Coming Up to Speed

Insurers' legacy systems have struggled to keep up withcustomers' changing expectations and market pressures. But ratherthan pulling the plug, insurers have taken a number of approachesto supporting process automation with in-place technologies.

Plastic silverware. Military intelligence. Jumbo shrimp.Process-savvy legacy systems. We won't argue the first three ofthese are oxymora, but what of the fourth? Can legacy systems beprocess savvy, or is that truly a contradiction in terms?

On one hand, the reputation of legacy systems as processautomation inhibitors often is well deserved. Hard-coded businesslogic, point-to-point integration, different systems doing the samefunction for different lines of business, and lack of visibilityinto in-progress processes are all common characteristics of legacysystems that lead to inefficient processes and lack of operationalcontrol.

"From an operational standpoint, what this very often causes ischanges and exceptions are done outside the system, and it's thesemanual workarounds that most often are the cause of problems," saysNathaniel Palmer, chief analyst at the Delphi Group. "Also,customers' service expectations outpace the ability of [legacy]systems to keep up."

These problems, however, typically pale in comparison with thechallenges presented by legacy system replacement. "More often thannot, insurers choose to deal with their legacy applications," saysSteve Discher, practice director at Robert E. Nolan Company."Technology obsolescence is less of an issue for our clients thesedays. They're stretching out the life of mainframe and midrangesystems."

To solve the inherent contradiction between "legacy" and"process savvy," insurers have done everything from wrapping systemcomponents with modern interfaces to performing completearchitectural overhauls. They also have leveraged EAI, workflow,and business process management (BPM) technologies both to augmentthe functionality of legacy systems and to create completely newend-to-end processes.

A New Lease on Life

"We can rebuild him. We have the technology." In the 1970stelevision show, scientists rebuilt the fictional Steve Austinusing the latest bionic components to make him the "Six MillionDollar Man."

The buzz today around technology promising to make systems"better, faster, stronger" is focused on service-orientedarchitecture (SOA). Under an SOA framework, insurers can build newand rebuild existing applications as interconnected services (oftenreferred to as Web services for their XML-based nature), and asingle service can be used as a component in any number ofapplications. SOA addresses the problems of locked-in businesslogic and integration difficulties that traditionally have made itdifficult for monolithic legacy applications to respond to processchanges.

Yet creating an SOA isn't for the faint of heart–or thin ofwallet. In general, plan on a rebuilding project–like that of SteveAustin–to be measured in multiples of millions of dollars and totake several years. The SOA development contract between Fireman'sFund and IBM, reported at $157 million over seven years, is arecent, well-publicized example of that fact.

Estimating legacy system transformation costs is a difficulttask for any insurer, involving an assessment of the size of eachapplication targeted, the amount of "dead" code that can beeliminated, and the overall complexity of each application. "Thosewho have not already invested in 'Web enablement' initiatives, whohave older infrastructure, older applications, and more'home-grown' applications, will be facing potentially significantinvestments to implement an SOA," says Rod Travers, senior vicepresident of technology at Robert Nolan Group.

Rather than rearchitecting entire applications from the groundup within an SOA framework, many carriers are using SOAtechnologies to work from the outside in, picking off legacy systemfunctions that can become reusable components and exposing existingsystem interfaces through services wrappers that can be accessedand used more easily by other systems that are part of theend-to-end process.

State Auto Insurance, for example, had no interest in replacingor rebuilding legacy policy administration systems from CSC(originally from PMSC) the insurer uses in both commercial andpersonal lines. "Those systems are pretty well entrenched here,"says Doug Allen, director of IT at State Auto.

Rather than being obstacles to work around, he emphasizes thesystems are assets that work well for State Auto. "Over the years,we've made a number of [company] acquisitions and migrated a lot ofother systems as a result to [the CSC platform]. We feel good aboutthe fact we have only two policy issue systems here and we have allour policies on one platform."

When State Auto deployed a commercial portal for itsbusiness-owners line in 2000, it had used a screen-scrapingapplication against the CSC system. However, that wasn't a goodsolution in the long term. "As a screen scraper, the functionalityis limited. It's not what the agents are expecting to see and do ontheir portal," Allen says.

Therefore, when the insurer deployed its personal lines portal,it wanted a more active connection between the portal and thecompany's admin systems, and it was committed to using ACORD XMLboth as the messaging method for that connection as well as forbridging rating and application processes directly to managementsystems used by agents. "At the time, CSC didn't supporttransformation for ACORD XML, so we wrote our own transformationapplication using .NET," Allen says. CSC since has added ACORD XMLsupport to its platform.

Having created XML adapters for the legacy system, State Autowas able to integrate more easily Fair Isaac's Blaze Advisorunderwriting system, running as a Web service, into its applicationprocess in early 2004. The company also has targeted specificmainframe functions for wrapping with Web services interfaces tomake those available to other systems.

For instance, State Auto previously had built amainframe-to-mainframe connection with ChoicePoint to retrievecredit scores. "Today, with our Web-facing applications, instead ofbuilding a new connection, we created "get score" as a Web serviceusing .NET, which makes a call back to the original mainframeinterface," Allen explains.

State Auto still does face some process challenges posed by itslegacy environment, the primary of which is the batch nature of thesystem. Though the insurer runs "mini batches" based on workload,there still can be a day delay between application submission andacceptance.

Better Orchestration

Regardless of how much an insurer may modernize any particularlegacy processing system, there are typical limitations to how muchany end-to-end process can be automated using application-levelcapabilities. That is, system X may be perfectly adept at handlingits part of the process and passing a completed task to system Y,but neither system provides visibility into the entire process lifecycle.

That leads to business process management systems (BPMS), thecurrent evolution of workflow technology. "BPM is workflow plus EAI[enterprise application integration]," says Art Barrios, businessprocess management practice leader for BusinessEdge Solutionsconsultancy. "It's different from previous workflow technology,because before workflow was specific to one application, and if youtried to extend it horizontally, then the proprietary nature of theworkflow systems wouldn't talk easily to other systems."

While a BPMS typically provides the process-modelingcapabilities and the process-monitoring dashboards of a typicalworkflow system, the defining characteristic of a true BPMS is an"orchestration layer." This layer serves as an integration hubthrough which various applications, components, and servicesconnect.

By establishing an application-independent orchestration layer,a BPMS can allow companies to create automated workflows that crossnot only different systems but also different processes. As anexample of this, Barrios cites the common processes associated withhiring a new employee. "You need to issue technology to a person,find a place for him to sit, and develop a benefits package. Allthose were typically handled by several different [legacy] systemswith e-mail acting as the middleware. Employees would show up andbe unproductive for days or weeks because they didn't have acomputer, didn't have an ID, even didn't get paid," he says.

Contrast that with the same process orchestrated by a BPMS. "The[BPMS] 'knows' based on the recruiting system that someone is hiredand moves that information to the HR system and then to thebenefits system. It sends an order over to facilities to make surethe person gets a cube and to IT to get technology. Now, you'vedeveloped an end-to-end 'employee and contractor onboarding'process that is defined, controlled, and monitored. If it's startdate minus three and you don't have a task completed, you can querythe manager who is responsible for that task, yet you're stillachieving that visibility using legacy systems in the process,"Barrios explains.

Gaining better visibility into and control of processes whileretaining legacy systems was a key objective of a BPM project atBrazilian health insurer DixAmico. The company was formed when Dixpurchased Amico from CIGNA, giving the insurer locations in S?oPaulo and Rio de Janeiro that used different legacy planadministration systems. Having two different systems and apaper-based application process meant the company often had no ideawhere a plan proposal was in the underwriting process, let alonewhether or not an agent had begun a proposal.

The company took a two-pronged approach to the problem. Itconsolidated the plan administration systems to the Rio de Janeiroplatform, an internally developed mainframe system using VisualBasic, Cach?, and an Oracle database. In July 2005, it finishedinstalling a BPMS from Fuego, which connects to the legacy systemas well as its ERP and CRM platforms and a new Web-basedplan-application system, which will be the carrier's only method ofaccepting applications going forward.

Whereas previously, DixAmico would not know a proposal was inprogress until the plan was received in the mail at either the S?oPaulo or Rio de Janeiro office, now the company knows when an agentbegins working on a proposal using the Web front end and canmonitor it through the entire process. "Today, if someone calls andasks, 'Where is my plan,' we can say, 'It's in the branch office,'or 'We're analyzing it.' The process is totally under control,"says Mauro Penha Bastos, technology director at DixAmico.

For DixAmico, the strength of its BPMS was its ability toorchestrate the application process while leaving legacy systemsintact. "The difficulty [with previous workflow solutions] is wecould design processes, but design tools couldn't automate theprocess. Fuego can make the connection with systems and processesregardless of language, allowing us to rebuild our processeswithout rebuilding our systems," Bastos says.

DixAmico spent about $225,000 (U.S.) on the Fuego project and onrelated consulting services from systems integrator DecisionWarehouse, and the insurer expects to obtain a return on thatinvestment within six months. "Before, we had 12 [manual] steps inthe process; today, we have three because Fuego calls the restautomatically," Bastos says, adding the electronic workflow willallow DixAmico to reduce staff by centralizing certain tasks, suchas the review of plan proposals by on-staff medical experts."Before, we needed the physical document. Now, I can have peopleanalyze the plan [anywhere]," he notes. The carrier also hopes toincrease sales by providing timelier plan issuance and fasterpayment of commissions.

Grand Vision

To achieve the maximum benefit from a BPMS, companies need tothink at the enterprise, cross-process level. However, enterprisedeployments often start by addressing particular legacy systemlimitations and department-level pain points. That approach worksfine as long as there is a larger vision at the outset. "BPM canstart divisionally, but to achieve the greatest value, you have tolook at it from an enterprise standpoint," asserts Barrios.Otherwise, "you'll find three divisions have installed BPM systems,but each has done it differently because the divisions weren'ttalking to each other."

Workers' compensation carrier Republic Indemnity first looked toa process management system because it needed to reduce cycle timesin its claims process to improve customer service, reduce claimleakage, and avoid fines it had been incurring for the late paymentof workers' compensation claims.

The main culprit behind the cycle time problem was not itsclaims system–an in-house developed AS/400 system using RPG andCOBOL with a DB2 database–but the 200,000 documents it handledannually as part of its mail-driven claims process. Therefore, thecompany installed Exigen's imaging and BPM solution in 2003. "Wewanted to wind up with a solution that would be used not just forclaims but for underwriting, accounting, [and] billing," says MikeKirrene, senior vice president and CIO at Republic Indemnity.

Republic Indemnity's legacy systems "relatively easily"supported integration with the new front end and workflow system,according to Kirrene. Exigen operates in a WinTel environment,although Republic transformed the database components of Exigen toDB2 under its AS/400. "We wind up with all our structured businessdata in DB2, which allows us to integrate more easily our businessapplication worlds," Kirrene explains. The carrier also deployednew Citrix servers to deliver the new application to remoteoffices.

Rather than dealing with paper claim documents and files at eachof its branch offices, today Republic receives all documents at acentral post-office box at its headquarters, where they are imagedand OCR-processed. Claim data is keyed into the Exigen front end,which transfers that data to the legacy system and initiates a newclaim workflow. If a claims examiner determines a claim iscompensable, the Exigen system initiates an assignment toRepublic's bill review partner. When the bill review is completed,the Exigen system prompts the AS/400 system to issue a checktogether with an explanation of benefits. And throughout theprocess, management uses the system to monitor the workflow to makesure tasks are handled within established time frames.

Increased efficiency related to the electronic workflow hasreduced Republic's claim payment cycle by two days. Workload isdistributed based on capacity, not location, and process monitoringpractically has eliminated fines for late payments. The companyplans an enterprisewide application of the system: It recentlydeployed Exigen to support the premium collections process and willnext tackle the underwriting process.

Secret to Success

Insurers are keenly aware of legacy system characteristics thatmake it difficult to automate or improve processes; however, theDelphi Group's Palmer says they tend to overlook business issues."The biggest impediment to process change may not be your legacysystems. It's cultural resistance and fear of change," he says.

That definitely was the case in DixAmico's BPM project,according to Bastos. "We didn't have problems with systems," hesays. "We had other problems, such as having 25 processes andhaving to negotiate with two groups before changing any ofthem."

Companies often err by taking a systems-focused approach tosolving process problems, Barrios adds. "Business comes to IT andsays, 'The market is shifting; I need to provide newfunctionality.' Companies tend to look first at what legacy systemsthey need to modify, update, or replace, but that is a veryvertical, siloed focus. Instead, they should look at the problem interms of what needs to be fixed in the process," he advises.

It's all part of not just having process-savvy systems but beinga truly process-savvy organization. "Yes, there is a tool suite youwill need to get eventually, but [better process management] is amental discipline you will need to wrap yourself around and getyour company to adopt," Barrios states.

For carriers that can do this, the change is fundamental."Today, we have stopped seeing 'systems' and begun seeing'processes,'" Bastos says. "Our operation runs like an automobileproduction line."