Internet Technologies
in the Legal Retirement Insurance

Increased Efficiency and Cost Savings
through Internet Technologies 
for Retirement Insurance Agencies


Jörn von Lucke

Dissertation for the Degree of Doctor
of Administrative Sciences (Dr. rer. publ.)
of the German Postgraduate School of Administrative Sciences-Speyer 1999

Defense Committee: Prof. Dr. Heinrich Reinermann,
 Prof. Dr. Herrmann Hill
Date of Oral Examination: 12th January 1999


The legal retirement insurance (LRI) and its retirement insurance agencies (RIAs) are confronted worldwide and especially in Germany with a multitude of challenges and fundamental changes. There are financial and social, in addition to political and ideological, problems to solve. The outstanding characteristics of the current development include the shift in demographic structure of the population, state modernization, the effects of globalization, as well as the success of the Internet and the associated transformation into an information society. The RIAs must dedicate themselves to these difficulties in addition to their daily and legally prescribed functions. The necessity for reorganization in the administrative structures of the German RIAs has been obvious since the release of the so-called "Berger Advisory Report" on the organization of the LRI. Therefore many RIAs seek solutions to increase their efficiency and flexibility and to lower their costs at the same time in order to guarantee their own existence and those of the entire LRI.

Internet technologies can prove themselves to be a very interesting solution in this association. With relatively limited funds clearly recognizable results can be attained rapidly. In times of scarce financial resources, internet technologies are therefore a very attractive starting point for new consideration.  Increased efficiency and cost savings can be achieved after a short time even without modifications of the existing organization or business processes. Many of these concepts are also usable on a long-term basis. Investments in internet technologies promise high net yields and short amortization periods. In order to react to the opportunities and risks of internet technologies appropriately and successfully, a strategy for deployment and utilization should be laid out. Otherwise important potential will be unnoticed or not used.

This dissertation examines possible applications of internet technologies in the LRI: Where are the potential introduction points for RIAs? How can an RIA use these potentials? Which effects will their utilization have on the RIAs? Which ramifications have to be considered? How should an introduction be initiated appropriately? Which opportunities and risks are related to internet technologies? Solid and realizable responses to these questions have to be found. Although all RIAs worldwide concern themselves with data processing, the use of internet technologies in the LRI so far hasn't been in the focus of a research work in the administrative sciences. The research at the Los Alamos National Laboratory (USA) deals more with the safety risks of internet services and their preventive measures. A study of the specific situation in Germany has not yet been published. From the many different RIA entities, the organizational structure of the German Landesversicherungsanstalt Rhineland-Palatinate (Speyer) was selected as the basic model for the following discussion.

The introduction of internet technologies is only one aspect of a fundamental reform of the RIAs. Organizational, mental, and technical modifications are necessary to solve the pending problems . Therefore all processes and organizational structures should be analyzed critically. By avoiding a fundamental reorganization of the business processes, the chance for far-reaching optimization would be missed, because otherwise the existing processes will only be transferred to another medium. For this reason internet technologies should be introduced at the same time as a initiative to revise the organization thoroughly.

The first section includes the structure, functions, current problems and development tendencies of the LRI in Germany. Activities of the RIAs in the areas of information and communication technologies are discussed later. Present possibilities, technological advancement and the fundamental condition of internet technologies are core items of the second section. The application and utilization potential of an RIA at a departmental and office level are treated in detail in the third section. Based on these ideas, solutions for the design and use of internet technologies are presented in the fourth section. The realizable measures for increased efficiency and cost savings are the emphasis of the fifth section. In the sixth section, considerations for the introduction of internet technologies are explored; including strategies, pilot projects, opportunities and risks. Finally a summary with a perspective on recent developments concludes the presentation. In addition there is a homepage available in the Internet, which corresponds to the references in the appendix.

Table of Contents

  1 Retirement Insurance Agencies in Change 
  1.1 National Retirement Insurance Agencies in Germany
  1.2 Retirement Insurance Agencies and Internet Technologies
  2 Internet Technologies 
  2.1 Current Possibilities for the Internet
  2.2 Further Development of the TCP/IP-Protocols and their Applications
  2.3 Improvement in the Framework of Internet Technologies
  3 Potentials for a Retirement Insurance Agency on a Departmental and Office Level 
  3.1 Information and Consulting Services
  3.2 Department of Insurance, Benefits and Disability
  3.3 Management and Internal Administration 
  3.4 Medical Services and Rehabilitation Clinics 
  3.5 Office of Finance and Assessment
  3.6 Office of Law 
  3.7 Office of Construction 
  3.8 Office of Audit
  3.9 Office of Press and Public Relations
  3.10 Self Administration
  3.11 Employee Council 
  3.12 Employees
  4 Bases for the Design and Utilization of a Successful Presence 
  4.1 Comments on the Introduction of Internet Technologies 
  4.2 Public Internet - Connection to the Computer Network Internet
  4.3 VDR-Extranet - Extension of the National Retirement Insurance Computer Network
  4.4 RIA-Extranet - Special Network for the Business Partners 
  4.5 RIA-Intranet - RIA-internal TCP/IP-Network
  4.6 Supplementary Activities for Retirement Insurance Agencies 
  5 Realizable Measures for Increased Efficiency and Cost Savings
  5.1 Economical Actions
  5.2 Acceleration 
  5.3 Improvements in Quality and Service 
  5.4 Improvements in the Organization 
  5.5 Steps for Cost Savings 
  5.6 Possibilities for Increased Payments 
  6 Reflections on the Introduction of Internet Technologies
  6.1 Fundamental Thoughts before Beginning
  6.2 Strategies for the Introduction of Internet Technologies
  6.3 Possibilities for Successful Pilot Projects 
  6.4 Decision Scope for Management 
  6.5 Preparations for the Introduction of Internet Technologies
  6.6 Experiences and Problems 
  6.7 Long-term Possibilities and Risks for Retirement Insurance Agencies
Summary and Outlook 

Executive Summary

For RIAs, there exist many starting points for the application and utilization of internet technologies. The proposed potential applications of the public Internet, the VDR-Extranet, the RIA-Extranet and the RIA-Intranet will be a meaningful supplement to conventional information and communication tools. In some areas they uncover completely new possibilities. Internet technologies will have a great influence on all communication streams both inside and outside of an RIA. With their virtual perspectives, they are able to change the entire organization of an RIA. The introduction of internet technologies should be regarded as a long-term investment. Innovative RIAs like the American Social Security Administration (SSA) already have shown that acceleration, improvements in service, quality and organization, as well as cost savings, can be obtained with the current capabilities of internet technologies.

The list of potential applications for RIAs presented is neither binding nor final. Eventually some corrections and refinements will be necessary. New aspects and future technological developments within the fields of encoding technology, electronic payment systems or intelligent agents cannot yet, at the beginning of their development, fully be grasped.  New aspects of the division of labor and virtual organizations will lead to significant modifications. Internet technologies enable new possibilities for a modern and customer-oriented RIA. At the same time they permit a structure for a completely new and virtual RIA. In the design of homepages on TCP/IP networks, employees can  adhere to specifications, but retain much opportunity for self-initiative and creativity. Finally, one of the enormous advantages of  internet technologies is the fact that all parts are at any time expandable, correctable and restructurable. TCP/IP-networks thrive upon the relevance of the information offered and the imagination of their users.

The possibilities presented can also be transferred, with consideration to their respective needs, to other areas of Social Security or those parts of the public administration which are predominantly concerned with data processing. Nevertheless, within all these fields it should be considered whether or not the actual structures will be adequate for the demands of the 21st century. The introduction of internet technologies might be the exact starting point for a fundamental new design in structure and organization, because it will create many new possibilities for organizations. However, the legislature, the service for citizens, the economy and the interests of employees must be considered, and not overlooked, during all modification measures.

Despite all of the euphoria, one has to be reminded that TCP/IP networks are only a means to an end. They are a means for data transfer and for the improvement of communication; both worldwide and internal. They are, however, not a universal remedy for RIAs in trouble. The technology of networking will have no success if the substantial organizational, mental and technical problems are not satisfactorily solved.

Each RIA must weigh the pros and cons of the introduction of internet technologies for itself and make its own responsible decision.  The future success and even existence of an RIA can depend upon the decision for or against internet technologies. Risks may be neither over- nor underestimated. They must be detected and minimized in any case. With a decision against internet technologies, its respective consequences must be carefully scrutinized.  Considering the tremendous effects and worldwide success of internet technologies, the decision makers will repeatedly be confronted by internet technologies in the near future. Many businesses have already discovered the enormous efficiency potential of internet technologies, in which they see a flexible and manufacturer-neutral information platform with good future prospects. The broad commercial use of internet technologies is already apparent. Internet technologies essentially offer a business functionality, which was missed or simply too expensive in the past. Several studies show that the creation of an intranet should begin as soon as possible. The faster an intranet becomes a component of the administrative infrastructure, the sooner increased efficiency and cost savings are realizable.

The extraordinary difficulties of data security are surely a critical damper on the general internet euphoria. The strict security which exists especially within RIAs in Germany must be preserved. It may not be compromised by an internet commitment. The current discussion and establishment of firewalls by RIAs in Germany are a step in the right direction. In view of the indeterminable advantages of internet technologies, security problems are nevertheless not a reason to remain in a wait-and-see mindset. Considering the continuing advancement of technology, security standards will finally be implemented and fears of an unsecure internet will disappear. Therefore, RIAs should currently use internet technologies to economically perform their legally-prescribed functions.


Zusammenfassung | Executive Summary | Résumé Directeur | Resumen Ejecutivo | Links - Appendix
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