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The real-time enterprise is a reality in business today,but the insurance industry has been slow to take advantage. What dothe leaders of real time in insurance know that othersdont?

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In 1956, Taiichi Ohno had a revolutionary idea for the future ofbusiness: just-in-time inventory. In Ohnos vision, a business wouldschedule inventory to arrive exactly in time to replenish an itemthat had just been depleted, allowing businesses to reduce thecarrying costs associated with warehousing large quantities ofinventory that might not be used or sold for weeks or months. Earlyadopters of just-in-time inventory ultimately would become leadersin their industriessuch as Ohnos Toyota and Sam WaltonsWal-Martbefore his method eventually garnered widespreadinterest.

Fast forward to the 1990s, when technologies began to emerge totransform the way insurers did business. The concept of real timewas created to describe this transformation, where batch-processingsystems, disconnected data sources, and days-old information wouldbecome relics. But is the real-time insurance enterprise ready forprime time today?

The technologies are available [for real time]. What has beenlacking is the drive from the industry, says Kimberly Harris, vicepresident of research at Gartner. Theoretically, it makes a lot ofsense, but insurers are not doing it [because] competitors are notdoing it.

This situation ultimately will change, however, driven bycompetitive pressure as more companies adopt a real-time mentalityand as consumers and agents, accustomed to the on-demand world ofother financial services, come to expect it from insurers. Like theearly adopters of just in time, insurers on the leading edge ofreal time are strategizing that their efforts today are thefoundation of a future competitive advantage.

Real-Time Successes

The best examples of real-time enterprises are found in the lifeinsurance industry, according to Harris, particularly in theannuity business. Were starting to see a trend where these[annuity] companies are asking how they can compete with investmentfirms, she says. In the investment and other financial servicessectors, initiatives such as T+1 and multichannel distribution andservice have pushed transactions to a real-time status faster thanin insurance and advanced the expectations of customers andbrokers.

The Guardian Life Insurance Company of America, New York, is acompany Harris identifies as a real-time leader today. JaimeSguerra, second vice president and chief architect of GuardianLifes information technology division, explains at the same timethe company was undertaking a multiyear project at the corporatelevel to create a service-oriented, enterprise applicationarchitecture, it also began rolling out applications that weredesigned to bring real-time capabilities to its annuity area.

These applications targeted both agents and customers. To itsintranet portalwhich agents also accessthe company added a unifiedclient view application that shows agents all the productscustomers have purchased from Guardian as well as a financialrepresentative modeling tool that allows agents to project andtrack the agents income. Guardian also deployed a new self-serviceportal for customers.

In implementing all these applications, Guardian dealt with achallenge common to many insurers: a host of legacy applicationsthat processed in a batch mode. Guardian addressed the issue withboth technological and business solutions. First, because it neededto integrate customer information from multiple sources, it createda data warehouse to store data from transaction-oriented mainframesystems, using IBM WebSphere MQ as the messaging system forexchanging the data. It then wrote Web services to deliver data tothe Web-based end-user applications.

Guardian utilizes an event processor engine, a backgroundapplication that continually quer-ies the database for transactionsentered at the policy level and distributes these transactions tothe appropriate server, explains Shelley McIntyre, vice presidentof information technology at Guardian Life. Some processes can becompleted immediately, such as an address change entered bypolicyholders into the online self-service application. Others mustbe pended, such as payment transactions that require fund valueinformation that is not available until the financial marketsclose. The important advantage of the new architecture andapplications is users now can see the current status of bothpending and completed transactions. With [only] our legacy systems,we couldnt do that, she says.

Additionally, McIntyre mentions Guard- ians producer alertsystem. When customers access any of their account information onthe self-service portal, the agent is notified of this activity viae-mail. This keeps agents informed and allows them to addressproactively potential business problems or new salesopportunities.

Property/casualty carriers in general are not as far along aslife insurers, and health insurers are even less so, according toHarris, pointing out the latters efforts have been focused onissues of information security. The real-time success P&C andhealth do have in common is in the claims process, where they haveemphasized providing current information on claims both internallyand externally for better customer service.

Most of the large P&C companies will tell you what makesthem special is how they process claims, says Harris.

A common claim area P&C has targeted has been the firstnotice of loss, indicates John Flynn, senior vice president andresearch director at META Group. This is a place where there arereal, measured business results as a result of investing in [realtime]. In the pre-real-time mode, [the first notice of loss] was apaper-intensive, lagging process that could take weeks to getacknowledged. Now, [insurers] can move those transactions to days,if not hours.

For example, in October 2003, AAA of Missouri, St. Louis, beganusing SceneAccess.net, a communications hub provided by applicationservices provider Scene Genesis. AAA worked with Scene Genesis tointerface SceneAccess to its existing Fiserv Claims Workstationsystem so appraisal assignments can be made by claims adjustersdirectly from within the Fiserv system. Using ZIP Code-basedterritories, SceneAccess automatically sends the claim assignmentto the right appraiser, who upon completing the estimate usingestimating software, uploads the results and any digital photostaken to SceneAccess.

From the adjusters standpoint, the immediate impacts have beeneliminating the time to key in the assignment, not having todetermine manually who gets the assignment, and getting theestimates back more quickly, says Gail Bray, systems and proceduresmanager at AAA of Missouri.

In P&C, the other area where companies have made real-timeadvances is on the money-in side of the business. Right now, we areseeing everyone talk about transaction services such as IVANS[Transformation Station], says Harris. However, despite the talk,the industry is moving toward these services relatively slowlybecause of insurers fear they help commoditize the insuranceproduct and eliminate competitive differentiation.
Safeco, Seattle, Wash., considered the question of commoditizationwhen deciding to link directly to EZLynx, a comparative rater fromWebcetera. We believe, despite the challenges of generic salesplatforms, they provide us with new business opportunities wewouldnt have gotten otherwise, asserts Anne Randall, vice presidentof automation for Safeco Personal Insurance. And if we can just getthe quote, we believe we can win not only that one piece ofbusiness, but we can win more from that agency as it experiences[the rest of] our uncomplicated proprietary technology.

That proprietary technology is offered via the Safeco Now salesportal, deployed in 2003, which provides a single point of entry toa number of previously existing sales applications. It allows thecompanys independent agents to quote and bind personal lines,commercial lines, and surety products; perform policy inquiry; andcomplete endorsements.

Like Guardian Life, Safeco uses Web services technologies toupdate back-end database tables in real time. This allows thecompany to make sure other systems have the same real-timeinformation and enables underwriters to consult with agents onin-process quotations and claims staff to take action based onup-to-the-minute policy status.

If [Safeco Now] were only a sales tool, it would be a limitingfeature, Randall says. Currently, Safeco offers personal lines autoand homeowners application capabilities directly via connectionwith EZLynx, but by leveraging ACORD XML standards, the insurer ispositioned to provide other lines or interface with otherthird-party systems agents use.

Specialty insurer RLI, Peoria, Ill., has taken real-timequotation, application, and binding to the next steppolicydelivery.

Specifically, the company offers a number of insurance programs,such as plans designed for restaurants, taverns, and hotels, whichare underwritten by managing general agencies (MGAs). Theseagencies use RLIs agent portal to underwrite, quote, and bindbusiness. If an application passes online system edits, a policy isgenerated immediately, rendered as a PDF, and e-mailed to the MGAwithin minutes.

Many systems come into play to make this happen. Piyush Singh,CIO of RLI, explains the insurer built its online applicationsystem internally, seeing the system as a point of competitivedifferentiation. It connects to a rating system from Duck Creek.The company uses an internally created document productionframework to assemble approved policies virtually and createPDFs.

Currently, only policies from program business are deliveredelectronically to agents, but RLI plans to roll out this real-timepolicy delivery gradually to most other lines of business, aswell.

There always will be exceptions, such as where we need customcoverages or manuscript forms, but our goal is to get the policyissuance done as quickly as possible, Singh says.
Completed policies either are e-mailed or printed, and PDFs arestored in a repository in the carriers content management systemfrom Vignette, which was installed in July 2004. The Vignettesystem replaced a previous ImagePlus system and completes RLIsefforts to create a single repository of documents that will helpensure employees and agents have access to accurate, up-to-datepolicies and other documents.

As the company has moved toward its real-time goals, it haspushed more and more functionality to front-end systems. Ourapproach was we were not going to try to modify [legacy] batchsystems to make real time happen. We wanted to build the front endsto be Web based, real time, and highly interactive; use the backend as data repositories; and interface with the back end throughenterprise application integration technology, says Singh. Hedescribes this as focusing on the suburbs of RLIs systemstheoutlying applications where users spend their timevs. the downtownof the legacy environment.

Real-Time Roadblocks

Moving toward becoming a real-time enterprise often involvesmassive work, says Paul McDonnell, senior vice president andinsurance segment leader at BearingPoint.

Technology challenges are numerous, any one of which is its ownseparate subject for discussion: an architecture that was neverdesigned to operate in real time, multiple applications andintegration points, different data formats and structures. The listgoes on and on, Harris states.

However, there are equally important cultural challenges thatmust be considered. Real time is a new way of doing things,McDonnell notes. I see big companies spend tons of money, do proofsof concept, look at tools, and this work is done in completeabsence of business context. Its a waste of time and money.

Being a real-time enterprise is a new way of thinking andworking for insurers, beginning with the electronic workflow itrequires.

The insurance industry still is paper- and people-intensive inmany areas, and people are set in their ways, contends Singh.
Making information available in real time also increases thenecessity that work be done right the first time.

From a quality-assurance perspective, as soon as you put thedata out, its visible to the policyholder, says McIntyre. The oldmindset of I get to check it the next day to make sure its correctno longer applies.

But the biggest cultural challenge proponents of real time needto overcome is convincing decision-makers its necessary. Theargument goes: If I can apply a real-time approach to how businessis generated, I will generate more business and be a betterorganization, Flynn asserts.

While in theory that argument makes sense, in reality it isdifficult to prove. Theres just too much investment, provenreliability, and reasonable expectations around operating certainprocesses and transactions in a batch mode that are purelyappropriate, he adds.

Over time, [real time] will have a different role, but rightnow, its not seen as something you have to do to stay alive in themarket, Harris points out. Nevertheless, the insurers profiled haveovercome technological and cultural obstacles in their pursuit ofreal time and believe they have realized solid business value fromtheir effortsalthough they express that value primarily inqualitative, rather than measured, terms.

Safeco, for example, sees Safeco Now and continued connectionwith third-party agency systems as a necessary feature of doingbusiness with the diverse world of independent agents. We want tobe where the sales are, Randall states.

Weve learned over all the years of working with independentagents theyre not all the same. They have differences in processesand procedures, and we therefore want to give them a variety oftools and have them use what works best for them.

We have reduced cycle time, and we can handle more submissionsand turn them around faster, within a few minutes in many cases,Singh affirms, adding the carrier is pairing its real-time effortswith a focus on a single point of entry for agents and staff toinformation and business applications. The lower the frictioncosts, the better off everyone is, he says.

AAA of Missouri was able to calculate what Bray characterizes asa very conservative first-year cost savings of $350,000 attributedto its SceneAccess project, but she observes the biggest impact ison customer service. We view the customer-service satisfaction asthe most important benefitgetting the assignment made, theappraiser out there quicker, and the check in [the claimants] handquicker, Bray says.

Guardian Life also sees the biggest impact of its real-timeefforts on improved customer service. McIntyre explains Guardiancustomers previously were frustrated when CSRs didnt have access tocurrent payments and other information, but that is not the casetoday. In fact, the company now has earned three consecutiveAnnuity Service Awards from financial-services market-research firmDalbar.

Like the early adopters of just-in-time inventory, earlyadopters of the real-time enterprise model view their efforts as astrategy for future success. And despite debate about the need forreal time in insurance, the industry does continue to progresstoward this goal, driven by internal operating pressures andexternal customer and agent expectations.

[Real time] is one of the many key items on CIOs agendas, Flynnremarks. They are exploring it and doing it. Theyre not resistantto it anymore, but they also are not just dropping everything elseto adopt it. Its being applied where appropriate.