Pain Relievers

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

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

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

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

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

When Kennedy came to Ohio Mutual a little more than three years ago, he indicates it was clear there was a system deficiency. "We really needed to do some major upgrades," he says. But prior to getting started, Kennedy pulled some of the company's technology staff and business people to the side and instructed them to think out the project before diving into anything. "We have a set of guiding principles that were like guideposts we pounded into the ground," he says.

While some guideposts may be carrier specific, others can help any insurer reduce the pain normally associated with such a major undertaking, and according to project veterans, those principles include the following:

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

"If you let it go the other way, at the end of the day, you'll get a very good system that nobody wants," says Kennedy. Business people are the ones who have to use a new policy administration system, so they should drive the project. Carriers should have a technology team that is willing to park its ego at the door, listen to the business, be savvy about the business need and what the business side says it wants, and then actually deliver it, Kennedy believes. "If projects are IT led, they are going to get done, but I don't think you're going to have what you want when you get done," he adds.

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

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

PEMCO also had executive support from the very top. "We weren't allowed to move off the one-team concept, the one-program concept, or the one-schedule concept," says Miller. "That's probably the biggest reason for the success."

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

2. Establish some guiding principles.

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

The senior leadership of a company must stay involved in projects of this size, Kennedy believes, but that also depends on the size of the carrier. Ohio Mutual is a $130 million premium company, 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 been involved in this initiative to the degree I was," he points out. "But there's a certain size at which senior leadership has to be all over it to provide that guidance and those principles to keep the thing on balance."

3. Set appropriate time lines.

A previous carrier Kennedy worked for made a pair of acquisitions, and none of the three companies had a system that would accommodate the other two. In the middle of merging the companies, it was decided a new system was needed. The corporate office mandated the system be up in nine months. "To do something of that magnitude in nine months is ridiculous," he asserts. "What happens is people take shortcuts. People will achieve the goal you give them. They'll take shortcuts to get there, and when the day of reckoning comes, they have delivered something, but there are 58,000 things that are broken, and it really doesn't work."

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

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

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

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

Time also is of the essence when a company is focused on a rate at which it expects to grow. After making an acquisition to enter the life insurance BPO market, Antares Management Solutions, which is owned by Ohio health insurer Medical Mutual, found the policy administration system that came with the acquisition would not allow Antares to grow at the speed the company expected. Antares had to move quickly with the installation of a new system from AdminServer.

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

The IT team at Mutual of Omaha, already pushed for a tight deadline on its policy admin project, knew it had to manage expectations to stay within its time frame, Litz notes. The business sponsor of the project wanted the system to be able to support dental when the system went live. "We looked at it and said there was no way," he recalls. "We held to our guns. We knew if we bent and said yes, we really were not going to be successful. You couldn't use the Mongolian horde theory–bring in more people–because we were dealing with all the same modules."

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

4. Be honest with your people.

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

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

Agents also lose commitment because they know the routine from other business partners, Kennedy adds. "Agents have seen this a thousand times from all their companies, and when you stand up and say nothing is going to change, your credibility shrinks," he maintains.

People know their jobs are going to be impacted by a new system, so Kennedy believes carriers need to provide training tools the staff can lean on to learn how to adapt to change, especially in deeply entrenched companies. "There were a lot of people who have worked [at Ohio Mutual] a long time," he says. "They are used to doing 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, and we have to do something different. I'm changing their world."

Ohio Mutual introduced some change management classes for employees. These classes had nothing to do with systems or insurance but were offered to help employees learn how to adapt to change in their lives. "I really think that paid a lot of dividends for us," says Kennedy. "I'm not na?ve to think we took all the anxiety out, but we took a great deal out by providing those tools."

One of the first steps Mutual of Omaha had to take was to assess what skill sets were needed from both a business and technology perspective. "Then it really was the collaboration of our technical infrastructure staff, our technical application staff, and a great group of business analysts working on the project," says Litz. The company had some experienced staff members, borrowed others from different segments of the company, hired contractors and consultants, and depended greatly on the SunGard resources.

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

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

Many customers try to make new software conform to current business practices. Kennedy believes the new software should dictate the business practices. "A lot of people have pet workflows and try to make the system adapt to their flow," he says. "That doesn't do you any good."

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

PEMCO's basic belief was it was not a technology company, Miller remarks, so it needed to find a technology partner with a vanilla product the carrier could install and use without having a lot of modification–practically no modification if at all possible. "When you begin modification, you drift into that world called development, and that's what, to a large extent, led us a little astray the first time around," he says. "[The system] had to be foundational–it had to be workable and a true tool for the people who deliver our service and our sales."

6. Choose a good partner.

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

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

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

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

Lesson Learned

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

Tech Guide: Administration Tools–Policy, Billing Claims

Accenture

Chicago, Ill.

312-737-8842

www.accenture.com

AdminServer

Chester, Pa.

610-619-3100

www.adminserver.com

AGO Insurance Software

Mt. Arlington, N.J.

973-770-3200

www.agois.com

Allenbrook

Portland, 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

Hartland, Wis.

262-369-7500

www.aqssys.com

@Global

Breckenridge, Colo.

800-419-4449

www.atglobal.com

Blue Frog Solutions

Pompano Beach, Fla.

954-788-0700

www.bluefrogsolutions.com

BML Istisharat

Beirut, Lebanon

961 1 983208

www.istisharat.com

Camilion Solutions

Markham, Ont.

905-477-7499

www.camilion.com

Castek

Toronto, Ont.

416-777-2550

www.castek.com

CGI Group

Montreal, Que.

541-841-3200

www.cgi.com

CheckFree

Norcross, Ga.

678-375-3000

www.checkfreecorp.com

Consis International

Weston, Fla.

877-426-6747

www.consisint.com

COSS Development

Mequon, Wis.

262-241-8989

www.cossdev.com

Covansys

Farmington Hills, Mich.

800-688-2088

www.covansys.com

Cover-All Technologies

Fairfield, N.J.

973-461-5200

www.cover-all.com

CSC

Austin, Tex.

800-345-7672

www.csc-fs.com

CS Stars

Amarillo, Tex.

800-858-4351

www.csedge.com

Delphi Technology

Boston, Mass.

617-259-1200

www.delphi-tech.com

Document Sciences

Carlsbad, Calif.

760-602-1400

www.docscience.com

DRC

Honolulu, Hawaii

800-836-6057

www.decisionresearch.com

DSPA Software

Mississauga, Ont.

905-279-9993

www.dspasoftware.com

Duck Creek Technologies

Bolivar, Mo.

800-889-8401

www.duckcreektech.com

Ebix

Atlanta, Ga.

678-281-2020

www.ebix.com

Edgewater Technology

Wakefield, Mass.

781-246-3343

www.edgewater.com

EDS SOLCORP

Toronto, Ont.

416-673-9900

www.solcorp.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.

800-345-3638

www.filenet.com

FINEOS

Cambridge, Mass.

877-893-7904

www.fineos.com

FirstApex

Singapore

+65 6225-8001

www.firstapex.com

First Notice Systems

Boston, Mass.

800-310-4367

www.firstnotice.com

Fiserv Insurance Solutions

Cedar Rapids, Iowa

800-943-2851

www.fiservinsurance.com

Garvin-Allen Solutions

Halifax, Nova Scotia

877-325-9062

www.garvin-allen.com

Genelco Software Solutions

St. Louis, Mo.

800-983-8114

www.genelco.com

Guidewire Software

San Mateo, Calif.

860-217-0215

www.guidewire.com

IDMI

Warner Robbins, Ga.

888-856-6388

www.idminc.com

IDP

Wyncote, Pa.

800-523-6745

www.idpnet.com

iGATE Global Solutions

Bangalore, India

877-924-4283 (U.S.)

www.igate.com

Infinity Systems Consulting

New York, N.Y.

212-541-7602

www.infinity-consulting.com

The Innovation Group

Danbury, Conn.

203-743-6000

www.tigplc.com

Innovative Software Solutions

Charlotte, N.C.

800-837-2187

www.webpgmr.com

Input 1

Woodland Hills, Calif.

888-882-2554

www.input1.com

INSTEC

Naperville, Ill.

630-955-9200

www.instec-corp.com

InsureWorx

Denver, Colo.

303-729-7566

www.insureworx.com

Insurity

Hartford, Conn.

860-616-7721

www.insurity.com

InsurSys

San Francisco, Calif.

415-975-0966

www.insursys.com

InSystems

Markham, Ont.

905-513-1400

www.insystems.com

ISCS

San Jose, Calif.

888-901-4727

www.iscsinc.com

ISO

Jersey City, N.J.

800-888-4476

www.iso.com

ISO Insurance Technology Solutions

Nashua, N.H.

603-598-5427

www.iso-its.com

LIDP Consulting Services

Woodridge, Ill.

630-829-7100

www.lidp.com

Management Data

Pelham, Ala.

205-378-1380

www.mgtdata.com

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

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