NAICC was big in workers compensation business, originally, and Khachaturian and his team wrote their own custom software on their own mainframe. This included all the policy processing, along with a sophisticated claims system. Its an article of faith at NAICC, Khachaturian says, that no matter what kind of deal we do, we always handle and control the claims ourselves. And they do it on their mainframe.

Theyve done a lot of different things, too. For example, one of their best deals is a relationship with a wholesaler in Northern California, SCJ Insurance Services, which has a non-standard auto program written on NAICC paper. SCJ handles all the distribution through its own sales force, and issues the policies on its own system. But the claims are handled directly by NAICC, on the mainframe. Every night they swap information. It works well, and although the program goes up and down in premium, its been consistently profitable.

Moving into the personal auto business, incidentally, created some immediate IT issues NAICC hadnt anticipated. We had to quickly write and deploy an interactive voice response system to handle the flow of phone calls, and install an NCR Cash Machine to handle the large flow of premium checks, Khachaturian explained.

Other than the SCJ deal, all the rest of NAICCs $85 million in writings is done through its 200 agents, mostly in California but also in six other western states. As it moved into other lines, though, it turned out to be expedient to buy ITCs client/server policy processing system, rather than build its own. It still handled the claims on the mainframe, though.

Because SCJ does its own issuance for personal auto, and NAICC uses ITC for issuance on commercial auto (and its now out of the remaining lines), Khachaturian decided the time is approaching to pull the plug on the very large, very expensive mainframe, which is now used only for claims.

Thats a big decision, and Khachaturian shared both his thought processes and a large working document hes prepared to guide NAICC and its management through the process of finding and implementing a replacement system. He started by finding a comprehensive listing of the vendors in the industry (at www.nationalunderwriter .com/links/vendors.htm, authored by yours truly). Using the list of vendors, Khachaturian identified three possible scenarios for NAICC.

The first option is to outsource its mainframe operation to a large company that can handle it, such as CSC or one of several competitors. That has the advantage of allowing it to continue to use its existing software, but without the mainframe support. The disadvantage is that it loses the direct control over the system.

The second choice is the ASP optionfinding a vendor that has software that can handle the issuance for auto and claims for all lines, and who offers the software on a hosted platform. Of all three options, this one gives NAICC the least control, however.

The third option is to buy a system, probably a client/server system, that can handle everything the company needs, and run the thing itself.

Khachaturian put together a comprehensive matrix of all the options, all the strengths and weaknesses of each of the vendors and each of the options. What he didnt do, however, was give any hints about which option NAICC would choose, or which vendor he preferred. Based on his timetable, however, the company is going to make a decision about the time you read this, so perhaps well all find out in a future article.