Dessert Reception: Integrating e-commerce into
Existing Distribution
--William Fandrich, Vice President of Information Services
and Manager of Electronics, Liberty Mutual Insurance Co.

"Liberty Mutual to Expand Internet Effort"

Liberty Mutual Insurance Group began developing electronic commerce systems four years ago but only recently made a larger commitment to electronic commerce, including eventual sales of insurance via the Internet, the head of the insurer's electronic commerce efforts said.

William Fandrich, Liberty Mutual's information officer and vice president for electronic commerce, said no specific date has been set to begin its expanded commerce. The decision came from Chief Executive Officer Edmund "Ted" Kelly, Fandrich said.

Liberty Mutual offers a broad line of insurance products, including auto and homeowners' insurance, and business coverages such as workers' compensation insurance. It receives business inquiries and referrals through various online sources, but does not sell through that medium. Fandrich spoke Nov. 15 at A.M. Best Co.'s annual conference in Boston.

Liberty Mutual's four-year, multimillion-dollar commitment to developing its e-commerce systems is remaking the company, Fandrich said.

For instance, internal documents and manuals are routinely published online on the company's intranet--an Internet-type network available only to internal users. The company also routinely exchanges data with clients and vendors. Every part of the company's far-flung operations is part of its online communications network and data can now be exchanged with outside systems, he said.

Fandrich joined Liberty Mutual in 1995. He is a veteran of Health Communication Services Inc., Deloitte & Touche and Electronic Data Systems. Four years ago, Kelly gave Fandrich a simple directive: "You build the electronic commerce highway and I will get the business to put the cars on the road."

That meant developing basic utilities and standards so Liberty Mutual's data and systems could easily communicate with the outside world. It also meant gathering knowledge and information into electronic form, and standardizing on a broad-based internal communications network. Today, Fandrich said, the company's intranet is fruitful:

• Liberty Mutual's overall spending on electronic commerce has remained consistent in the past four years but spending on technical infrastructure has declined. Meanwhile, the portion devoted to business projects has increased a sign that the company is using its electronic commerce framework to remake business functions.
• The company processes 20,000 medical bills per day without human intervention.
• The company now handles appraisals, auto quotes and other inquiries electronically.
• Eight business partners now interact electronically with Liberty Mutual. Fandrich also laid out a framework for insurers and others looking to enter the world of electronic commerce. Noting that Liberty Mutual has a field force of agents, Fandrich admitted that any company that begins to sell online would likely ruffle some feathers. But rising Internet usage and falling hardware costs means companies pay a high price for not joining the world of online commerce. "It's not all or nothing, but if you do it behind their (agents') back, you're in trouble," Fandrich said.

The conference concludes Tuesday afternoon.

Liberty Mutual Insurance Cos. Has an A.M. Best Co. rating of A+. Liberty Mutual had $7.1 billion in policyholder surplus and $3.03 billion in net premiums written for the first six months of 1998, according to A.M. Best Co. data.