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


Great post Retroman. - Thank you.

Scary about your in-laws. I've noticed the same problems here. people all fired up to prep and then when its time to spend $$$ - nothing. I have been having such strange conversations with folks too. One geek friend of mine spent half an hour extolling the virtues of her Y2k compliant boyfriend (he can shoot a gun, build a lean-to, and all the other things that make a single GI girl's heart go pitty-pat.) Then she talked about how bad things will probably get in her part of town. So we had this great GI talk and then she starts talking about her job where she is getting lots of new geek- web skills so she will be able to make even more money next year than this year. I laughed so hard tears came to my eyes. But really its not very funny. Here's this bright GI geek chick. She is still full of denial. It makes me nervous because I wonder if it is contagious. Will I wake up one morning and be a pod sheeple too?

-- R (, July 01, 1999.


Thanks for the great post. About the lip service thing, yes, the bull stops when it's time to pull the wallet out. Spending money means that to you it's real. And to be honest, everytime I have expended a large amount of cash on a prep' I find MYSELF thinking 'Am I nuts!?". (Anyone who knows me is NOT allowed to answer that for me.) Lots of people have fun playing "what if" with Y2K scenarios. You tend to lose those people where the cash meets the register. To be fair, part of the problem is almost everyone, and almost everyones parents, can't remember anything beyond the good times. And it has been good in America for a long long time. Even if you accept the possibility of a major disruption intellectually, emotionaly you will get the "Entering The Unknown" feeling.

Thanks again for the report and keep your...

-- eyes_open (, July 01, 1999.

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