Cut the Cake

As an example, Grieve cites the number of new policy administration systems on the market that do not contain their own rating engines. Grieve notes there are perfectly good third-party rating engines in the marketplace, so many policy administration vendors have formed alliances with rating vendors. The policy administration vendors also are doing this to a lesser degree with rules engines, imaging, workflow, and document management, he adds.

Gleberman believes the best-of-breed approach is slowly moving to insurance, even though he points out banking and brokerages have been doing it successfully for six to eight years. "The momentum is picking up in the insurance space," he says. "It's fairly rare, though, particularly for the midmarket insurer. It's looked at as a little risky, and people are not willing to step up and pioneer it. I see more interest in [best of breed] with the larger players."

What holds insurers back, Gleberman contends, is the search for the right vendors, and implementing disparate products is more complicated than buying a solution set from a single source. He admits the benefits are there, though. "You get a better match for your business requirements across all the functional areas if you open your search to what one of our customers calls 'best-of-choice solutions,'" he says.

Amerisure Mutual Insurance is in the midst of an application development project with InsureWorx, which brought the insurer a rating system from AscendantOne (now known as ISO Insurance Technology Services, or ISO ITS). "InsureWorx connected us, and the relationship has been going on from there," says Ed Cullari, director of Amerisure's project management office.

When working with multiple vendors, Cullari indicates it is important to watch out for duplication of tasks and assumptions such as one vendor thinking the second vendor is going to provide a service and the second vendor thinking the responsibility belongs to the first vendor. To keep those issues from boiling over, the carrier needs to have a project manager in place, he advises, adding vendors prefer that format, as well.

While InsureWorx and ISO ITS don't have a formalized alliance, Cullari states the contract among all three parties assured Amerisure integration between the two vendor products was not an issue. "[An easy integration] is what we're all seeking," says Cullari. "It's still early in the project, but we can see it happening. We can see it's starting to jell."

Bob Goldberg, vice president of technology with Colorado Farm Bureau Insurance, advocates the best-of-breed concept. "As I look at outside systems, I am looking for best of breed to be able to plug into the core system we have–rating engine, data warehouse, things such as that," he explains. "The vendor relationships really are important with how well the systems work and how well their people work with my staff."

"Clearly, from a client's point of view, if these multiple-vendor alliances are real–if they've integrated their software successfully in a production environment–as a client, it would say to me this reduces my integration effort," Grieve says. An added bonus is a proven multiple-vendor solution avoids the potential hassles of a best-of-breed solution that has yet to be integrated by the vendors. In the latter scenario, as time passes, the solution buyer may wind up with multiple pieces of software that may break components that already function or make certain systems incompatible that were compatible before, adds Grieve.

While attending conferences, Gleberman has viewed a great deal of vendor-to-vendor activity. "You get a sense there is a lot of dialogue," he says. "Vendors are trying to figure out how to drive more sales, and if they partner with another solution provider, they think it will drive more sales."

From his perspective as a consultant focusing on bringing carriers and vendors together, Gleberman observes a lot of the integration work is left for the carriers or the consultants to figure out. He believes part of the problem is driven by the industry. "Insurance is a little behind some of the other financial services sections in adopting best-of-choice solutions," he says. The insurance industry is more focused on the integrated soup-to-nuts solution provider, he continues, and is catching up only now to some of the advantages of the best-of-choice solution. Other financial services industries have discovered they can get the most flexibility and the most cost-effective solution if they piece together a number of products, Gleberman points out.

In addition to vendor alliances becoming more formalized today, Grieve reports they are becoming more publicized, as well. Ten years ago, if one vendor relied on another vendor to deliver a solution set, it was looked upon as a weakness, he remarks. Today, if a customer visits a vendor's Web site, one of the options on the home page often is a list of alliances or partnerships. "There's been a change in the way the market views partnerships from something that may be a little questionable to something that is actually a positive," he says. "The market now believes some vendors really are good at some things and not so good at other things. So, what buyers want in their solution set is the best solutions from the best vendors."

With a vendor alliance, Grieve feels customers are enjoying the benefits. "As a customer, I like it because they've done this integration before, so I'm not the guinea pig," he says.

Goldberg agrees integrating the various solutions can be difficult, and that is why he looks for vendors that have Web services applications. "In my opinion, [Web services] is where it's at from a vendor perspective, especially for carriers on the smaller side of the scale," he comments. With Web services, the development work already has been completed and the systems can plug in to the core applications. "I think that model makes a lot of sense for smaller and midsize companies," he says. "Offering Web services alleviates some of the stress from the integration of multiple products."

AmComp, a Florida-based workers' compensation insurer, had automation issues it needed to address concerning first notice of loss. "Ten years ago, the way we took our first notices was by telephone," recalls Mary Beth Slane, vice president, claims. "Someone manually wrote them, and we started a paper file." Once AmComp joined forces with First Notice Systems to automate the first notice of loss, the carrier still needed to find a way to do electronic filings. That is when Claims Harbor joined the team. "Claims Harbor provided the electronic piece for us," says Slane. "FNS and Claims Harbor built a bridge for us so the claims go right to Claims Harbor from FNS."

AmComp chose multiple vendors because the carrier concluded its core businesses were to write workers' comp insurance and handle claimants with great customer service and cost efficiency. "We felt we should partner with someone whose specialty this was," explains Slane. "FNS' specialty was taking the notices, and Claims Harbor's specialty was doing the electronic piece. We did not feel like it was cost-effective for us to do those pieces in-house."

AmComp was seeking as seamless a solution as possible. "That's why FNS and Claims Harbor built the bridge for us," says Slane. "We have quick and immediate turnaround. We get e-mail from FNS letting us know we have new claims sitting in the hopper, so we can go in immediately and pick them up from Claims Harbor."

In Amerisure's case, the fact the two products aligned with each other was something the insurer was seeking from the beginning, according to Cullari. "It would have been a setback if [the products] hadn't been mutually compatible. If the percentage of allocation of work had been skewed, the time line would have suffered," he notes. "Right now, there's a balance, and everyone knows what work they are supposed to do, and everyone works toward those milestones. But once you establish that relationship with the vendor, if that vendor would disappear, that would have a major impact."

Some smart shoppers may benefit financially from the vendor alliances, according to Grieve. "We know of a number of these relationships where if you go to the primary vendor–if it's got a relationship with other vendors–that relationship usually involves some kind of reseller ability, which includes a discount," he reveals. "It's not just a discount to the partner, and it gets passed on at least partially to the buyer. If you shop through one of those alliances, I think you're going to save money. You could be looking at 10 percent or 15 percent margins on licenses and maintenance costs over what you would pay in the open market."

Gleberman views most of the alliances going on in the industry as sales channels. He doesn't see vendors making an investment behind integrating the products that would ensure the products have the ability to communicate and a common way to exchange information. "[Vendors] are looking for the carrier to pay for that essentially as part of the implementation cycle," he says.

Since taking on the AmComp project, the two vendors subsequently have worked with several clients. Alex Tsetsenekos, director business development for First Notice Systems, believes the combined work done by the vendors brings AmComp strength. "AmComp felt first notice of loss was not a core competency," he says. "It is in the business of writing workers' compensation and adjusting workers' compensation claims. First Notice wanted a best-in-class business-solution partner for electronic state filing. So, we looked to Claims Harbor through the AmComp relationship to say this is an opportunity to leverage that type of functionality across multiple clients."

Grieve doesn't find any major negatives in vendor alliances, but there are what he calls "watch outs." One thing to be alert to is some vendors advertise alliances he assesses as less than mature. "We certainly know of vendors that meet each other at a trade show and say they need to be partners and then announce they have a partnership, but the partnership hasn't been consummated," he remarks. "From the point of view of a carrier, it's buyer beware."

Carriers may like the fact there is a partnership between vendors, but the carrier needs to know what the partnership consists of. "What's the nature of the partnership, and how long have you had it?" Grieve asks. "How many successful installs have there been as a result of this partnership? And are those successful installs relevant to what you want to do? Is the implied benefit for real, or are you the guinea pig?"

Beyond the verification and buyer-beware issues, Grieve contends the alliances are in general good for carriers. Purchasers of services and software always should decide whether they actually want the results of this partnership or whether they want one of the vendors without the partner. Grieve doesn't believe any of the alliances have exclusivity to them.

In addition, there are some hidden alliances that Grieve views as unhealthy. He indicates carriers sometimes bring in large integrators to perform service work, and sometimes part of the work involves the selection of third-party vendors for functionality or tools. "Sometimes what those service vendors are doing actually is trying to promote partnerships of theirs, which are not publicly declared to the carrier," he cautions. "They are trying to bring in their business partner because they will benefit financially."

The technology sophistication of the carrier is important in going the multiple-vendor route. To be successful in integrating these pieces, Gleberman feels the carrier has to be willing either to be the single point of focus for the integration activity or to assign that responsibility to one of the vendors. Carriers have the option of selecting one of the components of the solution to be the integrator or hire a third-party consultancy. "Someone has to step up to be the single point of integration," he says.

Carriers don't want to be guinea pigs, as Goldberg explains. "Proof of concept always is what I'm looking at," he says. "In almost every relationship I've established over the last few years, the vendor has been able to prove to us ahead of time its solution works. Prove to me you can do it."

One of the risks, Gleberman warns, is getting all of the pieces together but then something doesn't work. "You have to wrestle the whole help desk concept right from the beginning and make sure either the carrier can support [the integration] internally or someone external is going to bring that integration focus to the solution, so you have one person or one company to go to when you have an issue," he says. "Some of the smaller carriers aren't going to be willing to take that on and would rather have one vendor, one contract, one phone call to make if something's not working."

Tsetsenekos admits from an operational standpoint it can be complex in terms of a carrier turning to multiple partners and maintaining interfaces and integration points. "From a first-notice-of-loss perspective, we try to move as many of the administrative functions that occur toward the beginning of the claim into the first notice of loss so we can take those tasks off the adjusters' desk and they can focus on adjusting the claim," he says. "The key for AmComp is governance–the ability of a process to be in place for the carrier to feel comfortable with organizations executing a service or process on its behalf. It has that comfort level, so when it has an issue or concern, there is a process in place to come to a resolution with a policyholder."

AmComp could have turned to a single solution provider, but Slane doesn't believe it was the right move for her carrier. "There are some companies out there doing all these pieces themselves," she points out. "It works for some of them, but for us, it just wasn't a good fit. We didn't want to spend our resources on that. Call centers are very difficult operations as far as getting employees and servicing 24/7. It's a personnel nightmare, and we just didn't want to do that."

Goldberg likes to turn to vendors for advice on what can help his company. "The vendors have a ton of expertise," he says. "A lot of them have great ideas. You listen and learn."

The key to happiness, in Slane's opinion, is both vendors working together. "If they didn't, we would have a problem," she concludes. "We just want the customer service."