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LONDON-Cost reductions and improved client service are vital if the insurance industry wants to remain competitive, says the first chairman of the World Insurance Network.

Speaking at last week's official launch of WIN, an electronic data exchange system for insurance transactions, Chairman Dennis Mahoney marveled that four of "the fiercest competitors"-the brokers that set up the initiative-had cooperated for almost two years to get the project off the ground.

The WIN initiative is vital to the insurance industry, said Mr. Mahoney, who also is deputy chairman and chief executive officer of Aon Group Ltd., Aon Corp.'s London-based reinsurance and specialty unit. Last week, the WIN chairmanship transferred to Ron Forrest, vice chairman of Aon Risk Services Worldwide, the retail brokerage unit of Aon.

"Despite consolidation, repositioning and investment in new (information technology) and re-engineering, our business still remains uncompetitive" with other financial services entities, said Mr. Mahoney. "Traditional brokers and insurers are losing market share despite the fact the overall market is growing."

WIN is intended to help brokers, insurers and reinsurers communicate and conduct transactions electronically.

By developing WIN, the commercial insurance industry will become competitive again with other financial services concerns because WIN will be "the preferred electronic marketplace for commercial insurance," he predicted.

According to research by WIN, the WINconnect electronic mail system launched last week could lead to huge savings. Courier costs could be reduced by 70%, said Mr. Mahoney. Outgoing fax costs could fall by 50%, while incoming fax costs may go down 30%. In addition, long-distance telephone charges could be reduced by one-quarter, outgoing mail costs could fall 35% and incoming mail costs go down 30%.

"This, of course, is just the first step," said Mr. Mahoney. "WINconnect. . .is just the starting point and will evolve through continuous improvement and can deliver massive efficiency and productivity benefits."

Richard Wales and David Evans, joint CEOs of WIN, noted that WIN had developed a case study using various academic studies on the implementation of electronic mail systems.

The savings to an insurance department of 517 employees in London that implemented WINconnect and "vigorously reviewed its operations" could amount to 37%, according to the case study. That's a reduction of (British pounds) 500,000 ($829,350) on its annual courier, mail, fax and phone charges currently running at (British pounds) 1.3 million ($2.2 million). In addition, other savings would come from using less paper, reduced costs of filing documents, purchasing less office equipment and the "efficiency gains of re-engineering processes."

Messrs. Wales and Evans foresee a future where WIN will "become the industry standard. . .and where WIN will reach its pinnacle as a true value-added network." This will come about because WIN is not a proprietary network, and it links seamlessly with other systems. Also, it will evolve alongside Internet and intranet technology, they said. WIN is "the backbone on which software runs"-WIN is not the software itself, they explained.

"To harness electronic commerce to enable global opportunities, reduce frictional costs, to become more efficient and encourage flexible ways of working . . .that's where the future is," said the incoming chairman, Mr. Forrest.

The world's four largest brokers-J&H Marsh & McLennan Inc., Aon Group, Sedgwick Group P.L.C. and Willis Corroon P.L.C.-have developed the network. Johnson & Higgins and Alexander & Alexander Services Inc. were involved before they were acquired by Marsh & McLennan and Aon, respectively.

Together, the brokerages place more than $100 billion in gross premium, said Mr. Forrest, and they all have committed to using WIN as their preferred method of doing business. "We haven't done this because we're shareholders but because we know it is the only way forward," said Mr. Forrest.

Commercial Union Insurance Co. P.L.C., Royal & Sun Alliance Insurance Group P.L.C. and Lloyd's underwriting agency Brockbank Syndicate Management Ltd. have been involved with WIN during the testing phase.

The next move in WIN's evolution is the development of WINvoice, a voice transmission service to operate alongside the data transmission of WINconnect. WIN also will develop online information services and encourage software companies to develop products for the network.

"The future of WIN is to create and maintain the network infrastructure for global electronic commerce in the insurance industry and guide that network forward into the future, with a range of value-added services," said Mr. Wales. "We will enable our industry to keep up to date and take advantage of the opportunities offered by evolving technology."