Buy a package? Do it yourself? Get somethingbut not what you want? Or try to get what you wantbut end up fired. Its a problem.

The Toolset Approach

For at least a generation, smart technical people have been aware ofand trying to offer solutions tothe buy/build dilemma in insurance and other areas. Third- and then forth-generation languages offered a leg up. Object-oriented programming and add-in modules were another step. Remote Web servicesthe ability to access data and functionality from a third partypromises to obviate the need for some development projects. And modern development environments from Microsoft, IBM, and others can be a big help. But these are all generic approaches and dont provide specific insurance-space leverage.

Another approachand one weve seen several times in this industryis for some clever person to point out that it makes no sense to do insurance from-scratch development over and over because we already know a good bit about the problems and solutions. It would make more sense to create a toolkit that already has these elements available along with a configurator that would allow insurance business analystsnot programmersto supply the specifications. The toolkit would then create the actual software needed to run the applications.

The toolkit wouldnt be a software development environment. It would be a policy administration system generation environmenta powerful, insurance-specific wizard you could use to create custom systems. Then you could have it allwhat you want and with little risk. A pretty attractive idea, dont you think?

Of course there are some potential problems and risks with toolsets, and well look at them below. But first, its time to introduce Severan and its new toolkit for creating Web-based policy management systemsFocalPoint V2.

The Severan Approach

Severan (www.severan.com) was formed in 2000 by migrs from Merchants and Business Mens Mutual Insurance Company. Severan CEO Charles Talmadge had served as CEO of Merchants, and vice president of development Bill Gregory had been VP of IT. The remaining Severan staff of 10 consists of carrier and vendor veterans, some with 30 years in the field. Software development itself is done offshore under the direction of Gregory. Severan is privately held.

Severan was founded with the idea of creating a toolset to make it easy for carriers to create their own full-function policy administration systemsusing business analysts rather than programmers. Its first product, FocalPoint V1, was written for the AS/400 marketplace and is in use by three carriers today. Late in 2000 the Severan folks concluded, correctly I think, that the real opportunities lay in the Web world. They took what theyd learned in creating V1, focusing on delivering the same broad functionality but with a different approach to both the toolset and how the systems would be delivered to the end user. The new product, FocalPoint V2, is scheduled for release this month.

Severan says its market focuses on P&C carriers with direct written premium below $750 millionnot because the software wouldnt create appropriate and scalable systems for larger carriers, but because large carriers often have large IT staffs, who have an appetite for doing their own development. The software uses Microsofts SQL Server or IBMs DB2 and, with load balancing services part of the Web server environment, the applications should be scalable to high policy and user volumes. (Severan isnt in the business of Web hosting, but it can put carriers in touch with organizations who make that their business.)

Because FocalPoint V2 creates Web-based applications, carriers using it can solve three problems at once: ubiquitous access by carrier staff, agent access, and insured access. Security settings and the ability to have multiple versions of the same online form make it possible to serve a number of different constituencies from the same system and configuration base.

The FocalPoint V2 Approach

One could think of FocalPoint V2 as having two main elements. The first is the Configurator, written in VB and the tool that business analysts use to specify what a system will contain and how it will act. The second is a set of server-side Java code that actually runs the application from conventional Web servers.

What kind of systems is FocalPoint V2 intended to create? In a word, comprehensive. The system handles rating, ACORD and policy forms, billing, commission accounting, statistical reporting, ceding reinsurance, claims, access to external data sources, ACORD XML-based interfaceand even out of sequence endorsements.

To set up a new line of business, a user begins by defining relevant elements of the database that are used later in rating, forms, and other areas. Next, he describes the various entities that may participate in the processthe carrier (or carriers), agents, bureaus, reinsurers, and so on. Given these basic definitions, he can lay out the policy itself, including the rating process, forms, and statistical reporting specifications. Then comes claims handling, producer contract definition, reinsurance arrangements, billing plans, and security. Once these specifications are in place, the Configurator can generate the Java code to run the application on the Web server.

Under consideration for a follow-on release of FocalPoint V2 later this year is automated underwriting, imaging, workflow management, and a comprehensive set of line of business templates. That last point is worth more comment.

FocalPoint V2 is a toolsetnot a finished system. Thats part of its virtue, but that means carriers who use it have to go through an exhaustive specification process and thats not for everyone. In order to give carriers a head start, Severan will create and offer line-of-business templates that carriers can use as a starting point for their own policy specifications; BOP and Commercial Auto templates are ready now. In most cases, that should substantially reduce the time carriers need to spend, while still allowing the flexibility thats attractive about the product. And for those carriers who would like to outsource the configuration process altogetherat least for the first go-round or twoSeveran is establishing relationships with third-party consulting organizations who can supply those services.

What are the downsides? That Severan is a small startup, of coursebut it has done something thats very clever and shouldnt be ignored simply because its new. And some obvious concerns, such as the lack of support for automated underwriting and workflow, are already in the development queue. The environment needs more sensitivity to the management of the specification process, especially regarding maintenance over time. The system can track specification versions, and it does have a publish/lock feature, but real management of the ongoing use of the product still has to be handled outside rather than within the system. In other words, the toolset may be great for defining policy systems, but it doesnt pay enough attention to the management and documentation of that ongoing process. (After hearing me describe this concern while watching a V2 demo, Gregory now reports hes begun writing specifications for a layer to answer the need.

John Ashenhursts company, Sound Internet Strategy, provides consulting, Web site evaluation, and seminar services to carriers and their trading partners. He can be reached at [email protected] or (360) 376-1090.