Only the Beginning
No IT professionals like to hear the word antiquated associated with any of their systems, but that is how Marielen Leonard describes the policy administration system used by her company, Security Mutual Insurance, a New York-based personal lines carrier. Security Mutual has been a long-term customer of Insurance Data Processing (IDP), so the insurer was excited when IDP approached it with the opportunity to take part in the development of a new system known as Acies/one.

We couldnt find a system that was as robust as IDPs and did everything we needed, says Leonard, production systems manager. What Security Mutual found on the market were systems that comprised part of the puzzle, not the complete picture. After two years of development, Security Mutual is hoping to get the first of the companys 11 lines of business programmed within the next few weeks.

What Leonard likes in a system is flexibility. Carriers are different from each other, and so are insurance policies. Policy administration systems, she believes, should not all be the same. The system is flexible because of the areas [IDP] can design right to the clients specifications. Our screens will perform the same functions for everybody, but theyre in a display we are used to [viewing] and was designed for us, she says. For the next company [using the system] the screens will be [similar], but they will be formatted to their pleasing.

OneBeacon knew it was only a matter of time before it had to settle on a single policy administration system. The maintenance costs alone on nine different systems were enough to choke some companies, but even more glaring problems were the inability to manage the insurance products and release new products in a timely manner. We went looking for a better alternative that would push everything into one place, says Herenstein.

Carriers with multiple systems, such as what OneBeacon had, cant survive in that atmosphere for very long, he believes. You become buried by the maintenance costs of the systems, he says. Even if you think of it in its minimum. If every system needed a person [to maintain it], then it really needed two people because one of them would want to go on vacation at some point.

OneBeacon had two systems that handled one product linesmall package business. They had been built at different times by different companies, says Herenstein. Keeping rate synchronization for similar products was impossiblehow do you decide where to go? Think how hard this is for the agents. We could never expose our systems to the agents via the Web. How could they make a decision on which one to pick? How does the underwriter figure that out? The underwriter had to touch things 10 times and look at a million different things to get his simple components done.

The system OneBeacon acquired from Sapiens gives the underwriters a much simpler view of the risk, and agents can click on to get the quotes they need. OneBeacon looked around at various solutions but felt the Sapiens product gave the carrier the flexibility it needed.

The data challenges were extraordinary, says Herenstein of the conversion. The solution: As each policy month comes up, the system is in position to assist in automated conversion. That only requires the underwriting unit to look for data it is unable to find in the existing policy file, he says.

CyberComp to GE CyberComp
GE Commercial Insurance was so taken with the workers comp platform developed by CyberComp the insurer purchased the company and now runs the CyberComp platform for its independent agents around the country. Workers comp offers different challenges than other property/casualty products. It is a high-transaction, high-expense product for carriers and customers alike. The margins are traditionally very thin with this business, says Goldwater. Policy sizes typically can go down as low as about $800. On an individual item basis, thats not an awful lot of commission dollars or margin for the agents.

The picture isnt any rosier from the carrier side, either. Theres an awful lot of expense and not a lot of profit relative to the business, says Goldwater. The solution was to find a way to transact business more quickly. Transactions that took hours or days to complete needed to be done within minutes.

The challenge for us was finding the right legacy platform that would allow us to build and connect to our Web-based front end, Goldwater says. A lot of carriers have devised ways to do both pieces, but they do them separately, so there are numerous steps the agent would have to take to transact business with those carriers. The answer was to capture the data in real time from the agents, feed that data to underwriters, and then send it back to the agents in real time.

Quicker transactions make the workers comp policies more productive for both the agents and the carriers, thus making it a more viable business. The average transaction time for our customers is about three minutes and 42 seconds, points out Goldwater. When you look back at how traditional transactions were donepaper applications, fax machines, mail, telephone calls, visitsit was a series of interactions, back and forth between the agencies and the underwriter, he says. The underwriters would spend as much time underwriting the policy that was going to cost $2,000 as they did the policy that was going to cost $50,000. GE Commercial removed the guesswork by building into the system a set of algorithms that allow the carrier to select the business it wants to insure and uniformly price the product so the carrier ends up with a predictable risk, according to Goldwater.

No Single Package
Finding something that will do everything an insurer would want in a policy administration system is a nice concept but doesnt always work, according to Bulis. When SBLI selected its administration system from Genelco several years ago, one of the criteria was to find a system that had the ability to integrate with a number of the carriers enterprise applications. Wed like to centralize our insurance administration on one platform within one package so we can get all those economies, he says, but we clearly understand theres no package on the market thats going to do everything we want it to do.

Insurers could buy the latest product on the market, and he believes, they would still find the need, someday, to customize the solution to fit new products that dont fit any earlier molds. We dont expect there ever to be an insurance administration system that will not have to be customized at some point or another, regardless of whether its homegrown or a package you would implement, he adds.

Fortunately, vendors realize that such customization is why they are still in business. A lot of vendors, Bulis says, are enabling carriers now to modify and implement new products quickly on the newer administration systems if they fit the primary framework of older products or previously existing products. He claims a carrier could set up another term life product on a newer administration system in a day if the product fit the profile of the industry standards the vendor provided or a previously existing profile the vendor and the carrier had customized within the system.

Standards are a key to customization over the coming years, Bulis believes. There was a lot of investment made in building the capabilities onto administration systems that didnt exist elsewhere in the marketplace, he says. If they did exist, you were locking yourself in for quite some time. Thats not the case now because of the standardization of data transfer. The introduction of XML and the ACORD standards are important.
Although ACORD hasnt been adopted across the board, Bulis says, its on the road to the future. He believes carriers are going to see a lot of efficiencies driven into the IT side of insurance because the capabilities exist to accomplish that feat.

Jeff Fehn, director of IT at Virginia Farm Bureau Insurance, reports his companys previous system was so outdated it was hard to find people to operate it. It was very code-intensive, he says. It got to the point where the technology was causing problems from a training standpoint. We pushed the envelope as far as we could push it.

Virginia Farm Bureau has since implemented a policy administration system from AscendantOne. The XML-based architecture was the way we wanted to go, Fehn says. We do things dramatically different from other insurers. Were not hard and fast in enforcing rules.

The Webs the One
No matter what line of business a carrier offers, a policy administration system tied into the Internet is a necessity. Distributed computing is going to be a requirement, says Bulis. Goldwater believes it is so important that GE Commercial guarantees its CyberComp transactions will be completed within six minutes. Of course, it helps if the agents have high-speed lines, but Goldwater doesnt think that is a worry anymore. Thats really what drives the process, he says.

The Internet makes life easier for the agents selling those policies, and Herenstein believes the ability to make life easier for those agents is an order of magnitude improvement. Its multiple orders of magnitude improvement.

OneBeacon says its policy administration system allows the carrier to do things the company always wanted to do but was never able to perform: give the agents a quote and an understanding of what the price is, in comparison to another carrier the agent might represent. We are confident our product has been made so much easier and more attractively priced that the agents are going to want to work with us, says Herenstein. They can go from the beginning of the process to the end all at once. They dont have to wait for an overnight batch to come out. They can print the ID card or the certificate of insurance where its necessary. It improves the response time from days to minutes.

That Old ROI
There is not one single discussion in insurance technology these days that doesnt include the words return on investment. Not everyone has maintenance issues such as OneBeacon had, but if they do, they will see a tangible return. Layer number one was how much we can reduce the ongoing run rate for the IT operation to maintain commercial lines systems applications, says Herenstein. For example, if I had 50 people maintaining nine systems, what could I do it with on the ongoing basis? We actually found we are going to be able to do it with 40 percent of the original total. Thats one level of returnkind of cash in the bankthat when these systems are retired, our people are deployed to other projects and our staff is reduced.

OneBeacon also will be introducing a new product that will coincide with the new system, and the carrier believes it is in a great position to expand its book with that product, as well as make the company more attractive for agents to deal with. We tried to stay with the hard savings, and we got some very significant ones on the IT side as well as on the field productivity side, says Herenstein. We expect to reach our return in two to three years at most.

Leonard agrees manpower savings can be a significant factor. What you save in man-hours over the course of a few years pays for an automated system, she says. There were also duties where we were lagging behind by up to two months, and well now be able to work them on a same-day basis.

Goldwater agrees the options for carriers today are many. They can build their own system, buy a new one, maintain what they already own, or outsource the service. The insurance side of GE uses a variety of strategies, and Goldwater endorses that direction. We are going to match the business with the best option for our customer and our business itself, he says. Within GE, all of our businesses have to stand on their own, therefore having a variety of options is the way to go. We are not forced into using a legacy system internally if thats not the most effective means for our customer and our business. By doing that, we are going to maximize our investment in traditional legacy systems where it makes sense, and we may utilize third-party vendors where appropriate.

Employees are energized by new systems and become more productive and happier in their work environment, Bulis asserts. If you are willing to make the investment [in a new system], youre probably going to keep some really great people as long as you also make the investment to transform their skills, he says. The extensibility of the technology is really superb now, and the level to which you can distribute access to information is superb as well. Those are the things that are going to drive your ROI.

tech guide: Policy Administration Tools

Accenture
Murray Hill, N.J.
267-216-1049
www.accenture.com

AdminServer, Inc.
Malvern, Pa.
972-715-2028
www.adminserver.com

AGO Insurance Software
Mt. Arlington, N.J.
973-770-3200
www.agois.com

AIG Technologies
Livingston, N.J.
973-533-3200
www.aigtechnologies.com

Allenbrook
Brunswick, Maine
877-764-6452
www.allenbrook.com

Amerillium Systems
Raleigh, N.C.
800-330-3097
www.amerillium.com

Apex Data Systems
Tucson, Ariz.
520-298-1991
www.apexdatasystems.com

Applied Systems
University Park, Ill.
800-999-5368
www.appliedsystems.com

AQS
Hartland, Wisc.
262-369-7500
www.aqssys.com

AscendantOne
Nashua, N.H.
603-598-5427
www.ascendantone.com

Attus Technologies
Charlotte, N.C.
888-494-8449
www.attustech.com

Castek
Toronto, Ont.
866-922-7835
www.castek.com

CGI Group
Montreal, Quebec
541-841-3200
www.cgi.com

Covansys
Farmington Hills, Mich.
248-488-2088
www.covansys.com

Cover-All Technologies
Fair Lawn, N.J.
201-794-5586
www.cover-all.com
CSC
Austin, Tex.
800-3454-7672
www.csc-fs.com

Decision Research Corp.
Honolulu, Hawaii
808-949-8316
www.decisionresearch.com

Delphi Technology, Inc.
Cambridge, Mass.
617-494-8361
www.delphi-tech.com

Document Sciences Corp.
Carlsbad, Calif.
760-602-1400
www.docscience.com

DSPA Software
Mississauga, Ont.
905-279-9993
www.dspasoftware.com

Duck Creek Technologies
Bolivar, Mo.
417-777-6970
www.duckcreektech.com

DWL Inc.
Atlanta, Ga.
770-325-4000
www.dwl.com

Edgewater Technology
Wakefield, Mass.
781-246-3343
www.edgewater.com

Epic Solutions, Inc.
Mesa, Ariz.
480-969-2720
www.epicsol.com

ePolicy Solutions
Torrance, Calif.
310-819-3210
www.epolicysolutions.com

E-Z Data
Pasadena, Calif.
800-777-9188
www.ez-data.com

FileNet
Costa Mesa, Calif.
704-875-1934
www.filenet.com

FINEOS
South Portland, Maine
207-879-0400
www.fineos.com

FirstApex Technologies
Flower Mound, Tex.
404-626-4679
www.firstapex.com

Fiserv AIS
West Des Moines, Iowa
800-322-4220
www.fiservais.com
Fiserv SIS
Orange, Calif.
714-705-8200
www.fiservsis.com

Focus Solutions, Inc.
Fort Washington, Pa.
215-643-9300
www.focus-inc.com

Garvin-Allen Solutions Limited
Halifax, Nova Scotia
877-325-9062
www.garvin-allen.com

Genelco Software Solutions
St. Louis, Mo.
800-983-8114
www.genelco.com

IDMI
Warner Robbins, Ga.
888-856-6388
www.idminc.com

IDP
Wyncote, Pa.
267-620-2388
www.idpnet.com

Infinity Systems Consulting
New York, N.Y.
212-541-7602
www.infinity-consulting.com

Innovative Software Solutions
Charlotte, N.C.
800-837-2187
www.webpgmr.com

Input 1
Woodland Hills, Calif.
800-229-9822
www.input1.com

INSTEC
Naperville, Ill.
630-955-9200
www.instec-corp.com

Insurance Services Office, Inc.
Jersey City, N.J.
210-469-2389
www.iso.com

Insurance Solutions & Technology
Cayce, S.C.
877-675-0708
www.the-ist.com

Insurity
Hartford, Conn.
860-616-7452
www.insurity.com

InSystems
Markham, Ont.
905-513-1400
www.insystems.com

ISCS
San Jose, Calif.
888-901-4727
www.iscsinc.com

LIDP Consulting Services
Woodridge, Ill.
630-829-7100
www.lidp.com
Management Data
Birmingham, Ala.
205-991-7511
www.mgtdata.com

Mayfare Software Solutions
Hoboken, N.J.
201-792-7743
www.mayfaresoftware.net

McCamish Systems
Atlanta, Ga.
800-366-0819
www.mccamish.com

National Con-Serv, Inc.
Rockville, Md.
800-368-7720
www.accessflood.com

NaviSys
Edison, N.J.
800-701-2912
www.navisys.com

OAS Software Corp.
St. Charles, Ill.
800-546-2990
www.oasvas.com

OpenFlex Insurance Solutions
Los Angeles, Calif.
213-252-2332
www.openflex.com

P&C Insurance Systems
New York, N.Y.
212-425-9200
www.pandcis.com

PDMA
Indianapolis, Ind.
317-844-7750
www.pdmagain.com

PeopleSoft
Pleasanton, Calif.
800-380-7638
www.peoplesoft.com

Policy Administration Solutions
Whitestone, N.Y.
888-727-7658
www.pasolutions.com

PremiumWare
Arlington, Tex.
817-784-9599
www.premiumware.com

Progressive Data Solutions
Orlando, Fla.
407-382-5920
www.progressdata.com

QualCorp
Valencia, Calif.
888-367-6775
www.qualcorp.com

Rebus Insurance Solutions
Secaucus, N.J.
201-223-2900
www.rebusis.com

Results International Systems, Inc.
Dublin, Ohio
800-875-2126
www.resultscorp.com
Sapiens
Cary, N.C.
919-405-1500
www.sapiens.com

SeaTech Consulting Group
Torrance, Calif.
310-328-8119
www.seatech.com

Severan Corporation
Exton, Pa.
419-584-0284
www.severan.com

Sherwood International
Armonk, N.Y.
905-275-2299
www.sherwoodinternational.com

Sirius Financial Systems
Englewood, Co.
303-209-5900
www.sirius-inc.com

SOLCORP
Mississauga, Ont.
905-672-9444
www.solcorp.com

SS&C Technologies
Windsor, Conn.
800-234-0556
www.ssctech.com

SunGard Insurance Systems
Miami, Fla.
305-858-8200
www.insurance.sungard.com

Systems Engineering Group
Glastonbury, Conn.
860-652-0254
www.segllc.com

Taliant Software
Denver, Co.
303-209-4601
www.taliantsoftware.com

Tata Consultancy Services
Naperville, Ill.
630-717-4235
www.tcs.com

Tropics Software Technologies
Sarasota, Fla.
888-925-1234
www.gotropic.com

Trumbull Services
Windsor, Conn.
877-285-2174
www.trumbull-services.com

Unisure
Cincinnati, Ohio
800-864-7873
www.unisure.com

Vector Technologies
Indianapolis, Ind.
317-613-2400
www.vectortech.com

Xerox-Global Services
Rochester, N.Y.
770-569-5668
www.xerox.com

Whats a Carrier to Do?

The size of an insurance company has a great deal to do with a decision to replace its current policy administration system or find a way to make the old system keep running. Replacement of existing systems tends to come into play more with the second tier of insurers, according to Kimberly Harris, research director for Gartner, Inc.

The big guys that normally have huge IT shops and higher volumes are not the ones weve seen with a great deal of replacement systems, says Harris. It tends to be the mid- or small-sized insurance companies that have a greater interest [in buying] because of the limitations of rearchitecting or modifying that legacy system. They might not have the resources, the skill sets, or the time to do that.

Harris doesnt have any hard numbers on those purchasing new systems, but she says, the percentage of those wanting to buy is higher [among the second tier] than the rate of those wanting to buy within the large-sized insurance company segment. The drawback is the economy. Some are having problems justifying the investment, so they arent buying yet, she says.

So what should these insurers be doing if they are in the market for a new system? Look for a solution that closely fits your business strategy, says Harris. She believes carriers need to have a technology blueprint so when they look into vendors they are locking into a long-term strategy and not just trying to fix the evils of today. She adds the technical underpinnings of a product are just as important as functionality. Harris also suggests carriers be aware of a vendors viability in the market and its vision for the future. Is the vendor going to be able to grow and sustain the customer as well as keep the product up to date with future releases? she asks. You have a lot of small vendors that are coming into this market and their viability is questionable at this point.

A problem for some smaller carriers arises when the vendor begins to make a few sales and other customers want the product changed. If carriers arent careful, they can get pulled off their path where they never finish one thing before they are sent off on a side direction, she says. They never fully execute their vision.
As for the large insurers, Harris believes there are two ways to go. You can migrate to a new platform, or you can componentize the existing system, which tends to be the most popular strategy were seeing, she says. A system is broken down into different componentsrating, underwriting, claims, billingand the carrier either replaces or builds (whatever the carriers strategy is) the different pieces that were the pain points.

Its a tough market for vendors to sell some of their policy systems, says Harris. Many of the systems are using dated technology, or if they are newer systems, many times they are incomplete or lack the customer references that a large company would be looking for.