Policy Administration: Better, Stronger, Faster

But finding a way to improve policy administration while simultaneously committing minimal staff resources and conserving IT capital isnt easy. Most of the low-hanging fruit has already been picked, and mature systems have often been tweaked to perfectionor at least what passes for perfection.

Without making new investments in front ends and EAI, if we talk strictly about technical speed, theres not much that can be done, said Mark Sowers, principal in the national insurance practice for IBM global service. Business-wise, most legacy systems perform the functions they need to do very quickly. COBOL/CICS running on a 390not much will be faster.

And sometimes good ideas run up against the brick wall of architectural reality. A vast majority of gains to be made of older batch systems would be by making them real-time, but that would be like performing an arterial transplant, said Mike Tahan, CIO at National Life Insurance Company.

So, to rephrase an old clich, Sometimes you gotta spend money to save money. Weve scoured the industry and found a bakers dozen of ideas for you, ranked from the least to the most expensive. Each solutiontried and tested in real lifeoffers a positive return on your investment.

$ Listen.

Heres something that you can do for absolutely nothing and which is virtually guaranteed to save you money in policy administration projects you undertake: Listen to your users.

Take, for example, the Celina Insurance Group, which recently completed a Web-based front end to extend quote, application, and change capabilities to its agents. Rob Shoenfelt, Celinas CIO, reports that involving the agents throughout the development helped ensure the system met everyones needs.

Its tempting to sit here in our windowless rooms and think we know what [users] want, said Shoenfelt. We learned early on, however, that we could get feedback quickly. For instance, a recent survey of all the companys agents resulted in a 75 percent response rate.

User input also helps focus the project on priorities and avoid scope creep. In Celinas case, that meant concentrating less on design issues and more on ease of use. It has to be beneficial to [our agents] and make their life easier, said Shoenfelt, who said an overriding goal is to develop tools that keep us on that list of companies that keeps us in the agents office.

$ Resist the urge to customize.

The low-cost assessment of this solution is somewhat misleading, because it first assumes that youre implementing a vendor-developed policy admin system, which is not a low-cost solution. However, having the discipline to customize the installation only if and when it delivers a true competitive advantage can save hard dollars.

One of the best ways to save money is to accept the way the policy administration system vendor does things, said Chuck Johnston, vice president and director of insurance information strategies at the Meta Group. Many insurers feel that the way they calculate interest or the way they calculate a claims ratio is so critical and so important to give them strategic competitive advantage, when its really a nit. If you can work within the structure of the system in contrast to bending it out of shape to feed the ego of some product development person somewhere, you can save a lot of money. Its not trivial to refile a contract, but its often easier to refile a contract than it is to change a system. Thats a basic rule of thumb, but I see it violated all the time.

$ Use investments youvealready made.

Break down the barriers between departments and scour the enterprise for technology investments that you can apply in your policy administration system. For instance, National Life had purchased an imaging system to convert its microfiched library of policy dataa purchase that was cost-justified by that project alone. When the company looked to add imaging capabilities to its new-business policy administration system, it evaluated that existing system and determined it was robust enough to handle the new function as well.

$$ Manage tasks in the right order.

Not only do insurers contend with disparate systems for different lines of business and administrative functions, but often those systems havent been implemented with the complete business flow in mind. Take agent licensing, for example. If you have a licensing problem that cant be dealt with until the administration system completes the policy, thats the most costly time to deal with it, said Johnston. The time to deal with it is when it is initially brought in the system. Evaluating the way your administration system sequences tasks can uncover hidden inefficiencies.

$$ Get a checkup.

Even though you feel fine, you still (should) get a physical each year. Why? Because the docs the expert. Same goes for your shelf-bought admin systems: It pays to have an expert take a look at them. For instance, Celina was able to improve the performance of its online policy quotation simply by changing the number of agents who could access the AMS-based rating system at one time. It had been set to default to one. Even though quote requests could take less than a second to run, if someone happened to run one that was ten minutes, everybody else waited, said Shoenfelt.

$$ Do some spring cleaning.

Some homes have a job jara collection of small tasks not worthy of a full days effort and not needing immediate attention. But cleaning out the jar can result in some cumulative improvements. Spending some maintenance time on the top 10 things that annoy the customer service group for example, can pay dividends, said Johnston.

Johnston adds that those dividends can be particularly attractive if mergers or other company events have deferred what had previously been front-burner projects. Its really about portfolio management discipline, he said. Whether it be handling your 1035 exchanges or being sure all your taxation routines are working, he explained, if youre looking for low investment and high return, youre better off looking at the little things that have been deferred.

$$$ Extract and externalize.

Relying on your IT staff to make each and every change to the admin system takes more time than it would if the users themselves could be entrusted with some of that responsibility. Taking hard-coded processes and putting them into user-modifiable, table-driven functions can have huge time impacts.

Harleysville Insurance, for example, has taken many of its rating tables for its personal auto system that were previously hard-coded and externalized those for the users. The users can build rate tables in an Excel spreadsheet, and then import them into our tables, said Wayne Ratz, CIO and senior vice president at Harleysville. That has been a huge labor savor for the IT side of the house.

It can be a time-to-market accelerator as well. Nationwide took a similar strategy to Harleysville, extracting the rating code from its admin system and putting it into a callable module thats based on a rules engine purchased from Neuron. Its a project it completed in 2000 and that has paid dividends ever since.

In the past its taken days or weeks for one rate iteration. Now [the actuaries] can do it in a morning, said Kelly Cannon, vice president of operation solutions at Nationwide. They can do an iteration, fine-tune the rules, and do the actual rate change in a scientific, objective, yet faster way than before. The time-to-market impact has been significant."

$$$ Outsource.

Outsourcing is a topic for an article in itself. But on a basic level, look hard at each component of your policy administration; decide what you want to be in the business of doing, and what you dont.

For instance, Celina is looking to improve agency self-service by putting its policy declarations and bills online. Rather than host that itself, its looking to an ASP. We dont want to incur the hardware costs, said Shoenfelt. Were talking about lots of data and storage space as well as load-balancing issues, so were not afraid to go outside the walls and partner with people who have the hosting expertise.

$$$ Manage the workflow.

Workflow management systems arent cheap, but can have a tremendous impact on policy administrationas much as a 40 percent productivity gain, according to TCis Johnsen.

Every transaction coming in the door gets assigned to a clerk who has the skills to make that change, and it manages the work, he said. It doles out the work as people become available. You have a supervisor who can look at a screen that shows every transaction in the shop. If you have a high priority, you can shut everything else down until you exhaust the queue for that type of transaction. Weve also seen clients use that to track productivity.

$$$ Automate feeds of underwriting information.

A better solution to the cost of imaging records is to receive them electronically in the first place. Requests for vehicle records, attending physicians statements, credit reports, and similar information should all be generated directly by the admin system and routed to users upon receipt.

Theres definitely a short period of return on investment for automated feeds, said National Lifes Tahan. Its not an expensive thing to doonly a month or two of development time to get one feed automated, and that will save thousands of hours of manual work."

$$$$ Purge the paper.

Processing without paper is the fastest way to administer your book of business. But not all information can be received electronically, and that means imaging what isnt. National Life was able to leverage its existing investments in imaging hardwarealong with an Onbase imaging system by Hyland

Software it had purchased to image its library of microfichebut it still needed to integrate the imaging workflow system with the new business system its staff was building internally.

Yet the time its staff spent to complete the integration has been well worth it. Now, we can have multiple people work on the policy acceptance at the same time, Tahan explained. Before, it could take up to 40 days to issue a policy. Today, our average is 20 days, and many are issued in five.

The company is also gradually extending imaging workflow to the current book of a half million microfiched policies as well. In the past, a [policy information] request would go to the mailroom, then to the records center, said Tahan. Theyd have to pull the fiche, print everything with your information, stick it in a folder, send it to administration, and make a phone call to you. That would take days. Now, if the policy has already been imaged, the question can be answered immediately over the phone."

$$$$ Evaluate systemredundancies.

Whether installed to support different lines of business or collected via mergers and acquisitions, redundant administration systems are an issue at many insurers. We saw a company with 56 different admin systems from different acquisitions over time, Johnsen said. The cost of making that work is enormous. And thats even before the design inefficiency costshaving to toggle among various screens to update a single customer, for exampleare considered.

Notice, however, that we didnt say eliminate system redundancies. There may be perfectly valid reasons for maintaining a policy administration matrix.

Different systems have different strengths. If youre on the high-end corporate or bank-owned life insurance space, you may use something from McCamish, because theyre good at that, but you might turn to CSC [for higher volume lines of business], and that makes total sense, said Metas Johnston.

Therefore, before you undertake a massive project to collapse all your systems into one, do a thorough, independently verified cost-benefit analysis. The returns are longer-term, Johnston adds. If your ROI horizon is fewer than two years, you probably wont get an appropriate return unless its part of a larger customer centricity initiative where youre trying to pull things together through centralized files, or part of an easy to do business with the agent program, where its generally portal-based, trying to get information flows straightened out.

A more cost-effective alternative, said TCis Johnsen, is integrating multiple admin systems with middleware, improving communication among disparate platforms yet avoiding the cost of a total conversion. Get them at least to be able to access each other through a single middleware application, so the clerk can see all the common information, he said.

IBMs Sowers explains that this is best done by disconnecting the point-to-point interfaces among the systems and implementing an integration hubmessaging middlewarewhere all the communication is done through a single system. In that way, when I start to make changes and when I start to put in components, I dont have to have to contemplate 50 or 60 integration points, only one.

Also, the policy administration system has often become the de facto customer database at insurers. Thats not a problemuntil you have a multitude of components hitting the admin system for CRM and cross-selling purposes. Getting the customer into a bona fide database designed to support multiple systems and functions can have a big payback.

$$$$$ Focus on the front end.

Finally, if you have some money to spend but still want the biggest bang for your buck, look at tweaking (or building) front-end tools available to employees, agents, and customers.

Simply put, it makes sense that empowering more people to directly initiate policy inquiries and changes and decentralizing the data entry task should always generate a positive return.
New business is the area most companies first focus on in their front-end tools, and with good reason, considering the high up-front underwriting costs across all lines of insurance. And the bane of timely new business processing at every companyparticularly in life and health insuranceis incomplete applications. Over 40 percent of [life insurance] policy applications are not in good order and need to go back to the agent, Johnsen reports.

One solution to this problem is technological: building a front end with the screen prompts and solid edits that help ensure the application is in good order before its submitted. Youre not filling out an application online, youre populating data fields based on questions, he explained.

Celinas results point to the ROI on front-end projects. Its Web-based system pulls personal lines quotes from a comparative rater and commercial quotes rates from the companys own rating engine. Edits control the information required for quotation and application, and quotes are returned to the agent in about 10 seconds. Endorsements and applications, processed in a nightly batch, are sent to the producers agency management system; turnaround time for endorsements has been reduced from two weeks to 24 hours.

Granted, were still not talking a simple solution, replete with the back-end integration issues that have always dogged these endeavors. We have some clients where the [Web front end] generates a trouble ticket that goes back to the system administrator because the old systems arent connectable, said Johnston. So theres an effort to use EAI technologiesthe DWLs, the SilverStreams, the SeeBeyonds, the MQ seriesto connect things, and to make those connections such that you can use the portal to streamline the process.

But empowering the sales force can lead to other returns as well. At the core of many insurers improvement efforts have been single-entry projects, designed to eliminate the need to enter data in multiple back-end systems within the company itself. By making the agency system part of the chain, you can start that process with the producers entry of an application.

Interestingly, as another approach to the incomplete application problem in life insurance, Johnsen advocates a completely different strategy: eliminating the agent-completed application altogether. The truth is, you dont need an app to be filled out at the point of sale, he said, adding that lengthy forms serve to discourage many brokers who deal in financial investments that are simpler than pushing life insurance products. They also discourage applicants, who are often faced with answering the same questions from both broker and underwriter.

Instead, brokers can complete simple electronic tickets with basic customer information. Particularly if your integration between sales and application systems isnt all that robust, or if keying application data on the company side is something likely to remain the status quo at your company, shifting the burden of obtaining application information solely to your call center can be a solution that saves money when the whole underwriting chain is considered.

Michael Voelker (mvoelker@goequinox.com) is principal of Equinox Communications and a contributing editor of Technology Decisions.

Whos Using What

Curious as to what systems each of the insurers have in place?
Celina Insurance Group currently has four different administration systemsone homegrown, two off-the-shelf, and one purchased from INSpire. It is nearing completion of a project to move all four to a single platform, an internally built application based on the Inspire system, whose source code the company purchased in 1993.

Harleysville Insurance is running a number of different homegrown systems to support both its P&C and life business. All systems are CICS-based with COBOL business logic code on a VSAM platform. The company has Web enabled each system and is now in the midst of changing the CICS to Java for the presentation layer and converting from VSAM to DB2 for storage.

National Life Insurance Company is running three systems for its book of life insurance business. The first is a homegrown, COBOL-based, VSAM system for traditional term life. The other two systems are both versions of the Vantage platform. One Vantage system is used for universal and whole life; the second is used only for annuity business by Life Insurance of the Southwest, a National subsidiary.

Nationwide Insurance Company has different homegrown mainframe-based administration systems for different lines of business. A Siebel system provides client-server based agency access to the back end. Additionally, Nationwide recently developed a Web-based front end for its agents, based on COM, which the company is converting to Microsofts .NET platform. MPV

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Harleysville Insurance Group: www.harleysvillegroup.com
National Life Insurance Company: www.nationallife.com
Nationwide Insurance: www.nationwide.com
Celina Insurance Group: www.celinagroup.com
Meta Group: www.metagroup.com
IBM: us.ibm.com
TCi Consulting and Research: www.tciconsult.com