The Multisystem Migraine

Michael Jackowski of Accentures Insurance Solution Group also asserts insurers still are looking for prescriptions to solve their multisystem migraines. Were going to be talking about this problem for a long time, he predicts.

The reasons the industry hasnt fully solved this problem are multiple. Its more than the deep functionality that these [administration] systems have buried in them, Jackowski says. Quite often there are rules, business logic, and processing [embedded], and folks in the organization dont understand what those rules are and what they do. Also, when you look at the integration and interfaces that exist, its not only impractical but sometimes impossible to replace them, as well as the feeds for state reporting and federal reporting.

You can call it a rats nest, and thats being polite, Jackowski says.

Insurers are acutely aware of the potential problems of maintaining numerous administration systems. Multiple systems result in higher maintenance costs. Multiple platforms result in fewer standards. You have more vendor touch points. You have a higher chance for error rates. You have longer development [times] and a more complex organizational model. And on the business opportunity side, these things result in delays in getting products to market. IT is perceived as an obstacle, says David Keith, senior vice president and CIO at Security Benefit Mutual.

There are potential compliance issues, as well, particularly around management reporting and the need to reconcile financial feeds quickly from multiple systems. And there may be lawsuit expenses. If you have multiple ways you process policies and pay claims, that can create litigation, maintains Judy Johnson, vice president of insurance strategy at Sapiens Internationals re-search division.

Insurers awareness of these costs and an improving economic climate have increased appetites for policy administration projects, according to Johnson. Were currently seeing a lot of RFPs where insurers are looking at, or at least thinking about, replacing systems, she says. Theres particular appetite around Web services and around integration [technologies].
Carriers can select from a spectrum of possible prescriptions for multisystem migraines. On one end, they can take the wait-and-see approach. On the other, they can do a wholesale rip and replace. In between are several other viable options.

Prescription 1: Take Two Aspirin, and Call Me in the Morning

Though its human nature to want the latest and greatest gadgets, some insurers address their multisystem administration environment with what Johnson calls a review approach. [They say,] Were going to look at whats in the marketplace, keep an eye on our business, and see if we need to do something, she says.

One compelling reason for this approach, according to John L. Johnsen, managing director of TCi Consulting & Research, is the cost of conversion to a new platform, which may be particularly hard to justify when a carrier is dealing with a closed book of business.

Fifteen years ago, there was a trend toward converting policies off older systems, but that got to be expensive, he says. The rule of thumb we use [to estimate conversion cost] is $15 per policy, and thats just the data. A lot of times the data isnt in good shape, like having all nines in the Social Security number field. You need to cleanse the data first, and thats problematic and expensive.

Although maintenance costs associated with legacy systems often are cited as a reason for converting to modern platforms, Johnsen still believes maintenance costs can be less than the cost of conversion.

The good news about older systems is if youre not putting any new policies on them, you almost can leave them alone and let them die out, he explains. We find keeping older systems alive can be fairly inexpensive, perhaps three to four dollars per policy per year. Were seeing a trend to leave these policies alone, and because those languages are old, to offshore the maintenance of those systems to India, China, and even the Philippines.

The second argument for maintenance vs. replacement is the legacy system environmenthowever complexis perfectly adequate to get the job done, even if the system is used for new business. Says Sapiens Johnson, In some companies, particularly if theyre smaller, regionally based, and have good control over their organization, they say, Wait and see. If were going to change, we need a silver bullet.

Consider FCCI Insurance Group. The company began in 1959 as a single-line, one-state company and ultimately developed an AS400-based system in-house to process business. Today, the system still is the workhorse for administering the companys Florida workers compensation business. We know the system well, and weve made it hum, reports Debbie Douglas, the companys executive vice president.

However, in 1995, FCCI embarked on a diversification effort to write property/casualty business. The insurer contracted with Freedom Group, a unit of Fiserv, on an ASP basis to administer this book, Douglas says, rather than modify the mainframe system to handle the new lines.

As the property/casualty book grew, the company looked to bring the administration system in-house. It selected Allenbrooks Phoenix platform and completed the initial installation in 2001. Business is being converted from Freedom to Allenbrook as it comes up for renewal. FCCI also currently is converting property/casualty business from a Policy Management Systems Corpora-tion (PMSC, now owned by Computer Science Corporation) system acquired when FCCI established Brierfield, a joint venture with Mississippi agents. And in 2000, FCCI acquired Monroe Guaranty Insurance Company and another PMSC system. The design, planning, and implementation of converting the Monroe book to Allenbrook are under way.

Douglas says FCCI has createda menu-driven, user-friendly system, whereby users can launch either the AS400 or Phoenix application from their desktops. The dual-system approach does create some workflow issues, Douglas admits. Billing is a challenge, because you are billing from two different systems for a single policyholder who might, for instance, have both a workers compensation and liability policy.

Yet, she maintains, this approach is the best fit for the company now. The AS400 is an excellent system, she says, while FCCI sees the Allenbrook platform as important to its future growth and business flexibility in property/casualty. The [Phoenix] system is an enabler [allowing us] to go into multiple states and lines, Douglas says. We ultimately will get to a single platform for all states and all lines with a staged approach.

Prescription 2: Wrap the Wound

The next course of treatment involves bringing in technologies that make existing legacy systems work betteror at least look better. This can be anything from a common user interface to varying degrees of integration.

Johnson cautions, however, insurers looking to take an integration approach need to demonstrate the true effectiveness of the effort over simply leaving systems as they are. If I ask, What am I getting for this? and you say, The clerks get a nice screen, then I say, We can live without it.

Nevertheless, IBMs Scott Cosby, program director for WebSphere business integration, indicates the integration approach has been popular with insurers. The strongest push right now from our customers is, Look, Ive got what Ive got; I cant rip it out. They cite reasons of economics, product-specific platforms, and customized applications, he says.
Such was the case at Independence Blue Cross, a Philadelphia-based provider of individual, group, and supplemental medical insurance. Our legacy systems are valuable mainframe applications, and we have data warehouses we have no plans to replace, says Peter Walsh, the insurers senior director in common systems services.

Beginning with an enterprise architecture vision based on IBM WebSphere, Independence Blue Cross created a central application integration hub using WebSphere MQ and MQ Integrator and developed an MQ wrapper that allows legacy applications to message with each other and use common cross-application business rules. This also has allowed the insurer to connect new applications, such as a recently de-ployed Web front end for agent service and customer information, to the legacy systems.

The hub-and-spoke system gradually is replacing what had been point-to-point integration among the more than 150 systems that comprise In-dependence Blue Crosss administration environment, including the carriers core POWERmhs claims and plan administration system from CSC. Those point-to-point interfaces were a significant maintenance headache, Walsh asserts, particularly when it came to being able to generate HIPAA-required transactions.

When we began [the MQ project], I drew a map of every interface that existed just in support of POWERmhs, Walsh explains. When management compared that diagram to the relative simplicity of one drawn as a hub-and-spoke architecture, we didnt need to do much selling of the project beyond that, he adds.

The insurer began the project in 2001 with the consulting assistance of Promenix. In October 2003, Independence Blue Cross com- pleted the primary implementation and now handles additional MQ-related proj-ects using solely internal staff. Walsh reports identifying additional applications to wrap and point-to-point in-terfaces to replace often is driven by requests of IT or business staff who have been exposed to the success of the integration effort. We havent yet taken away all the point-to-point connections, but we are pulling them out piece by piece, he says.

Before Independence Blue Cross embarked on the project, it had projected return on investment; however, it has not calculated its actual ROI given what it sees are clear business benefits. Among those identified by Walsh and Hank Guckes, the insurers senior director in technology services, are easier access to information assets, faster customer service and support for Web-based service, lower development costs due to reusable infrastructure components and standardized methodologies, and quicker time to deployment for new applications.

Its almost like having running wateryou dont think about it after a while, Guckes says.

Prescription 3: You Need Surgery

Short of complete replacementtypically the most costly and complex optionis rearchitecting existing systems or targeting replacement of only select components or specific systems.
The strategy that is the most common now, and that makes a lot of sense, is a slower evolution and migration on a component-by-component basis, Jackowski says.

Great American Custom Insurance Services, a subsidiary of Great American, has taken the surgical approach to adapt its legacy policy administration system to meet business needs. Dean Bymaster, senior vice president of systems at Great American Custom, indicates the insurer uses two administration platforms, a Sybase-based client-server system it developed in-house for most non-workers compensation business and the parent companys CICS, a mainframe-based system for workers compensation and a few specialty lines.

One component of the administration platform presently undergoing renovation is the rating engine. Bymaster says, given the companys history as an excess and surplus insurer, Great American Custom traditionally had negotiated rates with clients and then used a spreadsheet-based system to record those rates and feed them to reporting systems.

[However,] as weve become primary and filed, our rating has become more regulated, he explains, which has required greater use of the CICS system for this regulated business. To bring that business onto its preferred administration platform, Great American Custom purchased a rating engine from INSTEC.
When it came to integrating the rating engine, Bymasters team faced the difficulty of getting a real-time handshake between our system and the INSTEC system, he says. Rather than move data between INSTEC and our system and present it in our screens, we instead move the user into the rating system. When rating is complete, this workflow component passes users back to the main system, and INSTEC sends rating data back, as well.

For Great American Custom, which also uses a Docucorp component for policy issuance, a targeted, best-of-breed component strategy makes sense. Rating and issuance is very much a commodity item in todays market. To be highly coupled with a rating vendor bogs you down because the vendor may change, Bymaster says.

The success of a component replacement strategy does depend on how well carriers legacy systems are architected today, claims Jackowski. When you say legacy, you think of poorly architected, difficult-to-manage systems. But having looked at a lot of different systems, there are many that are much better architected than others. Critical issues impacting successful component replacement, he says, are whether the system separates business, screen, and data access logic and whether business functions can be reused effectively.

Success of this strategy also requires the vision thing. According to Christine Skouenborg, financial services technology analyst at Datamonitor, replacing or rebuilding requires a top-level view of the existing IT structure. Its quite important to have a common underlying architecture, a model for rules for architectural development, particularly to ensure the success of the step-by-step approach, she says. Because if you replace one component, then change paths, the system will be much more muddled.

Prescription 4: You Need a Transplant

Replacing multiple administration systems with a single system is a course of treatment that comes with many doctors warnings. These projects are very large, very long, and very expensive, says Jackowski.

William Fournell, vice president of the financial services consulting group at Cap Gemini Ernst & Young, goes even further, maintaining insurers should look at legacy administration system replacement only if those systems are not functioning, if they are software products that are not supported, or if those systems cant support growth anymore. If the system is functional, insurers should focus on a service-oriented architecture [instead].

Lack of ongoing support for legacy systems was a key consideration of New Jersey Skylands, which was formed by OneBeacon in 2002 to handle personal lines business in New Jersey. Ortmann reports existing business that rolled from OneBeacon to New Jersey Skylands came with six different administration systems and six different databases, and wrapping or integrating these systems was not an option.
There were mainframe technologies we didnt want to get involved in, and there was no interest in maintaining the status quo, he says. A lot of knowledge had been lost about those legacy systems. Also, we didnt have much time to get this company up and operational, and we knew having one consolidated view of data would be absolutely key. Therefore, New Jersey Skylands instead chose an entirely new platform, INSideOUT, from CGI.

My marching orders were one system, one source of data, says Ortmann. INSideOUT was installed in time to begin processing new business when the company opened its doors. Existing business was converted at renewal, meaning the auto book took six months to roll over and the homeowners book 12. Historical policy and claims data was loaded to an Oracle data warehouse, which also receives new data from the INSideOUT system.

Loading the warehouse has been the biggest challenge of the project. As hard as we worked to cleanse data, we could never focus enough time on that, Ortmann says. [For example,] in our lien-holder database, we found a lot of duplications and incomplete records from the sending systems. It was a manual process to go through them, he adds.
But regarding the CGI system itself, There was a minimal amount of customization that needed to occur. There also was a well-defined conversion methodology [that CGI had], Ortmann says.

Ortmann declined to reveal project costs and reports New Jersey Skylands hasnt done a formal ROI on the project. We didnt think it was a necessity, he says, explaining the benefits of the proj-ect are self-evident, particularly the ability of the system to support the insurers agent portal. We couldnt have done [the portal] before, at least not without a lot of smoke and mirrors, to make everything look real time. Now, it actually is.

Life insurer Security Benefit Mutual also saw the cost benefits of replacing two mainframe administration systems with Navisys Home Office, including being able to decrease IT operating costs, service costs per policy, as well as IT staff (see Tech Decisions, March 2003, Indus-try Intelligence: Where Are They Now?).

Equally important, according to Security Benefit Mu-tuals Keith, is that project has had far-reaching business benefits. Its given us a flexible model, he says. We can get products out faster and explore new opportunities. Rather than traditionally worrying about how were going to get something in place, now we can explore the business value it will bring. Its completely changed the dynamics of the IT organization.
Our multisystem migraines no longer exist, he adds. Weve eliminated them with a good dose of IT strategy and business commitment.

One recent business op-portunity was the acquisition of a book of about 22,000 policies from Mutual of Omaha. According to Brent Littleton, second vice president over IT applications, prior to the NaviSys conversion, it would have taken half the resources of Security Benefit Mutuals IT department to handle the conversion. It would have required a lot of manual intervention. The file transfer of information to the old legacy environments was extremely difficult, mainly from the structures of the files themselves. Today, we can accept any information [another carrier] has. Either it can format the data to meet our needs, or we can take the data it has, Littleton says.

Now, were doing this conversion with just a handful of staff, he reports, and he estimates it will take 120 days to complete the process. Before we migrated to the new platform, it would have taken a year.

Of particular interest, the success of Security Benefit Mutuals system has caused the company to consider some nontraditional opportunities. Because weve made this investment, we can leverage that investment [to serve] those who dont want to sink those same kind of dollars [in their own legacy replacement project], says Keith.

So, does that mean Security Benefit sees itself as an outsource provider of policy administration services? Its premature to say were out there; we have a model, and were moving forward, Keith says. However, its clear the insurers view of opportunity is not limited by its technology.

We believe we have that capability, says Keith. We think we could help organizations that are looking at putting products on the street faster, lowering cost, and improving quality. We think there are needs in the marketplace.

Tech Guide: Policy Administration

Accenture
Murray Hill, N.J.
267-216-1049
www.accenture.com

AdminServer, Inc.
Chester, Pa.
610-619-3100
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

Align 360
Richmond, Va.
803-454-2525
www.align360.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, Inc.
Hartland, Wis.
262-369-7570
www.aqsadvantage.com

AscendantOne
Nashua, N.H.
603-598-5427
www.ascendantone.com

Attus Technologies
Charlotte, N.C.
888-494-8449
www.attustech.com

Blue Frog Solutions
Pompano Beach, Fla.
800-861-8908
www.bluefrogsolutions.com

Camilion Solutions Inc.
Thornhill, Ont.
416-346-3713
www.camilion.com

Castek
Toronto, Ont.
866-922-7835
www.castek.com

CGI Group
Montreal, Quebec
541-841-3200
www.cgi.com

Consis International
Weston, Fla.
954-217-3035
www.consisint.com

Corporate Systems
Amarillo, Tex.
800-927-3343
www.csedge.com

COSS Development Corp.
Mequon, Wis.
262-241-8989
www.cossdev.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

First Notice Systems, Inc.
Boston, Mass.
800-310-4367
www.firstnotice.com

FirstApex Technologies
Flower Mound, Tex.
404-626-4679
www.firstapex.com

Fiserv AIS
West Des Moines, Iowa
800-322-4220
www.fiservais.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

@Global
Golden, Colo.
800-419-4449
www.atglobal.com

Guidewire Software, Inc.San Mateo, Calif.
650-357-9100
www.guidewire.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.mayfare.com

McCamish Systems
Atlanta, Ga.
800-366-0819
www.mccamish.com

Metaserver, Inc.
New Haven, Conn.
203-492-3371
www.metaserver.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

OneShield, Inc.
Woburn, Mass.
888-663-2565
www.oneshield.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

Property & Casualty Management Systems, Inc.
Dallas, Tex.
972-479-1018
www.pcms.info

PDMA
Indianapolis, Ind.
317-844-7750
www.pdmagain.com

Pegasystems Inc.
Cambridge, Mass.
617-374-9600
www.pegasystems.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

Ravello Solutions
Atlanta, Ga.
770-508-1480
www.ravellosolutions.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

SBP/INFOEL
Glen Arbor, Mich.
231-334-6880
www.stratbizinc.com

SeaTech Consulting Group
Torrance, Calif.
310-328-8119
www.seatech.com

Severan Corporation
Exton, Pa.
419-584-0284
www.severan.com

SimpleSolve Inc.
Princeton, N.J.
609-452-2323
www.simplesolve.com

Sirius Financial Systems
Englewood, Colo.
303-209-5900
www.sirius-inc.com

SOLCORP
Mississauga, Ont.
905-672-9444
www.solcorp.com

SpeedBuilder Systems, LLC
Columbia, S.C.
803-647-9532
www.speedbuildersystems.com

SS&C Technologies
Windsor, Conn.
800-234-0556
www.ssctech.com

Steel Card
Santa Barbara, Calif.
805-560-8363
www.steelcard.com

SunGard Insurance Systems
Miami, Fla.
305-858-8200
www.insurance.sungard.com

Systems Engineering Group
Glastonbury, Conn.
860-652-0254
www.segllc.com

TAI
Orland Park, Ill.
708-403-7775
www.taireinsurance.com

Taliant Software
Denver, Colo.
303-209-4601
www.taliantsoftware.com

Tata Consultancy Services
Naperville, Ill.
630-717-4235
www.tcs.com

The Innovation Group
Overland Park, Kans.
919-888-4100
www.tigplc.com

Tia Technology A/S
Denmark
www.tiainsurance.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

United Systems & Software, Inc.
Lake Mary, Fla.
800-522-8774
www.ussincorp.com

Vector Technologies
Indianapolis, Ind.
317-613-2400
www.vectortech.com

Wildnet Group
New York, N.Y.
917-320-4511
www.wild.net

WorldGroup
Emeryville, Calif.
800-785-4526
www.wgcusa.com

Xactware, Inc.
Orem, Utah
800-424-9228
www.xactware.com

Xerox-Global Services
Rochester, N.Y.
770-569-5668
www.xerox.com