Protect the privacy of data with tighter rules, even as wireless networks liberate the transmission of information

Headed for a clash: insurance accounting managers face a bewildering contradiction: protect the privacy of data with tighter rules, even as wireless networks liberate the transmission of information

Tom Starner

When insurance accounting managers belonging to the Insurance Accounting Systems Association gather in Boston next month, there will be plenty of buzz all right–coming from opposite directions.

From one side, managers are going to be socked with the latest in data privacy and protection rules, in the wake of the disclosure regulations so ordered by the Sarbanes-Oxley Act of 2002. But, from the opposite corner of the ring, as if almost thumbing its nose at the concept of privacy, the latest developments in wireless technology are going to deluge the accounting managers.

Wireless, a technological marvel with the potential to make insurance claims, accounting and reporting more efficient, hates boundaries, detests tethers.

“Our members have been wrestling with Sarbanes-Oxley,” says Joseph Pomilia, executive director of IASA. “It’s a financial challenge, but it’s also a technological challenge. It certainly is going to be a topic that will be talked about at our meeting in June.”

Even as buttoned-down insurance accounting stalwarts meet in the birthplace of the Revolution, this is going to be no tea party. Regulators are looking to slap the accounting industry with yet more rules.

The National Association of Insurance Commissioners and the American Institute of Certified Public Accountants have proposed changes to the NAIC’s Model Audit Rule that would add new provisions to already burdensome regulations, says Layton Otson, senior vice president of Eagle Technology Management.

Eagle Technology, a Marion, Iowa, provider of software for insurance financial processing and reporting requirements, is a member of IASA.

Four years after the passage of Sarbanes-Oxley, this is one law that’s proving to be a hell of an expensive proposition, according to some IASA members and many of the law’s critics.

Companies are expending about twice the employee hours originally budgeted for the documentation of, and management’s attestation to, the adequacy and testing of internal financial controls, says Olson. Software and information-technology consulting costs have also ballooned beyond initial estimates.

The new rules, says Olson, “will give insurance companies the chance to validate their internal financial control effectiveness, and improve upon them.”

Surely. But there’s usually a downside. “At the same time, the cost of compliance is proving to be far greater than originally estimated,” he says.

WIRELESS: AN UNTETHERED BEAST

Wireless networks, which carry megabytes’ worth of spreadsheets thousands of miles in just seconds, love to puncture walls, shatter windows, leap across continents, sail over regulatory anchors.

Nationwide experts on arcane insurance accounting rules and systems are scheduled to deliver PowerPoint presentations to hushed audiences, at least those that don’t forget to turn off their cell phones, at the Boston Convention Center on the latest developments to proposed new rules.

Yet just a few feet away, in an astonishing juxtaposition of contrasts, will be IASA’s new Wireless Connection Center, encouraging users to transmit data from smart phones and handhelds to far-off servers.

“Professionals within our own IASA ranks have put together this new initiative for the annual conference, and it could not come at a better time,” Pomilia says. “The collaborative work of IASA and some leading technology vendors has led to a 3,200-square-foot area dedicated to emerging technologies in the wireless space.”

In addition to being a convenient area to check e-mail and make calls, Pomilia adds, the Wireless Connection Center will serve as a hub to view emerging technologies from hardware and software companies such as Panasonic, Sprint, ADP, T-Mobile, Pyxis Mobile and Service Power.

You can bet that vendors at the Wireless Connection Center will be aggressively promoting the expected benefits of wireless genius: faster returns on investment, the security options sufficient to protect policyholder data, and access for key employees to company portals, dashboards and other information.

“For insurers, wireless technology is a critical emerging technology,” says Mark Robison, IASA president and senior vice president and treasurer at Brotherhood Mutual Insurance Co., a property/ casualty carrier in Fort Wayne, Ind., that specializes in insuring churches and ministries.

“We’ve been investing to make our mobile claims professionals Web-based,” he says. “So the next move was to figure out how we could make them even more effective. Wireless technology is a key part of that answer.”

Even as regulators consider new layers to the Model Audit Rule that will likely make it more expensive for insurance accounting types to comply, one of the big promises of wireless technology is that it will be a lot cheaper to process data.

Claims professionals in the field no longer have to return to their hotel rooms or other “connected” areas to get on the Internet via broadband when it comes time to send data to the central database or, conversely, download important data from the company network.

BEYOND BOSTON

Looking past the upcoming show, Eagle Technology’s Olson says insurers will see several developments in general ledger and accounting systems in 2006 and beyond.

Insurers are striving to standardize on a common technology platform that uses mapping tools to simplify access to and retrieval of information from their source systems to the general ledger and, ultimately, to financial and statutory reports, says Olson.

One way to meet that challenge is through the ACORD-XML format, which is a way for the general ledger to absorb data in its proper format.

“This transparency allows insurers to store more detailed information to speed the preparation and filing of financial reports, both for internal and external consumption,” Olson says. Newer ledger systems also are able to absorb and render XML data for integration and “auditability,” he adds. For example, XBRL data for the general ledger is evolving as a standardized application of XML that “tags” data elements within financial transactions.

A common dictionary of terms is supplied and recognized by other XBRL-compliant systems, adding uniformity and integrity as the data flows in and out of the systems that use it. XBRL for insurance GAAP and insurance statutory reporting is one such example.

XBRL facilitates financial reporting and makes it easier for companies to expose data that is valued by investors and regulators. Before XBRL, insurers had to duplicate efforts in getting from the financial reporting model to all the financial statements necessary to fulfill the demands of regulators, or the demands of a broader audience, like the one accessing the company’s Web site or the one requiring printed financial statements. XBRL enables insurers to gather data just once, and then use it in many different ways without having to recreate it.

“The post-Sarbanes era we live and work in requires a dramatic improvement in the quality of data made available to regulators, investors and the marketplace,” Olson says.

Insurers also are beginning to understand the benefits of enterprise-class reporting platforms, he says.

These platforms are built on an industrial-strength database that uses a common language to create financial reports, tax returns and compliance forms for those who need them.

This approach verifies that all of the data contained within a financial communication format is derived from a common dataset. It improves the reliability of data, is sealable and streamlines compliance initiatives.

TOM STARNER, a Philadelphia-based writer, writes frequently about technology issues. He can be reached at riskletters@lrp.com.

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