICHT Seminar: A small group This committee is dedicated which is held each Fall. The engaged in advanced study and to choosing hot or relevant Executive Roundtables provide original research topics. We strive for the effective tailored programs to C-level By definition, the purpose engagement of industry leaders. audiences through panel behind IASA s Seminars Morgan is clear that without discussions, presentations, and Committee is to bring together his team of sub-committee breakout sessions facilitated by like-minded individuals for chairs, led by the Director of industry experts. The four areas the purpose of increasing both Executive Education Program of discipline are Chief Operating the individual and collective (EEP) Brent Jones, and the Officers, Chief Information/ knowledge of our industry. To Director of Solution Provider Technology Officers, Chief this end, they have performed Enrichment Committee (SPEC) Financial Officers, and Chief superbly! The IASA Seminars Committee provides educational growth, development, and idea exchanges for our industry s leaders. In fact, if you dissect the IASA s mission which is, in part, to initiate, enable and facilitate the exchange of educational information, best practices, and innovative ideas among insurance related professionals to enhance the effectiveness of these individuals, their employers, and the insurance industry as a whole, clearly the Seminars Committee holds the key to many elements which contribute greatly toward the achievement of IASA s mission and ultimate success. IASA s Seminars Committee is committed to facilitating the bringing together of individuals to focus on specific areas of interest within the insurance industry. They target C-level decision makers, as well as up and comers in the industry. Through active participation, the seminars guide industry leaders through formal presentations of research, current events and other relevant topics which Tim Morgan typically foster meaningful discussions and lively debates. This volunteer committee is led by Tim Morgan, who serves as the current vice president of seminars for IASA. Morgan has been a longtime contributor to IASA, both at the chapter and national level, holding several vital positions. In addition to his volunteer work, Morgan is the assistant vice president and corporate controller at the Republic Group. The Seminars Committee is tasked with driving relevant, innovative, and on-point information throughout the IASA membership. The objective is simple; provide an opportunity for leaders of the insurance industry to advance by staying connected, relevant, and equipped with solutions for future growth. Our goal is to make sure we provide high quality executive education to C-level individuals through providing relevant content as well as peer networking opportunities, said Morgan. Phil Iaccarino, as well as the committee members, none of this would be possible. The challenge for the Seminars Committee is to keep programs relevant every year with fresh topics and effective presentation formats. The volunteers are up for this challenge. The members of this committee stay abreast of changes to accounting, systems, whitepapers, as well as regulatory issues, said Morgan. They [the volunteers] are active in the industry on a variety of levels and excel in the exchange of ideas and communication, so we can provide relevant topics in the respective disciplines. The most visible focus of the Seminars Committee is the EEP. This committee takes center stage at the IASA Annual Educational Conference through their wellreceived Executive Roundtables and the Property and Casualty Statutory Accounting Seminars. In addition, the Seminars Committee plays a vital role in the organization and development of the IASA Executive EDGE Conference, Investment Officers. The agendas for the roundtables include topics or personalities of importance; panel discussions involving industry peers; regulators or solution providers; interactive presentations or programs; and much more, all geared to focus members on significant issues of interest, thereby, providing professional growth through learning. Brent Jones is clear that strong topic selection for the roundtables is imperative to attracting, engaging, and maintaining C-level executive interest. We are not afraid to repeat stalwart topics that may cross disciplines such as economic updates, but we are always looking to be cutting edge and relevant, said Jones. For instance, on the finance side, we are introducing a newer topic, Solvency Modernization, as a result of regulatory reform. We want to assist executives in being proactive in preparing for these changes. EDGE is actually an acronym for Education Dedicated to Growth and Excellence. The 26 Spring 2014 theinterpreter x

27 ASSOCIATION NEWS IASA Executive EDGE Conference is designed for the combined disciplines of the four roundtables, and was also designed specifically to appeal to the C-level insurance company executive. As such, the conference only takes the executive out of the office for one business day. EDGE s goal is to elicit high-level education and discussion on topics of innovation, technology, finance/investment, and other key management themes to assure both the individual who is participating and their organization, benefit from this conference. Hallmarks of this conference are thought-provoking keynote speakers, such as: high profile insurance executives; current or former elected officials; journalists; authors or other speakers who would be germane; panel discussions on topics such as the state of the insurance industry, involving industry peers, regulators, or solution providers; analysis from industry experts; and facilitated breakout sessions/discussions. These topics are designed for a multidisciplinary audience. To assure the program remains attractive to the C-level executive, EDGE fosters peer-to-peer networking and interaction. We have worked hard to develop a platform that is attractive to the executives, said Jones. We are cognizant of how difficult it is for them to be away from the office. The conference is structured so they only lose one business day in the field and yet we still find time to focus on peer-to-peer networking opportunities. The focus of SPEC, led by Iaccarino, is to develop educational content especially pertinent to IASA associate member companies. Associate members consist of service and solution providers, exhibitors, and vendors. The committee, which is still fairly new, continues to grow and develop. The goal of this committee is to educate and enrich professionals who have varying levels of insurance experience and industry knowledge, so they can better understand the goals and objectives of the insurers. Better educated vendors means more informed and effective conversations, which in turn leads to a better overall experience for insurers, said Iaccarino. SPEC accomplishes its objectives utilizing a variety of vehicles, including seminars, the Insurance Game, and in the near future, webinars. The IASA Boot Camp, typically held in conjunction with the IASA Spring Planning Meeting strives to provide education to associate members, thereby enabling them to better understand basic processes, policies, hierarchy and infrastructure within insurance companies. Ultimately, this leads to better designed solutions. Insurers are dedicated to this Jay Fishman of Travelers sat down to be interviewed for the 2013 IASA Executive EDGE Conference audience. process and often participate in panel discussions on topics such as marketing and selling to insurance companies. The greatest challenge faced by our committee has been getting vendors to speak about best practices in front of their competitors, said Iaccarino. They feel as though they are giving away their secret sauce recipe. However, it has become abundantly clear, as this committee has grown that Stephanie C. Leicht is the vice president of marketing for IDP, and a new volunteer for IASA. She can be reached for further information or comment via at sleicht@ idpnet.com. insurers want and need associate members with this enhanced expertise. Providing this education and increased communication makes the industry stronger, as a whole. Complex business issues and challenging new regulations will continue to test the leadership of our industry; however, we can look to the thought leadership and solutions innovation delivered by this small group engaged in advanced study and original research, to help us stay the course. theinterpreter x Spring

28 ASSOCIATION NEWS Member Company Spotlight Knights of Columbus by SONIA CLIFFEL NOTE: Knights of Columbus Chief Accountant Thomas Brockett recently sat down with Sonia Cliffel of First American Equipment Finance and IASA s Membership Committee for an exclusive one-on-one conversation about the organization, charitable initiatives, and the ongoing benefits of IASA membership. As a fraternal benefit society, the Knights of Columbus (K of C) provides financial aid to more than 1.8 million members and their families, and demonstrates deep commitment to the company s four core principles charity, unity, fraternity and patriotism. Since the company was founded in 1882, K of C has helped families obtain economic security and stability by providing and administering life insurance, annuity and longterm care programs. For 38 consecutive years, K of C has received an A++ rating from A.M. Best, which is the highest rating that A.M. Best provides. We strive for and take pride in receiving this rating every single year, said Thomas Brockett, chief accountant for K of C. It gives our members confidence in the current and future success of the Knights of Columbus. In addition to providing insurance products and coverages, K of C councils, members and supporters have contributed time and energy to service in communities worldwide in the interest of building a better world one good deed at a time. Some of the charitable initiatives to which K of C has contributed include: Coats for Kids: With the help of K of C and other committed entities and individuals, this program has delivered more than 167,000 coats for children in need since it was founded in Special Olympics: K of C is heavily involved in the Special Olympics, and in the past has played the role of title sponsor and host, as well as providing volunteer resources and monetary donations. United in Charities: K of C set up two endowments in the U.S. and Canada to raise money for causes important to, and which support, the company s four core principles. Tax-free donations to United in Charities have provided aid for victims of natural disasters and other critical need areas at home and abroad. In addition to the company s charitable initiatives, many exciting things are happening this year at the Knights of Columbus. In fact, in 2011 K of C purchased the Pope John Paul Sonia Cliffel is Vice President for First American Equipment Finance, as well as a member of the IASA Membership Committee and an IASA Board Member At-Large. She can be reached for further comment via at sonia.cliffel@faef.com. II Culture Center in Washington, D.C. The Center includes a museum and shrine to Pope John Paul II, and is open to the public during renovation. We are really looking forward to the completion of this project because its location in a major metropolitan area such as Washington, D.C. will make it accessible to so many people, said Brockett. IASA membership is an element of significant importance to K of C. For more than ten years, K of C has been a long-standing IASA member company, participating at annual conferences, roundtables, and at the local chapter level. The ability to network and talk with our peers about the challenges we face in the insurance industry is perhaps the greatest advantage we receive from our IASA membership, said Brockett. IASA conferences present a great way to stay current on issues that could affect the organization. At IASA conferences, we are able to learn new things and bounce ideas and questions off each other, said Brockett. Brockett also appreciates the educational benefits IASA membership offers. By attending a three-day seminar, I m able to receive hours of CPE credits in my particular area of focus, he said. Additionally, Brockett feels IASA meetings provide a great forum for getting new employees up to speed and in touch with what is happening in the industry. IASA seminars go over the basics, which gives our employees a broader outlook on the industry and strengthens their skill set, said Brockett. To better illustrate this, Brockett discussed the fact that K of C has had to convert from GAAP to IFRS accounting for their Canadian operations. Employees had to specifically expand their knowledge of IFRS accounting to cover this requirement. As chief accountant for K of C, Brockett in particular appreciated the ability to attend an IASA seminar focused narrowly on IFRS accounting. IASA provides the tools and education to support organizations that have to report on the IFRS side of accounting, said Brockett. It is an immense benefit that IASA education courses cover more than just the general spectrum of SAP accounting, realizing that there are insurance companies that have foreign operations and need to be knowledgeable on IFRS accounting. IASA is proud to have K of C as a member, and appreciates the opportunity to support the company s staff through continuing education and networking endeavors. In a small, but hopefully significant way, IASA better enables the Knights of Columbus to effectively carry out the company s mission and provide top-quality service to the worldwide community. 28 Spring 2014 theinterpreter x

29 NATIONAL VOLUNTEER PROFILE ASSOCIATION NEWS Ken Zieden-Weber, SVP & COO Xchange Benefits LLC, Chair, Interpreter/eInterpreter Committee IASA, and Secretary/Treasurer IASA Metro New York/New Jersey Chapter Interpreter: How do you typically get your work day off to a good start? Zieden-Weber: I am a very early riser; usually at 4:45a.m. Since I have a 75 mile commute to my office (I am there usually 4 times per week), I get a chance to listen to the morning news and various sports. Once I arrive at my office, I have a bowl of Kashi Wheat puffs with almond milk and read the various insurance news blasts that I get regularly. Interpreter: Is there a certain song on your ipod that gets you motivated? Zieden-Weber: Having been a high school and college student in the 1980s, I usually gravitate to something that is considered early alternative (punk/new wave). Waterfront from Simple Minds is a good one. However, there is also nothing quite like a blast of Ozzy, Metallica or Judas Priest to get the blood flowing as well. Interpreter: What would you consider to be the biggest benefit your company gets from your volunteer participation in IASA? Zieden-Weber: Not to sound selfish, but publicity. We are a small managing general underwriter and being a national volunteer exposes our company to the many members that belong to IASA. Interpreter: Do you have any hobbies that could affect your personal insurance premiums? Zieden-Weber: We actually had a trampoline in our backyard, but our umbrella carrier wouldn t offer us coverage so we got rid of it. We aren t a very daring family. Interpreter: What is your favorite way to relax after a particularly stressful day in the world of insurance? Zieden-Weber: Actually, I like to sit down and watch sports or movies. For me, it is a great escape. Interpreter: IASA is a great place to experience firsthand the cooperation of business, financial and IT professionals working toward a common goal. Do you struggle with issues relating to business/it alignment at your company? What is the best way you have found of successfully handling these types of situations? Zieden-Weber: No. Since Xchange Benefits is a small company, we all wear many hats. I am actually responsible for finance, operations AND technology. It is my role to make sure the proper technology is deployed for our employees and management team. Many of our programs have very sophisticated analytical components to them, while others are very basic and being designed and re-evaluated daily. However, what I am most proud of is that I have integrated certain technologies that allow our company to be run from a smartphone or tablet device. Several of our underwriters actually use an ipad to issue onsite quotes to our producers. Interpreter: What do you believe is the biggest challenge currently facing your company? Zieden-Weber: The usual capital/resource/growth challenge. I go to great pains to insure that the proper capital is efficiently deployed to support our growth efforts. Our organization has more senior level talent than most our size, so there are many competing priorities. My role is to keep that all in check and to provide the resources necessary to grow. Interpreter: How do the educational and networking benefits you get by volunteering for IASA help you do your job better? Zieden-Weber: Education and knowledge acquisition are keys to being a successful business person. IASA is one of my primary sources for such information. My personal knowledge base consistently grows as a result of my local and national IASA activities. Interpreter: Is your company getting involved in social media? Do you think social media can have benefits for insurance companies, or is it just a trend? Zieden-Weber: We are, but probably not to the extent that I would like. We have a presence on all of the major social media outlets, but outward communications is not consistent. We are an underwriting agency and generally do not work with the public, however, we do maintain a presence for the benefit of producers and insurers who aren t aware of us. Social media is here to stay. It will impact individual organizations in different ways, some positively and some negatively. There have been several infamous faux pas from insurers in the past. These were corrected, but did cause many millions of dollars of lost franchise value. So, how social media is deployed and managed is the key to social media success. The insurance industry is just entering into the next communication phase of what I call BIG SOCIAL MEDIA. I am very curious how its everyday application will be integrated into daily business. Interpreter: Can you name one thing most people would never guess about you when they first meet you? Zieden-Weber: I was a fairly serious athlete when I was younger. In fact, I received several scholarship offers to play soccer at college. I chose not to pursue any of those though. Just prior to my becoming a national volunteer for the IASA, I spent 17 years coaching and administering youth athletic programs. I still play for fun today. theinterpreter x Spring

30 THE LIGHTER SIDE Across 1. Inspiring American swimmer, Dana 4. Defense against risks, now extending to prevention of web threats 8. Set of international supervisory requirements focusing on the effective group-wide supervision of IAGs 10. Agree out of court 14. Mid-western state 15. Total after taxes 18. Having new life and energy 21. Club selection 22. Personal statement intro (2 words) 23. Adjuster slang for a major disaster 24. Smarter 25. Providers of specialist insurance software to insurance specialists 27. It may affect the premium 28. Chat room chuckle 30. wide, dedicated to being the leading provider of hosted insurance software solutions to the global property & casualty insurance industry 31. Heart 32. Soulmate of a Beatle 34. Stylish, in the 60 s 36. Look for the best price Concentrate 40. Small note 41. Number opposite IX on a clock 42. Presidential keynote s middle name 43. Software brand giving insurance companies a real competitive advantage 44. Owed 46. A swish misses it 48. Last name in the 2010 Act which made changes in financial regulation 49. Brief outline Down 1. Relating to a specialized field of knowledge 2. Computer storage 3. s and omissions coverage 4. It might refer to a car or a yacht 5. Take advantage of 6. Ending for lobby, social and capital 7. on invested assets 9. Mastek, delivering major technology and transformation programs to insurance companies 11. Join forces (with) (2 words) 12. It s perjury, when in court 13. Supervise Crossword by Myles Mellor CALENDAR OF EVENTS May 20, 2014 St Louis Chapter Cardinals Baseball Game 2014 Saint Louis, MO May 20, 2014 Metro New York/New Jersey Educational Session & Golf 2014 Manalapan, NJ May 21, 2014 Indiana Chapter Meeting Indianapolis, IN June 8-11, 2014 IASA 2014 Annual Educational Conference and Business Show Indianapolis, IN June 24, 2014 Land O Lakes Chapter Golf Outing and Ethics CPEs 2014 Prior Lake, MN July 23, 2014 Land O Lakes Chapter Networking Event 2014 St. Paul, MN July 24-25, 2014 Texas Chapter Meeting 2014 Austin, TX 16. Time scale section 17. Damage beyond repair 19. Countermand 20. Dinner check 24. The Master of Playfulness, Matt 26. Meat seasoning mixture 29. Important layer for earth s survival 31. Their intrusions create cyber threats 33. Sandra in Grey s Anatomy 34. Austin Powers power 35. Table 37. IAIS is promoting this as a key component of regulatory reform, abbr. 38. The end of a show set in Hawaii 39. Some begin with I am the son of the former king of Nigeria IASA conference location 45. Humanitarian org. 47. Institutional Investor, for short Puzzle solution can be found online at under Resource Center>Publications>the Interpreter>Current Edition. 30 Spring 2014 theinterpreter x

31 Is pleased to announce The 2014 Executive Education Roundtable Series Monday, June 9th & Tuesday, June 10th, 2014 IASA s Executive Roundtables are presented exclusively for insurance company senior executives. Timely content, a highly interactive program, and unparalleled peer networking are some of the many benefits of IASA s Executive Roundtables. n Enjoy individual events held for Chief Information/ Technology Officers, Chief Financial Officers, Chief Operating Officers and Chief Investment Officers with content tailored to the specific needs and interests of each group. n Participate in moderated discussion sessions led by respected analysts, industry consultants and your peers from insurance companies around the country. n Interact with a select group of solution provider knowledge experts that will also be in attendance. n Take actionable information back to your office that will help your company succeed in the coming year. n Earn CPE credits by attending timely sessions during the IASA Executive Roundtables. These important events are held in conjunction with the IASA Annual Educational Conference & Business Show register to attend the conference and your registration for the roundtable(s) is complimentary! The Roundtable Events will be held in the Marriott Indianapolis Downtown. #IASAEEP SPONSORED BY: REGISTER TODAY AT Insurance Investment Management JOHNSON LAMBERT

32 PreSIdent BIll ClInton To deliver the Keynote Address on Tuesday, June 10 INDIANAPOLIS IMPRESS INSPIRE IGNITE 2014 Educational Conference & Business Show June 8 11, 2014 Indianapolis Convention Center, IN The 2014 IASA Annual Educational Conference & Business Show gives you educational, networking and career development opportunities unequaled by other industry events. l More than 80 educational sessions in the areas of Accounting, Risk and Finance, Technology and Career Skills Development l 200+ product and service exhibitors l Networking events for insurance professionals specifically focused on accounting, finance, investments, operations and technology l An exclusive Executive Education Program that hosts roundtable events specifically for Chief Operating Officers, Chief Financial Officers, Chief Investment Officers and Chief Information/Technology Officers #IASA2014 Follow IASA on Join the IASA Group Friend us ( Go to IASA.org for more information!