The Right Connections

Contrary to the expression Its not what you know, its whom you know, a carriers success depends on both. Knowledge of the latest and upcoming technologies can be used to maintain and grow those whom carriers want to know besttheir customers. For insurers, fulfilling this requirement starts with new and improved communication options.

By Robert Regis Hyle

Not to belabor the obvious, but there are different kinds of insurance companiesand were not just talking about the differences between property/casualty carriers and those on the life/health side. There are the really large onesglobal carriersthat have very sophisticated IT departments, says Deb Smallwood, vice president of the consultancy TowerGroup. And then you have the small to mid-tier regional niche players. Their IT departments arent as sophisticated. They dont have the resourcesmoney or peopleto do a lot of the new technology. But IT leaders in the insurance field traditionally have had a tougher time selling projects than their counterparts in other financial services fields. I call insurance an industry of cautious adopters, says Donald Light, an industry analyst for Celent Communications. Typically, insurance companies are not pioneers.

On the Docket

So, what are insurers looking to accomplish in the near future through technology? Smallwood believes leading carriers are analyzing new tools such as Voice over Internet Protocol (VoIP), video conferencing, and ways to enhance the portals they are building to create higher customer intimacy, whether the customers are agents or policyholders.

Firemans Fund Insurance has a deployment around video, which Jim Dunn, senior director of operations, describes as being kiosk-station based. Were not doing a lot of desktop video at this point, but were deploying kiosk based, and thats all IP basis, too, he says. The employees are able to address issues in real time with individuals on the other end instead of having to get on an airplane. Every single industry is going in this direction, and it is relatively good insurance companies are going down this direction right now. Insurance companies are catching up very quickly.

One area that has been short on adoption but increasing in interest is the converged networkconnecting voice and data networks, according to Light, author of a recent study, Rethinking Insurance Network Infrastructure: The Case for Convergence.

In the past year, Light reports, very prominent companies such as Bank of America, Merrill Lynch, and Ford Motor Company have made commitments to VoIP with converged networks that serve thousands of employees. We havent seen much with the insurance industry, with the exception of AIG, which made kind of a generic announcement it was going to converge its network, he says. There are very few insurance companies hitting on this, although I think in the next year or two well see a lot more of them move in this direction.

Firemans Fund has a strategic VoIP initiative under way that it calls Any Service, Any Time, Anywhere. Were providing full integration of VoIP over an MPLS [multiprotocol label switching] network to offer the ultimate level of customer experience to the insurance business, says Dunn. With this technology, well be able to leverage our enterprise systems all the way down to a small field office, and it will create virtual work forces. The carrier will be able to supply all the tools down to a single individual from an enterprise architecture layer.

VoIP enables Firemans Fund to deliver carrier-level services over a data-grade network and to be able to extend voicemail down to a single-person office. Were employing [the service] to every single one of our nationwide field offices, and were also deploying it in all our campuses, says Dunn. From a disaster recovery perspective, it enables us as a company to be able to respond and forward calls to any location that is connected to our network and also forward calls to individuals who are employees of the corporation or contractors who have connectivity over VPN. So, I could have a virtual call center literally spread across the country. Its the key to the future in my opinion.

Firemans Fund is working in partnership with AT&T on this project. AT&T is providing what well call dial tone over an IP connection back to multiple PBXs in strategic locations in [its] architecture, says Dunn. The whole telephone company environment really has changed. It is leveraging all the broadband connections instead of laying copper for dial tone.

Broad Benefits

Benefits of such technologies to insurers fall into two broad categories, according to Light. The first is financial, which amounts to lower expenses. The second is operational, which can involve more effective experiences for policyholders, prospects, agents, and other business partners. As far as the lower expenses go, conceptually it is very simple, explains Light. If you start with having a voice network for telephones and a data network for your computers, you have two separate staffs that work on them. You also have two sets of pipesthe physical cables or wiresand you have two sets of servers that support each of them. If you converge them onto a single network, you have one set of people, physical wires, and cables.

The most dramatic area of operational impact, Light believes, involves going from a call center, which is basically dependent on telephone communication, to a contact center that gives the customers options of contacting the carrier either by phone, e-mail, chat or instant messaging, or video conferencing.
Creating these alternative channels has a lot of advantages because we basically are in a multichannel world now, says Light. It also gives the call-center reps a greater set of tools and more effective training methods in terms of getting up to speed and accessing whatever information they needpatching in underwriters, claims reps, or whomever they need to get closure on the issue that has brought the policyholder to them.
The benefit for insurers is cost reduction, according to Dunn, which comes as insurance carriers improve service. Flex-ibility is a key, he asserts. A great example of that is if individuals need to move to a different office, they unplug their phone, plug it in to the new office, and their number follows them. Its an overall IT delivery mechanism for improving service and being able to instigate change quickly.

Most companies have disparate PBXs, Dunn points out. This really gets us down into the architecture where we can keep the latest and greatest software revisions, we can do upgrades, and we can provide better services from three [core areas, for example]. Instead of having to touch 60 sites, we touch three sites, he explains. When you look at telephone services, broadband services, and networking services, there is just so much bandwidth in the market now. The Internet was developed and designed around an IP architecture, so you know the strategic direction is to go with everything over IP.

Simple Solution

Two issues take away from the simplicity of the solution, Light believes. One is you need the capacity and functionality to do voice successfully, he says. The technical term is quality of service (QOS), and basically what it means is if your network is bringing to you a Web page or an e-mail message, it doesnt matter whether you are waiting 1.6 seconds vs. 1.2 seconds, or however fast it builds. Talking on the phone, if suddenly a sentence or a word comes in even half a second later, it gets to be a difficult conversation. So, you need sufficient capacity, built-in intelligence, and functionality in the network to guarantee the necessary quality of service, and that will require an upgrade.

The second factor is the phones. Its possible to use conventional phones on a converged network, but to get the full benefit, a lot of companies are purchasing IP phones. What this does is turn your phone into a modestly endowed computer, Light notes. You have a small screen with text and maybe some graphics. It gives you the ability to do what is called unified messaginghaving your voice and e-mail in one Inbox. The screen lets you access any application XML is written for, and that can be very handy if you are trying to quote rates of return on various investment options, for example, a variable annuity.

At the corporate level, Dunn believes service has to be flawless. [The system] always has to be up, he says. It has to be utility-level service. Were actually using the MPLS network, which is an extremely reliable voice-grade network to carry this traffic. What well be able to do is connect those broadband connections in the event of a disaster, for example. Well be able to react to all sorts of environmental events in a matter of less than five minutes.

Straight on Through

Other priorities for insurance carriers include operational efficiencies, with some looking for straight-through processing. There are technologies out there that are putting very sophisticated forms on the desktops for agents, so when agents are capturing the information they can get accurate and complete data, says Smallwood. Part of the problem is the data. When the forms arent complete, [the policy] goes to underwriting, and you get the back and forth. Using the technology to put some of the business rules and the business processes closer to where the data is captured is another use of technology. You can look at a company such as SeaPass Solutions that has multiple levels of technology. It has a data-capture mechanism, a rules engine, and a process engine, so it has all these components. An agent can write policies and get a quote and approval instantaneously.

Straight-through processing implies no human input on a transaction, so the concept of an underwriting review of a transaction sometimes brings in a manual intervention, according to Brad Allen, senior vice president of information technology at Selective Insurance, which is using SeaPass Solutions. Automating all those underwriting rules and the complexity of the business itself make straight-through processing difficult, he says. The other aspect is agents prefer to work in their agent management system while carriers process business in their systems, and each one is different.

The challenge is connecting the two systems seamlessly.
One of the reasons straight-through processing has been difficult to achieve for insurance carriers that sell through an independent agent/broker channel is the underlying business model in the insurance industry, contends Eric Gerwirtzman, president of the U.S. operations for SeaPass Solutions. If you look at banks, I can take an ATM card and go to any ATM across the country and fetch money from it, he says. When you look at the business model of insurance, every carrier has its own underwriting rules, guidelines, and appetite. Thats what makes each carrier different from its competition. Basically, that requires different data attributes. On top of that, when you are looking at an insurance transaction, it is very data heavy. The amount of data that needs to be transacted for a single transaction is significantly larger, relative to any other industry.

Selective was looking for a solution for all its agents, Allen claims. Anything we could do to bring together the agency management system with the carriers functionality to make that process easier really was our objective, he says. What makes a solution of this type a good solution would be how seamless you make the integration between what the agency is used to working in and the carriers functionality. There really needs to be a gap analysis done between information coming from the management system and information passed to the carrier enabling the carrier to complete the transaction.

Allen believes Selectives IT organization benefits from the standpoint that if it can help bring additional business in the door by making it easier for agents, the entire company benefits. Strictly on the IT side, its really just another avenue to bring transactions into our systems, he says. We have systems in place that perform all the necessary functions to complete quoting, issuance, endorsements, and so on. This avenue allows us to reuse much of what we have in place.

Easier Path

Selective has been able to integrate its existing quoting engine and the back-end processes of its systems. I think any time you can provide an easier path for an agent to do business with a carrier, thats a win-win situation, says Allen. Its a win for the agency because if it can get its business processed straight through, it doesnt have to worry about additional follow-ups or calls. Its a benefit to the carrier because agents find it more attractive to place business with us because its easier to get it through. Thats really only one part of the picture because you also have to have good products, service, and relationships with your agencies to be successful.

The insurance industry is working on projects that will help sustain profitable growth, notes Smallwood. This is being done through the use of analytics, decision support, and straight-through processing for underwriting. Some of these products are so robust with the analytic capability for predictive modeling and risk segmentation. They really hone in on profitable pricing. Insurance companies just are starting to understand the capabilities there. Thats not necessarily a brand-new technology. It has been used a little in the personal lines, but companies are embracing it more.

Easy Does It

New technology at The Hartford in personal lines involves making the carrier easier to do business with, according to Keven Busque, CIO of personal insurance for the carrier. On the front end, the carrier has launched two initiatives: Quote to Issue (QTI) and Expressway. The carrier also has completed a system called Dimensions, which is the rating and underwriting piece of The Hartfords product side. Those three pieces have made the environment for our agent much easier, says Busque. One is from a product side, and two are from a distribution perspective.

The carrier created an engine within The Hartford that allows the carrier to price its products more appropriately and more quickly through an engine on the back end. It allows our product people to be able to change the variables within the engine on a day-to-day basis as well as put in new product in less than six months, where in the old environment it took us two years to do, says Busque. From a product perspective, we can price it better and we can change it faster for the trends in the business.

Speed to market probably is one of the most important things carriers do, according to Busque. What really distinguishes one insurance company from any other insurance company is how well you price the product and how well you do the distribution around the product. Those, to me, become two core aspects of what makes an insurance company successful. What weve been able to do is take the pricing piece of our business and make it into a core piece where we have flexibility and speed.

This allows The Hartford to have more of a flow in its business processes rather than have underwriters look at every policy, Busque believes. The underwriting piece is more automated, he says. So, in essence, weve created engines that allow us to get these transactions through the back end much faster and much cleaner and without any human intervention.

Real Time

From a distribution perspective, Busque claims QTI allows agents access to The Hartfords proprietary applications through a portal. They go to the QTI application in their office, and they literally can quote a policy right out of their office in real time, he says. [This is] opposed to the agent having to call The Hartford and go to a CSR and have the CSR type all the data in and then call the agent back with a quote.

What The Hartford has done with Expressway is to tell the agents they dont have to go into the QTI application. What they can do is send us their management system transaction, and well process it for them so they dont have to do dual entry, says Busque. There are several screens that they have to go through, that they have to respond to, but its not some clerical person going from one screen to another inputting data. Its taking their management system data, and it is being propagated into Expressway and then going into QTI. QTI still is the engine, but what we do is get the data in a format QTI can accept.

Barry Sergeant, program manager for The Hartford, says, We learned [carriers] cant carry a big stick and say, If you want to do business with The Hartford youve got to log on and do business with us a certain way. What weve done is follow [the agents] flow. They work with their own management system. Why would we want them to leave that system and jump into [our] proprietary system? Weve given them the ability to work within their own environment. We say we want to bring it to you.

Java Work

In putting the pieces together, The Hartford developed several aspects concurrently from a proj- ect perspective. Barry created a project team and used Java technologyJava script and object orientation to deal with that, says Busque. He has a discipline and skill set around newer technologythe Java J2EE type discipline. On the rules and rating piece, that was more around relational concepts and relational databases. [These were] two different disciplines and two different technologies but both coming together to complement the business and being able to service our agent.

In establishing its strategy, The Hartford looked at four possible actionsrenovate, buy, build, or do nothing. We knew if we did nothing we would probably be in a different spot today than where we are in regard to policy growth and penetration of the agent channel, so we knew we couldnt do nothing, says Busque. We said the build piece would be too long and too costly to try to do. In the renovate piece, we would be renovating our applications, which in some instances are 30-plus years old. We would be renovating them but not necessarily taking them to the next level.

For the future, Sergeants task is to continue to take the front end of personal lines and try to make it more of a commodity-type front end that falls in line with service-oriented architecture and service-oriented integration. We are looking at a common infrastructure from a front-end perspective and how we integrate with the back end, says Busque. In the insurance industry today, we have built a lot of proprietary interfaces, so we have a front end that probably has 30-plus ways of talking to our back end. What were doing is creating an integration service that only talks one way. The Hartfords overall program, Busque adds, probably has another four to five years to go. We are continuing to do automation to clean up some of our back-end legacy pieces but also enriching some of our front-end distribution as well as our back-end rates and rules, he says.

Great Architecture

Another interesting development is large companies now are buying technology solutions from small vendors. Five years ago, they wouldnt even entertain some of these small companies because of the risk associated with it, says Smallwood. Back in the 90s, insurers were building their own workflow engines and process managers or rating engines. Some of the technology we are seeing in the use of Web services has enabled these small companies to have pretty robust products. Either a J2EE or a .NET base allows them to be components insurers then can put into their solutions. Once you establish a really great architecture, [insurers] start to see some of the benefits from it.