Celent predicts that total insurance IT spending devoted to e-business is about US$1.6 billion today and will grow cautiously at about 5 percent per year over the next two years.

Celent’s new reports, Top 10 Trends in P/C Insurance E-Business Today and Tomorrow and Top 10 Trends in L/H E-Business Today and Tomorrow, present 10 key trends in each sector of the insurance industry. These trends have been observed by Celent over the course of its ongoing research and supported by data from its recent online survey of more than 65 insurance executives.

“In 2001, when Celent first examined the role of the Internet in the insurance industry, fewer than half of US insurers had any significant e-business systems,” said Matthew Josefowicz, manager of Celent’s insurance group and author of the reports. “But over the past three years, the Internet has become so integral to the way insurers conduct business that it is starting to fade as a distinct category and merge into the overall IT environment as a general enabling technology.”

The trends presented in the reports are:

Total insurance IT spending devoted to e-business is estimated at about US$1.6 billion today and will likely grow 5 percent yearly for the next two years. In both sectors, most IT budgets are devoted to agent/ distributor systems, but life/health insurers devote almost double the amount to policyholder portals that property/casualty insurers do. This reflects the greater strategic value of policyholder portals in life/health, where they are more widely viewed as a potential competitive advantage rather than as a parity play.

MANILA, Philippines — The Department of Finance has tasked the Bureau of Internal Revenue (BIR) to look into the tax compliance of insurance companies after it found out that taxes on insurance premiums fell 60 percent in the first quarter from a year earlier despite reported growth in sales.

“We cannot understand why taxes collected from the industry dropped by about 60 percent when many of them reported double-digit growth in earnings,” Finance Undersecretary Gil Beltran said.

Without mentioning names, Beltran noted that the biggest players in the industry posted growth of 17-20 percent in net income in the first quarter.

The increase is assumed to be a result of higher sales of insurance policies, he said.

Beltran said the BIR could use its new tax audit systems to detect which companies should be subjected to tighter investigations.

Under a benchmarking audit method, the BIR uses a benchmark ratio of taxes paid to income earned. If a corporate taxpayer’s tax remittance falls substantially below the benchmark, it will be investigated.

Beltran said the BIR should link up its database with that of the Insurance Commission and other government agencies that can provide tax-related information. He said the Insurance Commission has already expressed willingness to assist the BIR in the conduct of a tax audit.

Internal Revenue Commissioner Jose Mario Buñag said his office has made several initiatives to enhance auditing and tax administration.

He said the BIR would start an inquiry into the tax compliance of the insurance industry and other sectors in which companies were also suspected of avoiding payment of proper taxes.

The National Program Support for Tax Administration Reform, launched on Thursday, involves activities that will strengthen the BIR’s ability to collect taxes, such as by updating its database on taxpayers.

In response to suspicion that insurance companies are not paying proper taxes, Peter Coyiuto of First Guarantee Life Assurance Co. Inc. said many insurance firms made much of their incomes from investment-linked insurance products rather than pure insurance products.

For this reason, the growth in insurance companies’ incomes does not necessarily mean they had increased collections of insurance premiums.

A pay-as-you-drive car insurance policy for younger drivers has been launched by Norwich Union.

An in-car “black box” style device calculates premiums based on when and how often the car is used.

The scheme is open to 18 to 21-year-olds and, as with mobile phone tariffs, drivers will pay more during “peak” times, between 11pm and 6am.

There is a one-off fee of £199 for the box, but Norwich says that this amounts to less than savings made on premiums.

“The scheme brings motor insurance into the 21st century by providing affordable comprehensive insurance for young drivers in return for driving at safer times,” said Robert Ledger, programme director.

Pay-as-you-go generation

The policy works in a similar way to mobile phone tariffs.

Users pay a monthly fee for cover against fire and theft, and also a personalised rate for off-peak travel, which starts at 6p a mile.

Travel during peak times costs a flat rate £1 per mile.

HOW IT WORKS A “black box” style device is fitted to the car It uses Global Positioning Satellite (GPS) technology to record the journeys of the car This information is then transmitted securely to Norwich Union via a mobile phone network

The first 100 off-peak miles each month under the policy, known officially as “Pay-as-you-drive” will be free, Norwich Union said.

The insurer calculates that younger drivers could save up to 30% a year off the cost of their premiums.

“The concept closely follows the approach used by mobile phone companies,” Mr Ledger told the BBC News website.

“The standing charge is very similar to line rental and having a peak and off-peak tariff is very similar to the approach on mobile phone charging. We have done it in that way because of the group of customers we are targeting”

The launch of the scheme for younger drivers is part of a wider initiative being developed by the insurer. In August, it launched a two-year pilot scheme to investigate driving patterns for the development of pay-as-you-drive pricing.

The insurer says it has been able to launch a scheme for younger drivers prematurely because it already knows that time of day is a major factor for younger drivers.

It said the higher tariff for hours between 11pm and 6am reflected accident statistics for 18 to 21-year-olds.

Young people are at a much greater risk of being killed or seriously injured in car accidents between 11pm and 6am.

The following tips are provided to educate and inform you about how to avoid insurance fraud:

• If it’s too good to be true, it is.
• Never ignore notices from the insurance company even though your agent tells you it’s a “mistake” and nothing to worry about.
• Be careful of any life insurance plan that promises “vanishing premiums” or guarantees you a premium-free policy over a specific period.
• Don’t be confused by life insurance disguised as a “pension plan” or a “retirement fund.” Life insurance is NOT a pension plan.
• Don’t let yourself be pressured. You do NOT face any deadlines.
• Never buy coverage you don’t understand. It is the agent’s and company’s responsibility to explain your coverage in terms you can comprehend.
• Save every piece of paper explaining your coverage and your policy. Keep them on file with your policy. (If the agent used a laptop computer, insist on a hard copy version of what you were shown.)
• If a new policy replaces an old policy, make sure the old coverage is not terminated until the new policy has been issued. Also, an agent should explain how you will benefit whenever one policy replaces another.
• Never buy life insurance as an investment without understanding that some of your “investment” is paying for your coverage. Life insurance provides protection against economic loss resulting from death. (Also: Be careful of “special opportunities” to expand coverage for a non-working spouse or children.)
• If an agent tries to sell you life insurance as an investment with a high return, insist that you be shown that specific guarantee in your contract.
• If you are offered a chance to turn in a small policy for a larger one without paying substantially more, WATCH OUT!
• Never give an agent money without getting a receipt. Never “loan” money to an agent.
• Never sign a form that includes blank spaces, even if the agent assures you they are merely a formality.
• Never buy insurance from an unlicensed agent or an unauthorized company. You can check their status by calling your state’s Department of Insurance.

Charles Lloyd, owner of Scramblez Cafe in Quartz Hill and in Lancaster, lost $2,800 in premiums and went almost a year without valid workers’ compensation insurance without knowing it.

His insurance agent, who won the business after a cold call, sent Lloyd official-looking documents with an insurance policy number, the name of a major insurance company and details of his supposed coverage.

“Everything was perfect,” Lloyd said.

Then, in 2005, the cafe owner learned that he had been ripped off. The agent didn’t have a license to sell insurance and had pocketed the premium money from Lloyd and at least 13 other Los Angeles-area small businesses.

The majority of the approximately 275,000 insurance agents licensed in California are legitimate, but the ones who aren’t can wreak havoc on a small business.

Protecting your small company from unscrupulous insurance agents isn’t difficult. But busy small-business owners, who usually are unfamiliar with how the insurance market works, often overlook the few steps required.

“You have small businesses, especially start-up businesses, that are concerned with anything but insurance,” said Michael C. Strickler, a principal at Strickler Insurance Agency in Encino and owner of LyteSpeed Learning Center, which provides insurance and financial services training.

The cost of insurance and the lengthy list of insurance types a business owner needs can add to the confusion.

“Insurance is a big ticket — it’s a huge cost for us — and everybody is always looking for some sort of relief,” said Greg Owen, owner of Ability/Tri-Modal Transportation Services Inc. in Carson and a former chairman of the California Trucking Assn.

Businesses that need insurance that is hard to get or is very expensive also may be more prone to running across fraudulent agents, said Steve Young, general counsel of IBA West, a trade group for independent insurance agents and brokers.

That can include workers’ compensation, liability and commercial auto insurance. The way the insurance market is organized also plays a role. Because the agent acts as a go-between, a small-business owner may never have direct contact with the insurance company that provides coverage.

Agents are authorized to issue binders, documents that list your policy number. A binder arrives a day or two after you pay. Your actual policy usually is mailed to the insurance agent, who is supposed to verify its accuracy and then mail it to you.

Agents also can issue the certificates of insurance that small firms often need for business purposes, and collect the premium money, which is supposed to go into a trust account that is separate from the agent’s regular business account.

Technology has made it easier than ever for fraudulent agents to create legitimate-looking forms and documents, said Kim Johnson-Woods, chief investigator for the Los Angeles regional office of the California Department of Insurance.

The agency has handled more criminal insurance cases in recent years, she said. That’s in part because new laws have made insurance fraud a more serious crime. And the Insurance Department has won limited peace officer powers for some investigators, allowing them to execute search warrants and make arrests in coordination with police officers.

Within the next year, Johnson-Woods said, the department will have a team of peace officers with full powers to operate more independently and access law enforcement data.

“We are focusing more on these cases, trying to spend our time where it would help the public the most,” Johnson-Woods said.

Here are some tips to help you protect your business from fraudulent insurance agents.

• Check license status.

Agents are required to be licensed by the state and they must put their license numbers on their business cards and their marketing material. To verify that a license number is valid, go to http://www.insurance.ca.gov or call the state Insurance Department at (800) 927-HELP.

• Know your agent.

“Check references. Make sure they are a reputable broker firm,” said John Prichard, senior vice president and manager of small business at Heffernan Insurance Brokers, which has offices in Orange and Walnut Creek.

He recommends asking an agent for customer and insurance company references. Prichard also suggests checking an agent’s website for signs of credibility, including accreditations. Also, ask whether the company’s financial statements are audited or at least reviewed by a certified public accountant, he said.

• Get several quotes.

It’s important to shop around, but remember that cheaper is not always better.

“The best price is not always an indication of the best insurance,” Prichard said. Fees should be disclosed and justified, he said. “It’s often necessary for a broker to charge a fee, especially in the small-business arena where premiums are so low there is often not enough commission to pay for the time the broker spends on the client,” he said.

• Don’t pay cash.

Always pay by check or money order, advised Loretta Worters, vice president of the Insurance Information Institute. Get a receipt for all payments and be sure the receipts show your policy number, date of payment and the name of the insurance company providing the coverage.

The bottom line: “Never pay for insurance until you’re sure the agent and the company are legitimate,” Worters said.

• Confirm coverage.

The actual insurance policy can take as many as 90 days to receive, but within a day or two you should receive from the agent what’s known as a binder. It’s a document that has your policy number, the name of the insurance company providing the coverage and a summary of the coverage. It usually is effective only for 90 days.

Call the insurance company to verify that the policy number is legitimate and that it belongs to you and that you have the coverage you expected.

It also makes sense to check the financial stability ratings of the insurance company issuing the coverage. Moody’s (www.moodys.com), Fitch (www.fitchratings.com) and A.M. Best (www.ambest.com/bestline) provide unlimited free ratings on their websites and up to five free ratings via telephone, Worters said.

When Lloyd, the cafe owner, had to find legitimate workers’ compensation insurance for the 12 employees at his two restaurants, he checked the license of his new agent, a longtime customer, and checked the insurance company’s rating online.

“It’s kind of hard to take the time,” Lloyd said. “But the cost of not doing it could be significant.”