More than one IT leader has been jolted out of a deep slumber,suffering cold sweats in the middle of the night, over concernsabout the installation of a new policy administration system. Thereare plenty of reasons for them to worry, starting with thecomplexity of the project and concluding, as always, with theamount of money being invested. Obviously, not every project fails,but most insurers that have been involved with this type of projecthave stumbled along the way. Learning such lessons does noteliminate all risks involved with subsequent implementations, butsome of those risks can be reduced through experience.

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Take, for instance, Jim Kennedy, president and CEO at OhioMutual Insurance Group and a veteran of policy administrationprojects. Over his career, he's been involved in four suchprojects, most recently installing the POINT IN product from CSC atOhio Mutual. "You talk to 10 people and you probably will get fivedifferent views [on implementation risks]," he says. "I've had thepleasure of looking in the rearview mirror at the other three andrealizing the mistakes we made."

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PEMCO, a regional insurer in the state of Washington, firstbegan looking at policy administration systems in the mid-1990s,embarking on a development project with a technology partner toreplace a legacy system the carrier had used for more than 20years. "Our attempt was to co-develop a new application policyprocessing system prior to the year 2000," says Stephen Miller,vice president and COO. The plan failed, he explains, primarilybecause it was a development project. "Things happened in theownership of our development partner that caused [the project] tolose focus and change direction," says Miller.

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One thing PEMCO learned from this, though, was its business isinsurance, and it should stick with insurance and not technologydevelopment, according to Miller. "Those were good lessons learnedwe were able to bring forward into the decision we made to move tothe Exceed system supplied by CSC," says Miller.

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In late 2003, Mutual of Omaha changed its core products awayfrom group health to group long-term benefits; short-term benefits;life; and accident, death, and dismemberment. Business leaders feltthe systems in place would not support the new core products. Thecarrier began its policy administration project in April 2004,reports Mike Litz, information services manager, and implementedSunGard's iWORKS COMPASS in September of that year. Mutual of Omahabegan supporting new business one month later. "We had a short timeframe," says Litz. "So, we had a minimal amount of customization.We closely managed scope to get it done."

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When Kennedy came to Ohio Mutual a little more than three yearsago, he indicates it was clear there was a system deficiency. "Wereally needed to do some major upgrades," he says. But prior togetting started, Kennedy pulled some of the company's technologystaff and business people to the side and instructed them to thinkout the project before diving into anything. "We have a set ofguiding principles that were like guideposts we pounded into theground," he says.

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While some guideposts may be carrier specific, others can helpany insurer reduce the pain normally associated with such a majorundertaking, and according to project veterans, those principlesinclude the following:

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1. Projects have to be led by the business side, not the ITstaff.

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"If you let it go the other way, at the end of the day, you'llget a very good system that nobody wants," says Kennedy. Businesspeople are the ones who have to use a new policy administrationsystem, so they should drive the project. Carriers should have atechnology team that is willing to park its ego at the door, listento the business, be savvy about the business need and what thebusiness side says it wants, and then actually deliver it, Kennedybelieves. "If projects are IT led, they are going to get done, butI don't think you're going to have what you want when you getdone," he adds.

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PEMCO's project was business driven with a lot of support fromthe technology side of the company, according to Miller. "One ofthe reasons we were successful was because this wasn't a technologyproject," he says. "It was one project for the entireorganization."

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A problem PEMCO dealt with in the installation was the carrierhad a project team and the vendor had one, as well. The two sideswere supposed to be collaborative, but Miller found that wasn't thecase. "We recognized we needed somebody to run this program who hadbeen there before," he says. PEMCO hired someone to oversee theentire installation effort. "We said we can't do this with twoteams," Miller continues. "We needed one project steering committeeand one schedule." The project manager had full ownership of theentire program to implement the product, and everyone worked on oneschedule.

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PEMCO also had executive support from the very top. "We weren'tallowed to move off the one-team concept, the one-program concept,or the one-schedule concept," says Miller. "That's probably thebiggest reason for the success."

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Mutual of Omaha's project was date driven to meet the needs ofnew business, Litz explains. "It really started with the businessneed for hitting a September date," he says. "There was no wayaround that." The project staff never felt there was a point wherethe date was out of reach, though. "That doesn't mean we didn'thave question marks," admits Litz. "That happens all the time. Youreach a critical point, and you have issues, but you tear them downand find solutions. We never hit the point where we felt we had toraise the white flag."

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2. Establish some guiding principles.

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Projects the size of a policy administration system havetentacles going all over the place, observes Kennedy. "When you getin the middle of it, there are a million things going on," he says.Carriers experience some success and some setbacks–the normal ebband flow of a project–so they need something to guide them. "Ireally believe you need that set of guiding principles when chaosis reigning so you can take a deep breath and ask, 'What the heckare we trying to do here?'" he suggests.

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The senior leadership of a company must stay involved inprojects of this size, Kennedy believes, but that also depends onthe size of the carrier. Ohio Mutual is a $130 million premiumcompany, so Kennedy says he has his hands in just about everything."If we were a $13 billion company, I'm not sure I would have beeninvolved in this initiative to the degree I was," he points out."But there's a certain size at which senior leadership has to beall over it to provide that guidance and those principles to keepthe thing on balance."

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3. Set appropriate time lines.

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A previous carrier Kennedy worked for made a pair ofacquisitions, and none of the three companies had a system thatwould accommodate the other two. In the middle of merging thecompanies, it was decided a new system was needed. The corporateoffice mandated the system be up in nine months. "To do somethingof that magnitude in nine months is ridiculous," he asserts. "Whathappens is people take shortcuts. People will achieve the goal yougive them. They'll take shortcuts to get there, and when the day ofreckoning comes, they have delivered something, but there are58,000 things that are broken, and it really doesn't work."

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Carriers need to set realistic time lines and put realisticbudgets in place without trying to salve someone's ego, Kennedybelieves. "You can't set stupid time lines or you'll end up with abroken system," he says.

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PEMCO had set difficult time frames for its project, accordingto Miller, but the company felt it necessary to meet them. "In anysort of project this size, there are three drivers–time, money, andquality," he says. "We decided to drive this project from time.That was the most critical. We would spend more money if we neededto, and we would sacrifice more quality if we needed to, but timewas going to be the winner in the end."

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That decision arose from a belief on PEMCO's business side thecompany couldn't afford to take five years to implement one line ofbusiness and another five years to implement a second line. "It'skind of the old rules of holes," explains Miller. "If you are inone, stop digging. The second rule is to get out. The deeper thehole, the tougher it is to get out."

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A second reason PEMCO focused on time, contends Miller, wasbecause in a project of this size and scope, the longer itcontinues, the tougher it is to keep people's attention andfocus.

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Time also is of the essence when a company is focused on a rateat which it expects to grow. After making an acquisition to enterthe life insurance BPO market, Antares Management Solutions, whichis owned by Ohio health insurer Medical Mutual, found the policyadministration system that came with the acquisition would notallow Antares to grow at the speed the company expected. Antareshad to move quickly with the installation of a new system fromAdminServer.

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"The risk in using any new software from the sales side was wewere investing substantially in the [AdminServer system], and wewere putting a lot of our eggs in that basket," says Todd Sabath,vice president of North American sales, Antares ManagementSolutions. "But the market is such we need products quickly. Weneed a competitive edge to make us different but also keep our costdown."

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The IT team at Mutual of Omaha, already pushed for a tightdeadline on its policy admin project, knew it had to manageexpectations to stay within its time frame, Litz notes. Thebusiness sponsor of the project wanted the system to be able tosupport dental when the system went live. "We looked at it and saidthere was no way," he recalls. "We held to our guns. We knew if webent and said yes, we really were not going to be successful. Youcouldn't use the Mongolian horde theory–bring in morepeople–because we were dealing with all the same modules."

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Dental was put off until July 2005 as the IT staff got thesystem up and supporting core business and new business. Aftersupporting the existing environment for a couple of months, IT wentinto a development mode for critical enhancements. "That's a nicephrase for those things we put in the parking lot, which we said wecouldn't do initially," adds Litz.

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4. Be honest with your people.

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Honesty goes beyond staff and must include partners–"whoever isgoing to touch the system," says Kennedy, explaining he has seenpeople stand up in front of an audience and say, "We're putting upa new system, but don't worry–nothing is going to change." Hedescribes such talk as "lunacy."

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Virtually every job at Ohio Mutual has been changed sinceKennedy arrived. "We do not do anything at this place today thesame way we did it three years ago," he says. "You can't lie toyour people, because people can smell that, and they losecommitment to the process."

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Agents also lose commitment because they know the routine fromother business partners, Kennedy adds. "Agents have seen this athousand times from all their companies, and when you stand up andsay nothing is going to change, your credibility shrinks," hemaintains.

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People know their jobs are going to be impacted by a new system,so Kennedy believes carriers need to provide training tools thestaff can lean on to learn how to adapt to change, especially indeeply entrenched companies. "There were a lot of people who haveworked [at Ohio Mutual] a long time," he says. "They are used todoing the same thing and have been doing it that way for 25 years.All of a sudden, I show up and say our system isn't any good, andwe have to do something different. I'm changing their world."

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Ohio Mutual introduced some change management classes foremployees. These classes had nothing to do with systems orinsurance but were offered to help employees learn how to adapt tochange in their lives. "I really think that paid a lot of dividendsfor us," says Kennedy. "I'm not na?ve to think we took all theanxiety out, but we took a great deal out by providing thosetools."

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One of the first steps Mutual of Omaha had to take was to assesswhat skill sets were needed from both a business and technologyperspective. "Then it really was the collaboration of our technicalinfrastructure staff, our technical application staff, and a greatgroup of business analysts working on the project," says Litz. Thecompany had some experienced staff members, borrowed others fromdifferent segments of the company, hired contractors andconsultants, and depended greatly on the SunGard resources.

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5. Don't try to change the software system.

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Midsize and smaller carriers normally do not have large IT shopsand can't afford to rewrite code for a new system. But Kennedypoints out there are thousands of people at CSC who do this for aliving. "[Ohio Mutual was] seeking someone we could partner withwho would help us stay ahead of the cutting edge so we wouldn'talways be a day late and a dollar short as a company," he says.

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Many customers try to make new software conform to currentbusiness practices. Kennedy believes the new software shoulddictate the business practices. "A lot of people have pet workflowsand try to make the system adapt to their flow," he says. "Thatdoesn't do you any good."

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When Ohio Mutual installed the POINT IN system, only fourmodifications were made to the system. Three of those were donewith CSC in virtual development and now are in the base product, sothe next time a release comes out there will be no retrofitting.The carrier had one proprietary rating tool CSC wasn't interestedin installing. "So, now we have just one thing we have to thinkabout in the next release we take," says Kennedy. "That sets us upfor the future, so we don't agonize over the next release becauseof all the work it's going to take. That requires management tohave discipline."

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PEMCO's basic belief was it was not a technology company, Millerremarks, so it needed to find a technology partner with a vanillaproduct the carrier could install and use without having a lot ofmodification–practically no modification if at all possible. "Whenyou begin modification, you drift into that world calleddevelopment, and that's what, to a large extent, led us a littleastray the first time around," he says. "[The system] had to befoundational–it had to be workable and a true tool for the peoplewho deliver our service and our sales."

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6. Choose a good partner.

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One of the key drivers of the project for PEMCO was to find asystem that would serve as a foundation and allow the company togrow. "It had to be a system other companies like us would buy as acore processing system because we saw real advantages in havinglots of other insurance companies using the same core system,particularly midsize regional carriers," says Miller.

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This was the only way PEMCO felt it could truly compete in scaleagainst major insurers. "We can't deploy the level of scale ordollars against technology [bigger insurers] can, but collectivelya lot of companies using a base foundation core system could makebetter ground than an individual company could," says Miller. "So,we saw some value in the collectiveness of having a number ofcompanies working toward enhancing a foundation systemtogether."

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Miller does not believe the technology PEMCO uses is thedifferentiator in its marketplace. "It allows you to play the game,but it doesn't allow you to win the game," he comments. "Winningthe game is dependent on how you deploy that technology, how youleverage that technology in the marketplace, and what your businessmodel is." The PEMCO business model is based on customer serviceand the personalization of that service–delivering it quickly,efficiently, and better than anyone else. "That has more to do withthe people we have working for us," he says.

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The system is a tool for people to use, Miller contends. "Thissimply helped our people do a better job," he says. "It's to ouradvantage to see a similar system being used by lots of differentcompanies because then we benefit from its upgrades over time andthe best ideas of a lot of companies rather than the best ideas ofa few."

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Lesson Learned

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With projects of this size, it seems impossible to go through animplementation without making some kind of mistake. But as Kennedypoints out, making mistakes is one thing; repeating past mistakesis quite another. "I wish I could say we were brilliant on this[planning]," he says. "We've all made some of these mistakes in thepast, and we [resolved] not to make them again. If we make amistake, let's have it be a new one; let's not make an old oneagain."

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Tech Guide: Administration Tools–Policy, Billing Claims

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Accenture

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Chicago, Ill.

|

312-737-8842

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www.accenture.com

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AdminServer

|

Chester, Pa.

|

610-619-3100

|

www.adminserver.com

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AGO Insurance Software

|

Mt. Arlington, N.J.

|

973-770-3200

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www.agois.com

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Allenbrook

|

Portland, Maine

|

877-764-6452

|

www.allenbrook.com

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Amerillium Systems

|

Raleigh, N.C.

|

800-330-3097

|

www.amerillium.com

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Apex Data Systems

|

Tucson, Ariz.

|

520-298-1991

|

www.apexdatasystems.com

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Applied Systems

|

University Park, Ill.

|

800-999-5368

|

www.appliedsystems.com

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AQS

|

Hartland, Wis.

|

262-369-7500

|

www.aqssys.com

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@Global

|

Breckenridge, Colo.

|

800-419-4449

|

www.atglobal.com

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Blue Frog Solutions

|

Pompano Beach, Fla.

|

954-788-0700

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www.bluefrogsolutions.com

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BML Istisharat

|

Beirut, Lebanon

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961 1 983208

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www.istisharat.com

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Camilion Solutions

|

Markham, Ont.

|

905-477-7499

|

www.camilion.com

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Castek

|

Toronto, Ont.

|

416-777-2550

|

www.castek.com

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CGI Group

|

Montreal, Que.

|

541-841-3200

|

www.cgi.com

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CheckFree

|

Norcross, Ga.

|

678-375-3000

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www.checkfreecorp.com

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Consis International

|

Weston, Fla.

|

877-426-6747

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www.consisint.com

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COSS Development

|

Mequon, Wis.

|

262-241-8989

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www.cossdev.com

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Covansys

|

Farmington Hills, Mich.

|

800-688-2088

|

www.covansys.com

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Cover-All Technologies

|

Fairfield, N.J.

|

973-461-5200

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www.cover-all.com

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CSC

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Austin, Tex.

|

800-345-7672

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www.csc-fs.com

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CS Stars

|

Amarillo, Tex.

|

800-858-4351

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www.csedge.com

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Delphi Technology

|

Boston, Mass.

|

617-259-1200

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www.delphi-tech.com

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Document Sciences

|

Carlsbad, Calif.

|

760-602-1400

|

www.docscience.com

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DRC

|

Honolulu, Hawaii

|

800-836-6057

|

www.decisionresearch.com

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DSPA Software

|

Mississauga, Ont.

|

905-279-9993

|

www.dspasoftware.com

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Duck Creek Technologies

|

Bolivar, Mo.

|

800-889-8401

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www.duckcreektech.com

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Ebix

|

Atlanta, Ga.

|

678-281-2020

|

www.ebix.com

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Edgewater Technology

|

Wakefield, Mass.

|

781-246-3343

|

www.edgewater.com

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EDS SOLCORP

|

Toronto, Ont.

|

416-673-9900

|

www.solcorp.com

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ePolicy Solutions

|

Torrance, Calif.

|

310-819-3210

|

www.epolicysolutions.com

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E-Z Data

|

Pasadena, Calif.

|

800-777-9188

|

www.ez-data.com

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FileNet

|

Costa Mesa, Calif.

|

800-345-3638

|

www.filenet.com

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FINEOS

|

Cambridge, Mass.

|

877-893-7904

|

www.fineos.com

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FirstApex

|

Singapore

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+65 6225-8001

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www.firstapex.com

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First Notice Systems

|

Boston, Mass.

|

800-310-4367

|

www.firstnotice.com

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Fiserv Insurance Solutions

|

Cedar Rapids, Iowa

|

800-943-2851

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www.fiservinsurance.com

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Garvin-Allen Solutions

|

Halifax, Nova Scotia

|

877-325-9062

|

www.garvin-allen.com

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Genelco Software Solutions

|

St. Louis, Mo.

|

800-983-8114

|

www.genelco.com

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Guidewire Software

|

San Mateo, Calif.

|

860-217-0215

|

www.guidewire.com

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IDMI

|

Warner Robbins, Ga.

|

888-856-6388

|

www.idminc.com

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IDP

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Wyncote, Pa.

|

800-523-6745

|

www.idpnet.com

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iGATE Global Solutions

|

Bangalore, India

|

877-924-4283 (U.S.)

|

www.igate.com

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Infinity Systems Consulting

|

New York, N.Y.

|

212-541-7602

|

www.infinity-consulting.com

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The Innovation Group

|

Danbury, Conn.

|

203-743-6000

|

www.tigplc.com

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Innovative Software Solutions

|

Charlotte, N.C.

|

800-837-2187

|

www.webpgmr.com

|

Input 1

|

Woodland Hills, Calif.

|

888-882-2554

|

www.input1.com

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INSTEC

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Naperville, Ill.

|

630-955-9200

|

www.instec-corp.com

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InsureWorx

|

Denver, Colo.

|

303-729-7566

|

www.insureworx.com

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Insurity

|

Hartford, Conn.

|

860-616-7721

|

www.insurity.com

|

InsurSys

|

San Francisco, Calif.

|

415-975-0966

|

www.insursys.com

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InSystems

|

Markham, Ont.

|

905-513-1400

|

www.insystems.com

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ISCS

|

San Jose, Calif.

|

888-901-4727

|

www.iscsinc.com

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ISO

|

Jersey City, N.J.

|

800-888-4476

|

www.iso.com

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ISO Insurance Technology Solutions

|

Nashua, N.H.

|

603-598-5427

|

www.iso-its.com

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LIDP Consulting Services

|

Woodridge, Ill.

|

630-829-7100

|

www.lidp.com

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Management Data

|

Pelham, Ala.

|

205-378-1380

|

www.mgtdata.com

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McCamish Systems

|

Atlanta, Ga.

|

800-366-0819

|

www.mccamish.com

|

NaviSys

|

Edison, N.J.

|

800-775-3592

|

www.navisys.com

|

OAS Software

|

St. Charles, Ill.

|

800-546-2990

|

www.oasvas.com

|

OneShield

|

Westborough, Mass.

|

888-663-2565

|

www.oneshield.com

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OpenFlex Insurance Solutions

|

Los Angeles, Calif.

|

213-252-2393

|

www.openflex.com

|

P&C Insurance Systems

|

New York, N.Y.

|

212-425-9200

|

www.pcisvision.com

|

PDMA

|

Indianapolis, Ind.

|

317-844-7750

|

www.pdmagain.com

|

Peak Performance Solutions

|

Orient, Ohio

|

614-344-4640

|

www.peakpsi.com

|

Pegasystems

|

Cambridge, Mass.

|

617-374-9600

|

www.pegasystems.com

|

Policy Administration Solutions

|

Whitestone, N.Y.

|

866-496-8654

|

www.pasolutions.com

|

PremiumWare

|

Arlington, Tex.

|

817-784-9599

|

www.premiumware.com

|

Property & Casualty Management Systems

|

Dallas, Tex.

|

972-855-3518

|

www.pcms.info

|

QualCorp

|

Valencia, Calif.

|

888-367-6775

|

www.qualcorp.com

|

Ravello Solutions

|

Atlanta, Ga.

|

770-331-1349

|

www.ravellosolutions.com

|

Results International Systems

|

Worthington, Ohio

|

800-875-2126

|

www.resultscorp.com

|

Sapiens

|

Cary, N.C.

|

919-405-1588

|

www.sapiens.com

|

SeaTech Consulting Group

|

Torrance, Calif.

|

310-328-8119

|

www.seatech.com

|

SimpleSolve

|

Princeton, N.J.

|

609-452-2323

|

www.simplesolve.com

|

Sirius Financial Systems

|

Englewood, Colo.

|

303-209-5900

|

www.sirius-inc.com

|

SpeedBuilder Systems

|

Columbia, S.C.

|

866-844-3748

|

www.speedbuildersystems.com

|

Steel Card

|

Santa Barbara, Calif.

|

800-553-9961

|

www.steelcard.com

|

SunGard iWORKS

|

Boston, Mass.

|

508-650-6100

|

www.sungard.com/iWORKS

|

Systems Task Group

|

New York, N.Y.

|

646-731-1000

|

www.stgil.com

|

TAI

|

Orland Park, Ill.

|

708-403-7775

|

www.taireinsurance.com

|

Tata Consultancy Services

|

Naperville, Ill.

|

630-717-4235

|

www.tcs.com

|

Trumbull Services

|

Windsor, Conn.

|

888-410-2963

|

www.trumbull-services.com

|

United Systems & Software

|

Lake Mary, Fla.

|

800-522-8774

|

www.ussincorp.com

|

Vector Technologies

|

Indianapolis, Ind.

|

317-613-2400

|

www.vectortech.com

|

Whitehill Technologies

|

Moncton, New Brunswick

|

888-944-8344

|

www.whitehilltech.com

|

Wildnet Group

|

London, U.K.

|

+44 (0)20 7397 9500

|

www.wild.net

|

Xactware

|

Orem, Utah

|

800-424-9228

|

www.xactware.com