My experience-Insurance Industry : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Ive been lurking for a while on this site, thought I would offer my experiences in the industry. I am a business analyst in the software industry. Yes, my email address is real. Not a techie, I spent 12 years as an insurance broker, saw how the industry was eliminating agents by going internet, and got a job assessing software needs for agents and companies.

My view is that in general, large insurance companies will be compliant and should see relatively few problems come 2000. Agencies are a different matter. Our company estimated that 25% of all agencies will go under as a result of Y2K. Many agencies are run by old timers, running DOS programs on 286s. Our support staff would make outbound calls to tell them its too late-sell the agency, and also send out certified letters telling them about their non-compliance. Many would hang up the phone, thinking we were trying to sell them software, or think that Y2K is marketing hype. This has serious implications-if a construction company needs an insurance certificate, work cannot begin until that document is secured from the agent. Should the agent not be able to access files, that firm is out of work until the paperwork can be generated. Most of the managers at my company are techies, and in general (no offense intended) do not have a realistic view about how the free market/business works. Most say, So, they cant find files for a few months. Big deal. It is a big deal if one is a carpenter out of work, or in a car accident and the agent cannot process the loss report. Yes, the large agencies will buy out the non compliant ones cheap, but this takes time and the information has to be transferred to the new databases. My former employer, a large agency, was on top of this issue from the beginning. When they moved to a new, large computer system, it took months to get all of the bugs out. Most products are sent being beta-tested on the companies and agents-it would take too long to do extensive testing. MAKE SURE YOU HAVE A STATEMENT FROM YOUR AGENT AND HE IS AT LEAST USING WINDOWS.

One area of concern on the company side is interconnectivity. Companies and agencies download information for credit ratings, MVR reports, CLUE reports from other locations, sometimes state offices. Will interacting with a non-compliant systems cause a crash? I dont know and no one at my company could answer that. Im always talking to a good friend up in Q&A about this, and Y2K preps. He just laughs, but one day he said, Really, this is so bad, I dont want to think about it. And I WONT think about it. Then he sold me his backpacking stove and arctic winter mummy bag dirt cheap!

A manager at my company wrote a report about the Y2K Implications for insurance companies. This is unrealistic. Essentially, he said there was nothing to worry about because all files are on paper. I worked for several years for a direct market insurance firm, a very large one. A request for the original paper document in microfiche took 2-4 days. The department could only handle 6-7 requests per day. This company has several hundreds of thousands of insureds.

Some large companies do have problems. I dealt with one comany in NYC whose board had no idea what they were doing. Also, from talking with another business analyst at a conference, one major US health insurance firm has serious problems with Y2K. They were behind schedule and sent work to another firm. Unfortunately the other firm used all newly trained programmers and none of the code was documented. When the work came back and modifications were needed, all of the outsourced code had to be scrapped. They are having problems with the claim proccessing software. My best friend is insured with this company, and is recovering from cancer. Currently the company is over a year behind in making 35K worth of payments and he had hired an attorney to handle the collection agencies and go after the insurance company.

The most disasterous aspect of Y2K from the companys standpoint is that of liability. Agent and Broker magazine ran a 4-part series on this issue. Stay with me here.

There is some disagreement as to if Y2K is fortuitous. For a claim to be covered, the event must be unexpected, or fortuitous. But, Y2K is NOT fortuitous, it is known. On the other hand, there is no Y2K exclusion in most polices. Is is covered? Many companies are still grappling with that issue.

Lets say an insurance company has solved that issue, Company A. Company A will insure a client if he can show proof of compliance and compliance from vendors. An agent, covered by malpractice (or Errors and Omissions) insurance by company B, sells a policy to Acme manufacturing firm that shows compliance from all vendors. The agent tells them in good faith they have Y2K coverage because of these statements. Come 2000 a consumer suffers a loss from Acmes product due to non-compliance. Company A finds that the real cause of the loss was Acmes widget supplier, Amalgamated Widgets, and declines to cover the loss for whatever reason. (Acme gave faulty information, Amalgamated was a new supplier undocumented on the policy, agent didnt disclose, whatever). Now Acme sues Amalgamated and the agents E&O policy, company B. The E&O company now sues Amalgamated Widgets for get the idea. The example the magazine gave was similiar to this one and was pretty complex.

Companies will fight for years over who settles a $600 claim. We had a case where a client had a small hairdressing business in the house. We strongly encouraged them to spend a few hundred extra dollars and put the business and home with the same company, and put it in writing. They wouldnt to save money and placed each risk with a different insurer. A friend came over for a hair cut and fell, $600 claim. Two years have gone by and the companies have not settled this, one says it was a personal visit the other says it was a business call. The client was, when I left, now threatening to sue the Agents E&O carrier.

Finishing up now. At my company, management alone and techies alone are not concerned about the Y2K problem. Business Analysts are pretty, well, shocked. This is my little area of expertise. This WILL cause problems in the insurance industry. Other areas? I dont know, but simply make a logical projection into other industries. Here are my thoughts.

Folks like Decker may criticize the concept of buying water filters, food, a gun, etc. First of all, I go backpacking, so I can always use filters. But for those who dont, NOTHING can go to waste. If Y2K doesnt cause problems, missionaries in the Former Soviet Union can always use water filters. If I buy 100lb of rice and nothing happens, I donate it to a homeless shelter or church food pantry and take a deduction. I am astounded by the fact that people will not take these simple steps, even to make preparations for a weekend storm. Im ahead of the game, as I already have a good deal of outdoor gear and tools. We sold our condo in an area that I thought wasnt the best and have an apartment in a country area, 200 to water, with few neighbors. Am VERY concerned about heat though.

My wife and I have tried extensively to create a Y2K community in this New England area, its an exercise in futility. Our in-laws were very concerned, went to some of our meetings, for six months we have been making plans together dividing tasks (they take care of heat and place to stay). Recently I found out that have done NOTHING and called me a paranoid. My wife and I have been having some meetings with several people from our church and in the area. We met for months, however when we covered food and planned to make a bulk purchase of maybe 1 months worth for each family, everyone suddenly got scared about this crazy talk and we cant seem to get another meeting going. What did they think this was all about? I suspect that many people give Y2K lip service but dont really make realistic preps. I do winter backpacking and have some outdoor survival skills- without heat, everything takes longer, everything is more difficult. I have a respect for lack of utility services and hope the problems are not severe with water and power.

-- retroman (, July 01, 1999



-- retroman (, July 01, 1999.

I have spent 12 years as a "captive agent" in a large multi-line company, and 3 in the Independent world. One problem I see is the lack of knowledge on the agents part. The "captive" agents are having to sell life insurance quota's to keep their jobs and are not being trained in P&C. The quy who took my place is a moron after 3 years. "Gee, I didn't know medical paid for your hospital bill if you got hurt in a one car accident." And commercial insurance "gee I think fire liability covers the cars parked outside a building in case the building burns, it doesn't cover the building if you left the coffee pot on and ended up causing the fire...Quotes out of a 3 year vetern agent. But he will sell life insurance or lose his nice little job.

Then the other problem I see is batch filing. Hard copy is filed in that days folder, not the person's folder. Which is great if you have it in the computer on what day to find the hard copy, but if you can't get into the computer or the info is lost how to you find that important piece of paper to cover that clients claim? I can't imagine going through a years worth of files looking for a piece of you know how much paper is used in an insurance office? LOTS.

And the 3rd area I see causing a problem is in-house fixing. I was in an outside office and after 1 year they still couldn't fix the problem with my connection to the main after 1 year I still couldn't access the main computer and they wondered why I was upset. The "computer geek" who knew just a little more about computers than I did was in charge of fixing the problem and his solution was to run scan disc everyday...and after that he was lost. They just don't want to call the experts and spend the money...So I can see a lot of companies turning the clock ahead and saying, "see it still works so we are ready to go". 3 minutes and 0 money spent, see what a great computer expert I am.....But this company also kept software in the managers office until he could virus scan it and he would never release it until it was we would give out auto quote's and the company would have had 2 rate increases since...but hey it's within 100 bucks, no problem. Or crop insurance disc after the deadline to see any crop insurance.

I could be interesting. JO

-- Puppylady (, July 02, 1999.

Hi. As a P&C agent, you both have made excellent points. I've also worked for the biggies...Yucko....I am now doing temp assignments at mom and pop agencies. In retrospect, the lil guys I feel have a better chance than some of the biggies. I am presently working for an agency which is all paper files. The old way...I learned the 'old way'. I cant stand the new applied system and have YET to work with one that is easy and user friendly. I also did adjusting for the now defunct Coronet Insurance. This company went under solely due to mismangement of money...As a captive agent, I pity you. I see the industry began in about 1992 with the 'pac man' syndrome of the bigs buying the littles....I say for those agents who stay unautomated...hooray....they have a 'chance' but who has ever tried using Safeco's new system? OUCH......I'm not afraid to name names here. Soon, I wont have a job....I can possibly go back to adjusting but I totally agree with many losing their jobs. I worked for a biggie who was bought out and of course, I lost my job....On my final exit interview, it was marked 'would NOT rehire', imagine my surprise when My friend called me to ask if I would take an assignment for them, and yep, they asked for me by name.....HHMMMMMM......I am no techie, dont know much at all about computers, but one thing I've learned,,,,,those who claim compliance (smaller agencies) of those I've worked for, it was lil ol me who discovered they werent. Thanks for letting me vent....I love insurance and to be in this business, one must surely be a lil deranged.......come on, who ever woke up saying, "when I grow up, I wanna be an agent?" LOL.

-- consumer (, July 02, 1999.

Okay - you three in particular, anybody else in general, recommend something.

I want to copy this thread, send it to our states insurance commissioner, and try to get a "user's protection" practice set up: The commissioner was instrumental in getting medical authorization for extra medicine prescriptions approved for next year - so I know he is y2K "compliant" himself - and is aware of the potential for massive problems.

Something to effect of: if a person has an automatic payment plan (through an escrow account, for example) or a car insurance policy with automatic payment plan, or can show they sent checks ontime through the first 4-6 months of 2000, the insurance company has to consider their policy in effect - regardless of "what the computer says."

That is, how can the honest owners of policies (consumer level, business level too) be assured of protection if the "background" payment plans fail somehow - Post Office, bank transfer, phone lines down, no power or power spike kills records, program cancels policy, etc. There are millions of reasons why a policy (or thousands of policies) could get "cancelled" incorrectly.

What kind of "process" could a state regulator put in place to protect against this kind of error - while preventing fraud (legitimate cancelation) of illegal or real non-paying accounts?

What other things could he (o rhis staff) help with - at the state level - to prevent or minimize problems?

-- Robert A. Cook, PE (Kennesaw, GA) (, July 02, 1999.

Moderation questions? read the FAQ