How many insurance carriers are ready to make a substantialcapital investment in a new policy administration system? Thatnoise you hear is the sound of thousands of hearts pounding fasterin the executive offices of virtually every insurance company inthe countrythe prospect of such an investment is frightening formost carriers. A policy administration system is the motor thatdrives the insurance operation, and carriers cant afford to let thepolicy administration system break down. Neither can they afford inthese times to run out and buy a new system.

Some carriers dont have a choice, though. You can patch thingstogether only so long before the care and feeding of a sick orunwieldy system becomes prohibitive. OneBeacon Insurance Group, aproperty/casualty insurer formed through mergers and acquisitions,had nine different systems managing policies for its commerciallines. A single system was inevitable. It allowed us to bring someof the newer technologies to bear and enabled us to do things wewere incapable of doing before, says Arne Herenstein, vicepresident application development for OneBeacon.

John Goldwater, executive vice president of GE CyberComp, adivision of GE Commercial Insurance, knows hard choices have to bemade. I look at policy administration systems, and theytraditionally require a substantial capital investment, he says.Depending upon the size of a carriers business, that may or may notbe a worthwhile investment for it to make.

The expense of replacing a system can be scary, but Eric Bulis,vice president information officer for life insurer SBLI USA,Mutual Life Insurance Co., Inc., says, I believe carriers that bitethe bullet and move away from their legacy application to theextent the business rules can be moved from the old legacy platformto a new platform shouldnt shy away from that move. It will bepainful, without a doubt. No organization in this day and age willgo into that without those concerns, but if its done right, [acompany] will see efficiencies and a new level of responsivenessfrom the IT organization to the business that is increased by anorder of magnitude.

Only the Beginning
No IT professionals like to hear the word antiquated associatedwith any of their systems, but that is how Marielen Leonarddescribes 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 DataProcessing (IDP), so the insurer was excited when IDP approached itwith the opportunity to take part in the development of a newsystem known as Acies/one.

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

What Leonard likes in a system is flexibility. Carriers aredifferent from each other, and so are insurance policies. Policyadministration systems, she believes, should not all be the same.The system is flexible because of the areas [IDP] can design rightto the clients specifications. Our screens will perform the samefunctions 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 beformatted to their pleasing.

OneBeacon knew it was only a matter of time before it had tosettle on a single policy administration system. The maintenancecosts alone on nine different systems were enough to choke somecompanies, but even more glaring problems were the inability tomanage the insurance products and release new products in a timelymanner. We went looking for a better alternative that would pusheverything into one place, says Herenstein.

Carriers with multiple systems, such as what OneBeacon had, cantsurvive in that atmosphere for very long, he believes. You becomeburied by the maintenance costs of the systems, he says. Even ifyou think of it in its minimum. If every system needed a person [tomaintain it], then it really needed two people because one of themwould want to go on vacation at some point.

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

The system OneBeacon acquired from Sapiens gives theunderwriters a much simpler view of the risk, and agents can clickon to get the quotes they need. OneBeacon looked around at varioussolutions but felt the Sapiens product gave the carrier theflexibility it needed.

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

CyberComp to GE CyberComp
GE Commercial Insurance was so taken with the workers comp platformdeveloped by CyberComp the insurer purchased the company and nowruns the CyberComp platform for its independent agents around thecountry. Workers comp offers different challenges than otherproperty/casualty products. It is a high-transaction, high-expenseproduct for carriers and customers alike. The margins aretraditionally very thin with this business, says Goldwater. Policysizes typically can go down as low as about $800. On an individualitem basis, thats not an awful lot of commission dollars or marginfor 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 tothe business, says Goldwater. The solution was to find a way totransact business more quickly. Transactions that took hours ordays to complete needed to be done within minutes.

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

Quicker transactions make the workers comp policies moreproductive for both the agents and the carriers, thus making it amore viable business. The average transaction time for ourcustomers is about three minutes and 42 seconds, points outGoldwater. When you look back at how traditional transactions weredonepaper applications, fax machines, mail, telephone calls,visitsit was a series of interactions, back and forth between theagencies and the underwriter, he says. The underwriters would spendas much time underwriting the policy that was going to cost $2,000as they did the policy that was going to cost $50,000. GECommercial removed the guesswork by building into the system a setof algorithms that allow the carrier to select the business itwants to insure and uniformly price the product so the carrier endsup with a predictable risk, according to Goldwater.

No Single Package
Finding something that will do everything an insurer would want ina policy administration system is a nice concept but doesnt alwayswork, according to Bulis. When SBLI selected its administrationsystem from Genelco several years ago, one of the criteria was tofind a system that had the ability to integrate with a number ofthe carriers enterprise applications. Wed like to centralize ourinsurance administration on one platform within one package so wecan get all those economies, he says, but we clearly understandtheres no package on the market thats going to do everything wewant it to do.

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

Fortunately, vendors realize that such customization is why theyare still in business. A lot of vendors, Bulis says, are enablingcarriers now to modify and implement new products quickly on thenewer administration systems if they fit the primary framework ofolder products or previously existing products. He claims a carriercould set up another term life product on a newer administrationsystem in a day if the product fit the profile of the industrystandards the vendor provided or a previously existing profile thevendor 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 thecapabilities onto administration systems that didnt exist elsewherein the marketplace, he says. If they did exist, you were lockingyourself in for quite some time. Thats not the case now because ofthe standardization of data transfer. The introduction of XML andthe ACORD standards are important.
Although ACORD hasnt been adopted across the board, Bulis says, itson the road to the future. He believes carriers are going to see alot of efficiencies driven into the IT side of insurance becausethe 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 tofind people to operate it. It was very code-intensive, he says. Itgot to the point where the technology was causing problems from atraining standpoint. We pushed the envelope as far as we could pushit.

Virginia Farm Bureau has since implemented a policyadministration system from AscendantOne. The XML-based architecturewas the way we wanted to go, Fehn says. We do things dramaticallydifferent from other insurers. Were not hard and fast in enforcingrules.

The Webs the One
No matter what line of business a carrier offers, a policyadministration 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 guaranteesits CyberComp transactions will be completed within six minutes. Ofcourse, it helps if the agents have high-speed lines, but Goldwaterdoesnt think that is a worry anymore. Thats really what drives theprocess, he says.

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

OneBeacon says its policy administration system allows thecarrier to do things the company always wanted to do but was neverable to perform: give the agents a quote and an understanding ofwhat the price is, in comparison to another carrier the agent mightrepresent. We are confident our product has been made so mucheasier and more attractively priced that the agents are going towant to work with us, says Herenstein. They can go from thebeginning of the process to the end all at once. They dont have towait for an overnight batch to come out. They can print the ID cardor the certificate of insurance where its necessary. It improvesthe response time from days to minutes.

That Old ROI
There is not one singlediscussion in insurance technology these days that doesnt includethe words return on investment. Not everyone has maintenance issuessuch as OneBeacon had, but if they do, they will see a tangiblereturn. Layer number one was how much we can reduce the ongoing runrate for the IT operation to maintain commercial lines systemsapplications, says Herenstein. For example, if I had 50 peoplemaintaining nine systems, what could I do it with on the ongoingbasis? We actually found we are going to be able to do it with 40percent of the original total. Thats one level of returnkind ofcash in the bankthat when these systems are retired, our people aredeployed to other projects and our staff is reduced.

OneBeacon also will be introducing a new product that willcoincide with the new system, and the carrier believes it is in agreat position to expand its book with that product, as well asmake the company more attractive for agents to deal with. We triedto stay with the hard savings, and we got some very significantones on the IT side as well as on the field productivity side, saysHerenstein. We expect to reach our return in two to three years atmost.

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

Goldwater agrees the options for carriers today are many. Theycan build their own system, buy a new one, maintain what theyalready own, or outsource the service. The insurance side of GEuses a variety of strategies, and Goldwater endorses thatdirection. We are going to match the business with the best optionfor our customer and our business itself, he says. Within GE, allof our businesses have to stand on their own, therefore having avariety of options is the way to go. We are not forced into using alegacy system internally if thats not the most effective means forour customer and our business. By doing that, we are going tomaximize our investment in traditional legacy systems where itmakes sense, and we may utilize third-party vendors whereappropriate.

Employees are energized by new systems and become moreproductive and happier in their work environment, Bulis asserts. Ifyou are willing to make the investment [in a new system], youreprobably going to keep some really great people as long as you alsomake the investment to transform their skills, he says. Theextensibility of the technology is really superb now, and the levelto which you can distribute access to information is superb aswell. Those are the things that are going to drive your ROI.

tech guide: Policy AdministrationTools

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 adecision to replace its current policy administration system orfind a way to make the old system keep running. Replacement ofexisting systems tends to come into play more with the second tierof insurers, according to Kimberly Harris, research director forGartner, Inc.

The big guys that normally have huge IT shops and higher volumesare not the ones weve seen with a great deal of replacementsystems, says Harris. It tends to be the mid- or small-sizedinsurance companies that have a greater interest [in buying]because of the limitations of rearchitecting or modifying thatlegacy 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 newsystems, but she says, the percentage of those wanting to buy ishigher [among the second tier] than the rate of those wanting tobuy within the large-sized insurance company segment. The drawbackis 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 marketfor a new system? Look for a solution that closely fits yourbusiness strategy, says Harris. She believes carriers need to havea technology blueprint so when they look into vendors they arelocking into a long-term strategy and not just trying to fix theevils of today. She adds the technical underpinnings of a productare just as important as functionality. Harris also suggestscarriers be aware of a vendors viability in the market and itsvision for the future. Is the vendor going to be able to grow andsustain the customer as well as keep the product up to date withfuture releases? she asks. You have a lot of small vendors that arecoming into this market and their viability is questionable at thispoint.

A problem for some smaller carriers arises when the vendorbegins to make a few sales and other customers want the productchanged. If carriers arent careful, they can get pulled off theirpath where they never finish one thing before they are sent off ona side direction, she says. They never fully execute theirvision.
As for the large insurers, Harris believes there are two ways togo. You can migrate to a new platform, or you can componentize theexisting system, which tends to be the most popular strategy wereseeing, she says. A system is broken down into differentcomponentsrating, underwriting, claims, billingand the carriereither replaces or builds (whatever the carriers strategy is) thedifferent pieces that were the pain points.

Its a tough market for vendors to sell some of their policysystems, says Harris. Many of the systems are using datedtechnology, or if they are newer systems, many times they areincomplete or lack the customer references that a large companywould be looking for.