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Celent Model Insurer 2010
Case Studies of Effective Technology Use in Insurance
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Executive Summary Introduction Common Best Practices and Results Model Insurer Components 2010 Claims Esurance Hertz Europe Highmark Distribution Management Allianz Life Insurance Company of North America AVIVA-COFCO Life Insurance Co., LTD Erie Insurance Group Farmers Insurance FBL Financial Group Harford Mutual Insurance Company Infrastructure/Architecture Kansas City Life Insurance Company LV= The Phoenix Companies Unitrin Direct IT Management Atava, RSA Scandinavia PMI Group Tokio Marine & Nichido Fire Insurance Co., Ltd Zurich Financial Services Policy Administration American Modern Insurance Group The Cincinnati Specialty Underwriters Insurance Company Calliden Group Limited Product Design and Development / Rating Erie Insurance Liberty Mutual Agency Markets Suncorp Service The Church Pension Group Nationwide The Hartford Financial Services Group, Inc. Underwriting Capitol Insurance Companies Model Insurer of the Year 2010: Missouri Employers Mutual Conclusion Leveraging Celent’s Expertise Related Celent Research
The vision for Celent’s Model Insurer research is to try to answer an apparently simple question: “What would it look like for an insurer to do everything right with today’s technology?” Given the recent economic environment, this question is more applicable today than ever before. Capital-constrained insurers must leverage all available resources to the maximum to meet market challenges. The approach Celent takes to identify model insurers is to offer, at a high level, some key best practices in the use of technology across various areas of the industry—whether in components of the product and policyholder lifecycle or general areas such as IT management, service, or business process outsourcing—that a “model insurer” would use. These areas are illustrated by case studies of specific initiatives and capabilities, selected from the many submissions and presented in this report as “Model Insurer Components.” Model Insurer Components are used to group the case studies and represent portions of the insurance value chain. The components represented in the 2010 report are: Claims Distribution Management Infrastructure/Architecture IT Management Policy Administration Product Design and Development / Rating Service Underwriting
Copyright 2010 © Oliver Wyman
testing. and project management Solicitation of end user feedback and review Measurable Business Results Higher productivity. and system integration Data transparency and compliance Improved use of channels Risk management through proper development. Table 1: Common Best Practices and Results IT Best Practices Use of industry standards Optimization of infrastructure Positioning for future reuse Automation.A case study typically includes multiple examples of best practice and/or outstanding results. Celent has organized the general benefits of initiatives into categories to allow readers a summary of the major value areas of each profile. reduced losses Decreased time to market More efficient document/content management Improved agent/customer satisfaction and adoption Compliance and reduction of market conduct penalties Use of metrics Source: Celent 4 Copyright 2010 © Oliver Wyman . lower staff expenses Increased revenue or market share Faster cycle times and more consistent processes Better decisions. more accurate pricing. These are summarized in Figure 1. STP.
An important note is that a model insurer component is a recognition of a insurer’s effective use of technology in a certain area. they represent the way things should be done. some key best practices in the use of technology across the product and policyholder life cycle and in IT infrastructure and management that a “model insurer” would use.Introduction What Is a “Model Insurer?” The vision for Celent’s Model Insurer research is to try to answer an apparently simple question: “What would it look like for an insurer to do everything right with today’s technology?” Of course. there is no such thing as a “Model Insurer”—every insurer does some things well. These case studies are presented as “Model Insurer Components”—components of a theoretical model insurer’s IT systems and practices. Celent identified Model Insurer Components through the following process: Copyright 2010 © Oliver Wyman 5 . In general. and others not as well when it comes to technology. and their technological starting points. at a high level. not necessarily a statement that the insurer is absolutely best in class (although some may be). The terms “everything” and “right” mean very different things to different insurers depending on their size. the complexity of their operations and product sets. the question is not nearly as simple as it appears. What Is a “Model Insurer Component?” Of course. Celent refines this summary of best practices and identifies new Model Insurer Components annually. Nomination and Selection Process For this report. Celent gathered as many real world examples of effective usage of technology as possible and then decided on a set that reflected important best practices. Accordingly. The approach Celent takes is to offer. Model Insurer Components are those that help insurers improve performance and meet market demands.
Each section contains an overview of what makes a component important and how a Model Insurer can distinguish itself in this area through technology. Nomination forms were reviewed by Celent insurance senior analysts. Some of the nominating vendors. The 2010 process was more selective than previous years. and cases that demonstrated the most effective use of technology. Celent was not directly involved in the creation or deployment of any of the initiatives that have been recognized. and quantifiable success metrics were selected. Celent selected an overall Model Carrier of the Year for its outstanding application of multiple best practices. We are pleased to report that Missouri Employers Mutual has been chosen to receive this recognition in 2010. An extended case study of its initiative is included as the final selection in this report. and no preference was given to clients in the selection process.” Consistent with the practice begun last year. Insurers were interviewed to review their cases and provide additional information if necessary to create the case study. However. Celent senior analysts drafted case studies. 6 Copyright 2010 © Oliver Wyman . This is followed by one or more Model Insurer Component case studies that illustrate the best practices discussed.Invitations and self-nomination forms were sent to over 100 insurers and 50 vendors (vendors were asked to pass the form along to their insurer clients. The 2010 selection process was extremely competitive. and many of the selected insurers are or have been clients to Celent’s retained advisory service (Celent serves dozens of insurers across the globe in this capacity). which were approved by the insurers for accuracy and confidentiality. and allowed to work with them to nominate their initiatives) in multiple waves over the course of 2009. Client Disclosure There were no fees charged to insurers or vendors mentioned in this report. About this Report This report is divided into sections for each of the Model Insurer components of the product and policyholder life cycle. a clear best practices approach. Submissions were 50% above 2009 levels and almost all categories had multiple qualifying “winners.
Copyright 2010 © Oliver Wyman 7 . and Japan. Since there is a high degree of overlap in best practices for effective use of technology between life/health insurers and property/casualty insurers. differences between the sectors are noted and separated where appropriate. nearly all are equally applicable to insurers in geographies with roughly similar conditions and business practices. including the UK.g. “property/casualty” rather than “general insurance”) are used throughout.. Celent has combined both into a single volume to avoid unnecessary duplication.Although the majority of the cases cited in this report are of initiatives in the US. Europe. Although Celent intends this report and future Model Insurer reports to be equally applicable to non-US insurers. US terms (e. However.
lower staff expenses Increased revenue or market share Faster cycle times and more consistent processes Better decisions. Copyright 2010 © Oliver Wyman 8 .Common Best Practices and Results No two projects in the insurance industry look exactly the same. Table 2: Common Best Practices and Results IT Best Practices Use of industry standards Optimization of infrastructure Positioning for reuse Automation. reduced losses Decreased time to market More efficient document/content distribution Green organization Improved agent/customer satisfaction and adoption Compliance and reduction of market conduct penalties Source: Celent IT Best Practices Industry Data Standards Model Insurers understand that they need to think beyond successful point solutions and create lasting systems that work within a larger infrastructure. Critical to this is the use of industry data standards. testing. a cross-section of best practices and quantifiable gains common across all model projects regardless of their particular category. more accurate pricing. such as XML and ACORD. however. and project management Solicitation of end user feedback and review Use of metrics Measurable Business Results Higher productivity. While this report does not present an exhaustive list of best practices or expected results. making it difficult to judge which ones qualify as model insurer components. Celent has attempted to identify a number of the most important items. Any insurer striving to be a model insurer in its approach to an IT initiative should consider the following IT best practices. The projects that rise to the top. and system integration Data transparency and compliance Improved use of channels Risk management through proper development. And any insurer looking to achieve model insurer results should plan in advance to measure the following business gains and returns on investment in a quantifiable way. STP. tend to demonstrate a number of similar elements.
any model insurer will spend a good deal of time in the planning phase determining how best to utilize these standards. When looking to bring in vendor software or integrate with a third party source. deciding to reject them only when the benefits and risks have truly been weighed. And any insurer with multiple systems duplicating similar functionality knows that bringing in a new system might add to the burden even before the day’s end. However. Copyright 2010 © Oliver Wyman 9 . Perhaps more importantly. As more and more systems within the organization conform to the same industry standards. they also work to rationalize and optimize their existing systems into an ever modern infrastructure. Even if it requires a little extra work or planning. and it’s likely that even the most disciplined team will find the need to add some unique customizations to suit their needs. The optimization of the infrastructure doesn’t have to trump other business realities. An insurer that licenses a modern policy admin system might decide that rather than going through an expensive conversion process. An insurer with several policy administration systems may consider consolidation a higher priority than bringing in a modern system. and well-defined models. working with industry data standards helps position a new system for easier integration. whether with systems internal or external to the insurer. Positioning for Reuse Any insurer struggling with a legacy system that is decades old understands that today’s technology investment might become tomorrow’s burden. the reduced risk will save time overall. Although this may create a suboptimal infrastructure.Using data standards means that an insurer avoids reinventing the wheel and instead manages risk by working with accepted. This can mean different things. such data standards enable a common ground from which to start. Not every project needs to define itself around industry data standards. depending on the project and the circumstances. it will keep the legacy system in place for existing business and utilize the new PAS for new business going forward. well-tested. the Model Insurer knows that the optimal scenario balances many factors. it becomes easier to have them communicate. An insurer looking to manage expenses in a difficult financial market might seek ways to better leverage its existing legacy system in a modern environment rather than replace it. Optimization of Infrastructure Model Insurers do more than just build or buy modern systems.
When a process requires 10 Copyright 2010 © Oliver Wyman . some decisions. it is important to build or buy a system that can be configured to fit the company’s business process needs and also be integrated into the larger infrastructure. industry standards. when the legacy policy admin system is no longer supporting the business. 2. However. need to be made by a human. And in two years time. Manual processes most frequently arise for one of two reasons: 1. A system does its job well. A system does not provide the correct functionality and can not be easily adjusted. Manual processes are a burden on an insurance organization. the agent portal.This is why a Model Insurer thinks about reuse when investing in new technology projects. however. and any other user getting quotes. such as complex underwriting. but about the way a system is tested and used by the enterprise. extending or bringing in systems that can be configured to automate as many decisions as possible. Manual processes are not just about flaws in the technology. Nowhere is that as crucial as when planning a reduction of manual processes and an increase in automation. In order to reduce these burdens. For example. Automation. in terms of both functionality and shelf life. a new rating engine needs to be leveraged by the policy admin system. It will be easier to achieve these goals by using a service-oriented architecture. requiring a manual process to pass data or jobs from one system to the next. but a Model Insurer knows the challenge is not just about the technology. increasing errors and requiring additional staff. STP. requiring manual workarounds. is to maximize STP. a high ranking item on most insurer’s priority lists. and easily configurable systems. but is poorly integrated with other systems. and System Integration Many of the technology best practices involve thinking about an IT project as a full enterprise strategy rather than an isolated solution. Any system added to the infrastructure will likely be stretched beyond its original intentions. The goal. Straight-through processing (STP) is slowly becoming a reality in selected lines of business. the nowolder rating engine needs to easily adjust to support the replacement. of course. Otherwise the investment has resulted in additional processes to keep multiple rate models in synch.
in many cases. how actions will be audited. allowing good reporting even if such reports come in a later phase. and easily configurable systems. it does not win any Model Insurer awards if it is not adopted by agents and customers. And while the use of a text messaging channel might push the envelope of technological innovation. a change to corporate culture. failed attempts at just such projects still linger as a model of how not to approach an IT initiative. the workflow should be simple. at many insurers. being a modern insurer typically requires providing agents and customers with easy-to-use web applications. It is crucial. which is why Celent does not demand that new technology utilize the web in order to be considered a Model Insurer Component. But new projects will make data accessible and usable.” these goals will be helped by service-oriented architecture. Even projects focused exclusively on business intelligence sometimes create new silos of data that only exacerbate the larger problem. Clearly. Many otherwise excellent projects fail to consider how data will be utilized by other systems. This doesn’t mean an insurer can only be a Model Insurer if they have a centralized enterprise data warehouse—in fact. Copyright 2010 © Oliver Wyman 11 . Improved Use of Channels The IT Best Practices listed in this report focus on an approach to a project rather than a specific “feature” of a system. This allows Model Insurers to make good decisions about their business and prepares them for audits and to comply with whatever regulations the industry may face. however. Like the best practice of “Positioning for Future Reuse. the importance of having a good view into corporate data has never been clearer. Data Transparency and Compliance In an economic environment where regulations are likely to be increasing while expenditures are shrinking. that insurers think about all their channel options when implementing new technology or enhancing existing systems. industry standards. allowing the people at an insurance company to focus on their high-value jobs rather than dealing with systems. and. Data is critical in the insurance industry. and model insurers know that any project needs to fit into a broader data strategy.human intervention. though direct integration to agency systems or simplifying existing paper processes is also important. or how historic records will be archived and made accessible. but require foresight and planning.
but this isn’t a best practice. on the same day. proper interaction with the business. 12 Copyright 2010 © Oliver Wyman . with smaller. Celent considers a company that plans several stages of development. Risk Management Through Proper Development. Maximizing results by maximizing risk is not typically best for an insurer. But it also might be a project in a different area that effectively considers how new functionality will impact existing channels and leverages it appropriately. Many projects finish late and over budget not because of a failure of execution but because the IT group failed to properly estimate and explain the true timeline. While best practices in execution help guarantee many things. By building a user group to review early designs and milestones. Many times in the industry. and much more. executive level support and user level buy-in. and Project Management Model Insurers don’t need to have highly paid or prestigious IT teams in order to succeed.A Model Insurer project that succeeds in this best practice might be an initiative entirely focused on improving a channel. nor does a project timeline have to accomplish huge amounts of revolutionary change in a minimized schedule. usage of both automated and manual test cases. This is not because of a failure to deliver the requirements. and project management—an insurer can accomplish great things over time. What is the risk the project will be late? What is the risk there will be bugs in production? What is the risk the right features won’t be available? What is the risk that by the time the project goes live the needs have changed? The best practices associated with execution are too numerous to list. rolls out several new nationwide systems for multiple lines of business can point to its accomplishment as a huge success. Solicitation of End User Feedback and Review While it may not sound like an IT Best Practice. but because the requirements were misaligned from the beginning. One of the most crucial practices is having a team of players who can communicate effectively. localized pilot programs to be a true Model Insurer. when it comes down to it. testing. the response to a solution is only lukewarm. By following best practices in project execution—development. Testing. such as (and most commonly) a new Producer Portal. after immense efforts are put forth by an IT organization to launch a new system. a project path can be readjusted before time has been wasted on low priority features. the solicitation of input from end-users can be crucial to a project’s success. but involve good requirements gathering. A team that. they are there to help companies manage risk.
it is impossible to know what constitutes a successful project. claims. meaning that metrics are an implied best practice for all winners. agents and others who will be using a system are happy to participate if not excited at the chance to give feedback. a Model Insurer is able to focus on the most important IT efforts. a Insurer must go out and build relationships. Smart technology can help insurers achieve more with less. Copyright 2010 © Oliver Wyman 13 . automate tasks (and occasionally entire processes). or a smaller number of staff to handle the same volume of work. such as when building a portal for independent agents.Sometimes a user group consists of other internal staff who sit right down the hall and getting their participation is easy. But other times. service requests. and continuously discover areas for improvements. Measurable Business Results Higher Productivity. Lower Staff Expenses The insurance industry—like most industries in today’s market—is looking for ways to cut expenses without sacrificing service quality or speed.). Increased productivity allows the same number of staff to handle increased volumes of work (submissions. It is not enough to measure the time to underwrite new business in a new system if that cannot be compared to the previous toolset. Using metrics does not mean a insurer needs to practice Six Sigma or a highly repeatable and measurable review methodology to succeed. Typically. etc. All of the business results and returns on investment listed by Celent as necessary for a Model Insurer Component require the use of metrics. It is difficult or impossible to determine the highest priority IT needs if such self-analysis is not available. Model Insurers use this as an opportunity not just to build the best system. By identifying critical business factors and performing realistic measurements. but also to get a head start on training. Technology can reduce cycle times. give workers the information they need when they need it. It does mean that an insurer needs to take a good look at the important metrics of a system before and after a project. point to successes. Use of Metrics Without the ability to quantify results.
project changes. A Model Insurer also remembers that improving retention of current business is a foundation of growth (and profitability as well). The largest cost impact will generally be among operating staff. and time consuming processes are expensive and error-prone. Since complex processes span systems. better system-tosystem integration reduces the need for staff time to accomplish handoffs. How will a new system link to existing systems? Will it reduce or add to the overall burden on staff? Sometimes an organization needs to recognize that the first phase of an implementation will actually increase everyone’s manual process load. and effectiveness. the key for a Model Insurer seeking this benefit through a given initiative is to identify where and how things will change. Growth may be absolute (increase NPW by 8%). establish baseline measures. Reduced Losses IT projects can help the bottom line by helping grow new areas of business. Measuring growth is a challenge. linkages. especially when the new system has gone online but the old system still maintains half the business. inconsistent. or renewal rates for claimants) are more readily available. or relative (increase market share to 4%). and then track those changes post-deployment. 14 Copyright 2010 © Oliver Wyman . but sometimes secondary metrics (for example: number of submissions received. Managing insurance risk is what insurers do. To optimize labor costs. A Model Insurer also knows that new systems do not just take existing processes and put them online.In either case. but it can also help an insurer be smarter about the business the company already has. Rather. More Accurate Pricing. several Model Insurer winners automated underwriting rules and shortened the cycle time for new business submissions. Growth in a shrinking market means taking business away from competitors. an insurer needs to look across the entire infrastructure before beginning an IT initiative. Many new initiatives automate tasks and/or simplify processes. Specifically. Faster Cycle Times and More Consistent Processes Manual. but savings in IT itself will often seen as well. these new projects provide an opportunity to rethink processes: their complexity. or approved. Increased Revenue or Market Share Growth is a goal for nearly all insurers. Better Decisions.
Many insurers see an unacceptably long delay for product adjustments and leap into a new technology acquisition instead of calculating ROI for a new project. Decreased Time to Market Time to market is a “cycle time. policyholder statements. marketing materials. Whether a company attempts to roll out an entire new line of business or make one change to a rate table. but overburdened IT departments required to write code for every alteration can create huge bottlenecks for the business. selling. Time to market is one of the most frequently cited reasons for licensing new systems. policies. however. and good tools for all the people involved in the process of pricing. Not every project is directly tied to making these kinds of risk decisions.and that is best done with good data and insight into the customers and policies. adjuster reports. an IT initiative is not always the right or only solution. and many IT initiatives are started not to make better product decisions but simply to provide the tools and data needed to understand the decisions that are being made. and approving business. More Efficient Document/Content Distribution The interaction of an insurer with its agents and clients all comes down to content: product information. It is not enough.” but it differs from the previous category Faster and More Consistent Process Cycle Times in that the time to market is a cycle that takes places before any business is transacted. a Insurer may discover that a six week bottleneck still exists in another area. and all manners of correspondence. Being nimble enough to adjust pricing strategies and provide competitive new products is crucial to a company’s ability to adapt to a difficult marketplace. A Model Insurer knows to analyze the whole process and to measure each step before any projects begin. however. application forms. Once IT is able to implement a change to a rate in a day. It is not just about reducing printing and mailing costs. the time to market can take anywhere from minutes to months. Moving all of these documents off of paper and into an electronic format has been an industry focus for as long as computers first started showing up on desktops. less error-prone ways of interacting. Many companies have gone Copyright 2010 © Oliver Wyman 15 . bills. While decreasing time to market may be a critical factor in the business. Measuring this. to recognize that time to market is a problem. but Model Insurers recognize that all initiatives do involve new opportunities for gathering data. can be difficult. whether it is business users seeking approval or the time spent updating marketing material. The IT department must think about all systems as an opportunity to feed data to the business. it is also about creating easier.
a Model Insurer doesn’t just take a paper process and put it online. But these investments also result in a less tangible increase in agent and customer satisfaction. Increased agent and customer satisfaction itself leads to higher productivity and increased revenue. a Insurer can reduce the costs associated with printing and mailing. as long as there are plans in place to update the back-end document process as well. Instead. In addition to these reductions. a Model Insurer looks to use new channels to interact in a better way. allowing agents and customers options as to how they will receive policies and information. a Insurer can also increase agent and customer satisfaction. but a Model Insurer knows differently.through the effort of providing agents or customers an online channel for submitting business only to print out those submissions in-house in order to feed them back into an older process. so may be seen as a means-to-an-end rather than an end in itself. If a new agent portal is being used by only five percent of the agent force. Many of the reasons for this investment tie to previously listed business results: reduced cycle times. higher productivity. reduce storage needs. This also allows a Insurer to track how changes are being received and adjust accordingly. Though only briefly touched upon in the IT Best Practices section. One way for an insurer to measure agent and customer satisfaction is to talk to their agents and customers. more efficient content and document distribution. Improved Agent/Customer Satisfaction and Adoption There has been a great focus in the last few years on providing portals and tools to agents and customers to allow them to more easily interact and transact business with the Insurer. With more efficient document and content distribution. it’s a sure thing that the agents are either unhappy with it or do not know about it. even if those users are outside of the organization. and reduce errors associated with rekeying data. reduce manual process times. and increased revenue. Similar to the result Faster and More Consistent Process Cycle Times. For a certain Insurer this might be the right first step. Working with the agents to determine their opinions will both help a Insurer build the best possible system and also kick start the agent education and training process. 16 Copyright 2010 © Oliver Wyman . an important part to making any IT initiative succeed is to involve input from the targeted users of a system. Another way to measure satisfaction is the more concrete metric of system adoption.
prospects. and increasingly. both through market conduct penalties. and policyholders. Copyright 2010 © Oliver Wyman 17 . These include process. and unless the system is being used those goals will not be realized even if the features are there. And given that any insurance process can the subject of regulation. a system has been put in place to achieve certain benefits to the organization.Measuring system adoption is not just to gauge user satisfaction. and document management. at the federal levels. and even more significantly by a tarnished image among producers. Noncompliance can impact the bottom line. Presumably. Compliance and Reduction of Market Conduct Penalties Doing business in the insurance industry means conforming to a broad set of regulations at the state. and reporting and data transparency. the job of compliance is a constant. using the best available governance and project management methodologies. Given legislators’ and regulators’ proclivity to pass laws and issue new regulations and guidance. achieving compliance is a job for both business and IT leaders. rules.
LTD: Realizing internal and external business value through data standards Calliden Group Limited: Consolidating multiple systems to a modern platform which enables growth in a startup operation Capitol Insurance Companies: Bringing work processes in line with the expense structure of a book of business Church Pension Group: Changing a legacy platform to selfservice to realize a business vision Erie Insurance Group: Tying together all parts of the insurance value chain Erie Insurance Group: Increasing speed to market and decreasing expenses using an external rating engine Esurance: Implementing self-service claims with vendor technology while retaining company-specific branding/look and feel Farmers Insurance: Using data to drive distribution strategy and tactics FBL Financial Group. Inc: Supporting a startup business with necessary automation without incurring all costs of a traditional support structure Harford Mutual: Using multiple technology solutions to increase ease of use for independent agents Copyright 2010 © Oliver Wyman 18 .RSA Scandinavia: Combining the scale of a traditional company with the flexibility of a startup to build a new proposition AVIVA-COFCO Life Insurance Company.Model Insurer Components 2010 The following is an alphabetical list of the 28 Model Insurer Component case studies included in this report: Allianz Life Insurance Company of North America: Using technology to attract new distribution partners American Modern Insurance Group: Replacing a legacy platform in a budget-neutral manner Atava .
. aging systems that support a critical. highly regulated process The Phoenix Companies: Consolidating multiple systems into a single front end in order to increase efficiency and improve customer service Tokio Marine & Nichido Fire Insurance Co. Ltd.Hertz Europe: Transforming a business model with technology Highmark: Discovering fraud that cannot be seen Kansas City Life Insurance Company: Using ECM to modernize applications across multiple processes Liberty Mutual Agency Markets: Changing product development from a reactive to a proactive process to support business growth LV=: Using a standard presentation layer across the business to increase online channel revenue from multiple lines of business Missouri Employers Mutual Insurance Company: Transformational change Nationwide Insurance: Using technology to rapidly enter a new market with premium service requirements PMI Group: Using an advanced testing utility to improve system delivery and business results Suncorp: Supporting a segmentation approach to the market The Cincinnati Specialty Underwriters Insurance Company: Leveraging a previous implementation in order to enter a new market quickly The Hartford Financial Services: Bringing order to multiple.: Overcoming critical challenges in a complex project Unitrin Direct Auto and Home Insurance: Using business process management (BPM) to modernize applications across multiple processes Zurich Financial Services: Standardizing process and technology on a regional basis in a manner that allows for local differences Copyright 2010 © Oliver Wyman 19 .
Claims Overview Improving claims systems provides an opportunity to improve the form of claims information and data. Based on Esurance’s experience as an innovator in direct online insurance. and through insights gained about customer expectations by surveying its policyholder base. Esurance decided to focus on providing its tech-savvy customers with a unique. and underwriting activities. Traditionally. pricing. This 2010 report includes a new push to self-service claims that further leverages web technology and allows clients to manage more of the transaction. The company’s objective was to provide customers with an online selfservice claims experience that would transcend the industry’s typical online claims approach. Several insurers are beginning to use claims analytics to provide systematic loss information to their front end product development. and the processes that depend on it. claimants reporting through the Copyright 2010 © Oliver Wyman 20 . the experience of claimants and their agents improves. New claims technology gives insurance companies the opportunity to revisit both their organizational structures and their staffing levels in order to put them in better alignment with organizational priorities and skill requirements. With the front end process well-established (allowing customers to quote. Model Insurer Components Esurance Implementing self-service claims with vendor technology while retaining company-specific branding/look and feel Esurance was one of the pioneers in offering personal insurance direct to US consumers online. how it is accessed. reserving accuracy increases and compliance increases as required forms and correspondence are automatically created and sent by the claims system. and manage their policies online 24/7). robust self-service claim reporting experience. buy. Esurance determined that technology leadership in self-service was paramount to future growth. One of the most common changes is that all (or nearly all) information becomes digital as paper claim files are eliminated—workflow is easier to manage and moves more quickly.
Internet dealt with static forms. and integration with third parties such as CCC Information Services (ProcessClaims) and Esurance’s own “E-star” network of repair facilities. A unique aspect of this implementation is the ability of Innovation Group’s platform to substitute the Esurance presentation layer of the software for its own and thus maintain a 100% consistent Esurance-branded experience throughout the entire website. Through December 2009. This percentage is projected to increase approximately 10–20% annually as awareness grows among customers Copyright 2010 © Oliver Wyman 21 . the platform also provides such critical services as: Real time triaging Scheduling of field appointments for auto physical damage claims Dynamic vehicle inspection options based on the location of the policyholder Scoring for coverage and total losses Claim number assignment Claims office assignment (with contact information available during the online experience) Email confirmation of a successfully submitted claim along with the contact information of the assigned claims office immediately following submission. Customers did not have access to claims services and could not make their own assignments. The solution provides flexibility for different customer interactions based on a sophisticated business rules capability. The company also observed a lost opportunity in the lack of branding applied during the claims process. scripting engine. and little to no impact on paid loss. Implementation began in September 2008 and was completed in all states by May 2009. The current Esurance solution enables a unique online claim reporting environment that moves far beyond data capture. higher expenses. Innovation Group’s First Notice of Loss (FNOL) technology was chosen for the self-service solution and is embedded in Esurance’s website design. and significant rekeying. In addition to providing a unique customer experience for each policyholder through reflexive. The result was lost cycle time (longer time to repair/resolution). This percentage also includes recently released glass claims. very basic data capture. conditional questioning.0% of all claims reported. online claims volume accounted for 7.
and prospects. commercial brokers. On average. the Americas and EMEA & Asia-Pacific. Cycle Time Improvements-Comprehensive Claims: Comprehensive claims reported online have an increased closure rate of 7% over those that were not reported online. this manual entry process took 9 minutes per claim. 99% of customers who reported their claim online were satisfied with the self-service online experience. It manages approximately 175. The new claims reporting application automatically imports the details of the claim into the claims system and routes the claim to the appropriate claims office. 22 Copyright 2010 © Oliver Wyman . and half of those inspections were set up online. Allowing customers to report their claims and set up their own inspections enables adjusters to resolve the claim in a more efficient manner. and risk carriers. Hertz Europe Transforming a business model with technology Founded in 1981. and automation / STP / system integration. Esurance offered an inspection 80% of the time. Future development will include self-service claim reporting for glassonly claims (recently released in December) and the ability to provide rental scheduling. Hertz Claims Management (HCM) is a division of the Hertz Corporation and provides services in the two Hertz Divisions. All duplicate entry is avoided for each claim. claims that were reported online generated an email notification to a Loss Reporting Unit. insurers. In November for all claims reported online.000 motor first party and third party. Significant benefits are accruing: Efficiency Gains for claims reported online: In the past. personal property and personal accident incidents across Europe. which would then have to manually enter all of the data into a claims system. Esurance was chosen for Model Insurer because of the company’s best practices for higher productivity. improved use of channels. HCM Europe has claim offices in eight countries and specializes in third party auto liability claim handling for the Hertz rental businesses and for clients including corporations. Customer Service Satisfaction Rate: Over the past six months of survey data obtained.
Moreover. externalize some of the processes and information via the internet to their customers and dramatically reduce operating and claim costs. as Hertz has rapidly developed the range of customer services (through acquisitions. development of Hertz Equipment Rental. Limitations in the existing system did not allow for these abilities. Initial results reveal an overall productivity improvement of 28% and claims cost reduction of 8%.HCM Europe had two key strategic objectives. become significantly customized by country. Italy went live in October. and subsequently one month later for Netherlands and Germany. increase automation of those processes. 2009. Fundamentally. The result was that transformation and organizational development opportunities were limited and flexibility and agility inhibited. reduced overall operational costs. While unplanned. HCM selected Innovation Claims from Innovation Group to be the basis for their new Claims solution. entering new territories. The baseline system was implemented in the UK in June 2008. Most recently. market. Second. To achieve these objectives. Copyright 2010 © Oliver Wyman 23 . the new solution also offered HCM efficiencies and cost reductions during the global financial crisis. regulatory. First. scalability. and client changes or demands effectively. The new platform has allowed Hertz to restructure key business processes. and agility to respond to internal. centralize generic processes (such as FNOL. and provided flexibility. The legacy claims system had no workflow functionality and had. it was imperative to have an overall claims management operation that drove efficiency into the business. A phased implementation and conversion of 10 years of country-specific data was used to create a baseline global solution that is localized for country specific needs. over time. followed 9 months later for Belgium and Luxembourg. Receivable Management and Customer Contacts) in the Hertz Europe Shared Services environment in Dublin. Hertz Europe was chosen for Model Insurer because of the best practices of optimization of infrastructure and higher productivity / lower staff expenses. the legacy system did not provide the necessary platform to drive change. new rental technology and launching new products such as 'Connect by Hertz'). the strategy to transform the business proved to be 'ahead of the curve'. helping them retain customers through aggressive pricing while preserving quality and service levels. efficiency and flexibility into the business. HCM has responded. enable growth by increasing the amount of claim handling services delivered to Hertz operations and to enable an increased servicing capability to external clients.
One analysis identified a medical group that was misusing anesthesia products. It recently began providing feeds of claims information hourly. Highmark selected the FICO Insurance Fraud Manager based on its predictive analytics capability. resulting in waste. Using the parameters of that case. and processed 201 million health. dental. Value realization when compared to recoveries and savings versus investment has been in a range between seven and nine to one. Limited automated detection was in place using a rules-based system. However. 24 Copyright 2010 © Oliver Wyman . At that time. analysis indicated that they were missing the vast majority of fraud that was too difficult to spot with the human eye and too abnormal to identify with a rule. the company serves 28 million customers. As one of the largest health insurers in the United States. had 2008 revenue of over USD $13 billion. Highmark’s data is hosted on the vendor’s servers. Highmark launched an initiative to automate the detection of fraud. Medicare. The company has extended the use of the technology to cases involving abuse and waste. This increased frequency moves them closer to real time detection of fraud. The higher the score. abuse and error both prior to and after a claim payment. 83 were in fact true cases of fraud and 39 of those were previously undetected by Highmark's existing technology and processes. and pharmacy claims.coming in through referrals from examiners and customer service representatives. 12 additional groups were targeted. Most of the cases that were spotted were either well-defined or already known fraud cases. In 2006. Highmark was chosen for Model Insurer because of the best practices of better decisions. vision. all medical providers were scored. the more likely the provider is fraudulent. reduced losses and the use of metrics. Shortly after implementation. more accurate pricing. Savings were realized in excess of US$2 million. Of the 44 cases that were already under investigation. most of the leads on fraud cases were "organic" -.Highmark Discovering fraud that cannot be "seen" Highmark was created in 1996 by the consolidation of two Pennsylvania licensees of the Blue Cross and Blue Shield Association. Of the top 200. the solution helped uncover an additional 19% potential recovery dollars.
Model Insurer Components Allianz Life Insurance Company of North America Using technology to attract new distribution partners Allianz Life is expanding its broker-dealer and wirehouse distribution channel to enable top line revenue growth.” Distinguishing oneself in this area involves continuing to outperform rivals in old models while investing in new ways of bringing product to prospects. this is easier said than done. The Distribution Management Component is the most heavily represented category in the 2010 report. However. An assessment of the market determined that technology investments were required to meet the requirements of new distribution partners and gain “shelf space” for Allianz Life products. Profitable. fragmented. Copyright 2010 © Oliver Wyman 25 . Given the imperative of growth in virtually every insurer. new processes were needed to enable wirehouse-registered representatives to do business with Allianz Life in a manner that minimizes manual processing of applications. but few historical approaches are “retired. Model Carrier Components reflect an ability to service multiple channels or to significantly change the “game. sustainable growth. given the current economic outlook? Celent believes that effective distribution management is an untapped area of competitive advantage. No matter what geography. insurance distribution is a multichannel. the lessons that can be learned from this group are particularly valuable. How can insurance companies grow their business in a meaningful manner.Distribution Management Overview Growth.” They use technology to more effectively move information from one part of the value chain to another. and changing landscape. Business practices are constantly innovating. The result can be confusing and expensive. Additionally.
Collaborative workspaces using Microsoft Sharepoint assisted communication and coordination across distributed teams. DTCC and ACORD Life Standards are used extensively to ensure that data exchange is reliable and consistent. Building the capability to receive new business applications from broker dealers for fixed and indexed annuities through the DTCC. Building the capability to send positions and values to broker-dealer partners through the DTCC POV feed. The benefits are beginning to accrue. eight broker-dealers were on the system receiving position files. and load data. Named the DTCC (Depository Trust & Clearing Corporation) Transformation program. transform. Establishing an eCommerce portal application to manage both the setup of broker-dealer eCommerce partners and the inbound and outbound feeds for each partner. and technical utilities. and Informatica Data Transform work together to extract. industry standards. MS SQL Server. domain-expert business analysts were involved throughout the lifecycle using tools such as rational unified process methodologies and automated requirements documentation software.A four-phased program was developed to update existing Allianz Life systems to support wirehouse expansion. reliable means of exchanging files with DTCC. a number of process innovations were instituted with the project. Informatica Power Center. Optimal offshoring sourcing was used to reduce development costs. The technology applied to enable such a high level of integration includes packaged software. Providing money settlement through DTCC MSD feed. The Lombardi TeamWorks business process management tool controls the rules that manage the messaging. and results to date indicate that the program will drive top line growth and reduce expenses. there were 16 brokerdealer distribution partners using the POV services for Allianz’ fixed product line. providing financial details on over 66. Within two months of implementation. The design emphasized not only a successful exchange of information but also an environment which enables ongoing maintenance at low cost and effort price point. Improved ease of doing business will expand the broker-dealer channel.000 fixed annuity 26 Copyright 2010 © Oliver Wyman . the first phase has been implemented and included: Procuring and implementing a managed file transfer solution to provide a secure. Finally. As of December 2009. In addition to the technical improvements introduced.
licensing. and appointment administration through the DTCC LNA transaction. It enables comprehensive business-to-business (B2B) integration with various partners. which include banc assurance. agency. The implementation of the automated order entry system using the DTCC APP transaction is in production with its first broker-dealer distribution partner. In addition. LTD. real time straight-through processing between ACL and major domestic insurance agencies is accomplished through DMS. LTD Realizing internal and external business value through data standards AVIVA-COFCO Life Insurance Co. and plans to extend its business to retirement planning services. Future phases will include commission reconciliation and payment functions through the DTCC COM transaction. The system is based on the ACORD LAH Standard for industry standard transactions. and data models. The expansion of the business has called for an integration of ACL’s multiple distribution channels. This was accomplished with the implementation of DMS (Distribution Management System). brokers. The adoption of a single solution based on an industrial best practice is a top priority for the company. life and health insurance.. the Copyright 2010 © Oliver Wyman 27 . (ACL) is the second largest foreign life insurer in China. It offers financial services in savings.policies a month. AVIVA-COFCO Life Insurance Co. This new functionality has improved Allianz’ ability to provide enhanced value to its broker-dealer partners. business.. Operational expenses are also lowered through the elimination of manual processes. and automating handling of activities such as broker account number changes though the DTCC IFT transaction. This has resulted in direct cost savings to Allianz though reduction of call volumes for policy detail information. direct telemarketing. investment. and outsourcing service providers. These Allianz broker-dealer partners now receive daily information delivered directly to their administration systems with current detail policy information. and optimization of infrastructure. improved use of channels. supported by Siebre Systems Ltd. automated account transfer through the DTCC ACATS transaction. The DTCC Transformation Program was chosen for Model Insurer because of the best practices of use of industry standards. For example.
AVIVA-COFCO Life Insurance Co. and relationships that helps to maintain high customer satisfaction and consistently develop in-depth understanding of customers needs. annuity and group voluntary life insurance policies to Dell Perot Systems in August 2007. the system has supported ACL through its continued. DMS also provides a standard information architecture at the enterprise-level for ACL. In addition. Given the increasing 28 Copyright 2010 © Oliver Wyman . LTD. The company has also launched two new universal life policy forms and a new group voluntary life product since the transition. was chosen for Model Insurer because of the best practices of use of industry standards. universal life.. ACL has built a comprehensive and accurate view of its customer. DMS also enables real-time data exchange with outsourcing data entry partners and telemarketing channels. Development costs have been reduced by over 50% through the deployment of DMS.application supports data exchange with major banks and enables bank tellers to respond to proposal preparing and new policy issuance in real time. in terms of knowledge. Erie Insurance Group Tying together all parts of the insurance value chain Erie Insurance transitioned the back-office administration of traditional life. increased agent/partner adoption of technology and optimization of infrastructure. double-digit growth in the past three years. Extensions to additional systems such as claims and reinsurance have been made more quickly and at lower cost than in the previous system environment. DMS has been implemented for various headquarter-to-headquarter and headquarter-to-branch connections with five major domestic banks in China. A total of 11 direct business connections among five banks are supported. Bank systems can also conduct daily direct debit and direct credit transactions on DMS platform. value. ACL also uses the ACORD Information Model for a consistent and cross-functional information model and has built a customer-centric data model. By consolidating customer and transaction information from various processes and systems. With the adoption of the ACORD LAH Standard and the flexible configuration capabilities of DMS. the DMS unified business model enhances the efficiency of data analysis across the various channels.
The result is that front-line agents can serve their customers more proactively. Since the functionality was implemented in January 2009. ERIE has saved more than $400. The system also offers substantial cost savings over mail delivery of hard copy print-outs. To accomplish this. the development team built document-level configuration rules for outbound documents. Copyright 2010 © Oliver Wyman 29 . it was critical to ensure tight integration between the company. The technology also enhances service reliability by eliminating the chance of lost or misplaced mailed copies. the independent agents and the policyholders. policy administration and imaging systems provided by Dell Perot Systems to deliver electronic notification and secure access of all correspondence sent to customers. The Web Carbon Copy (CC) Functionality for Policy Correspondence system allows agents to view exact images of the letters sent to their customers. the outsourcer. To support the need for custom requirements. This allows agents to review correspondence and anticipate their customers' needs based on the information in the correspondence. ERIE and Dell Perot staff have direct access to a copy of the correspondence mailed to the customer. Erie Insurance launched an initiative that leverages the Agent Web Portal. Agents can access correspondence copies before customers receive them in the mail. which adds professionalism and satisfaction throughout the value chain. Agents. ERIE agents have been notified of nearly 1 million correspondence documents that have been sent to their customers. Agents typically receive notification and viewing access to correspondence images between two and nine days before the customer receives the correspondence. Compared to the typical costs to print and mail copies of the letters.sophistication of its service delivery approach. The parameters also allow specific document types to be physically printed and mailed to agents where necessary on an exception basis. This allows agents to proactively contact customers where needed. Most importantly.000 USD. Agent feedback indicates that the Web CC functionality has increased ease of doing business with the company. all areas of service delivery have access to the same client information in a model that delivers higher quality service at lower cost levels. These tools work with the policy imaging system to store electronic images of customer correspondence.
Farmers established three goals for their analytics effort: Fully understand their best customers Use this information to attract and retain the customers with the highest lifetime value Better understand the performance of their top-performing agents. A number of data elements are used. In addition to acknowledging key policyholders. 30 Copyright 2010 © Oliver Wyman . A complete understanding of customers involves identifying their unique characteristics and understanding their attitudes at both an individual and collective level. The analytics team at Farmers uses the SAS Analytics product to derive unique insights from existing data. and higher productivity / lower staff expenses. Once these agents are known. the expected longevity of each. and current and future expected cross-sell revenues. including the number of relationships. This approach lies at the intersection of distribution management and data analytics. Farmers Insurance Using data to drive distribution strategy and tactics Business strategists at Farmers Insurance began this initiative after analysis revealed that 20% of its customers provided nearly 80% of its profit. top-performing agents are also identified based on historic metrics such as sales and retention as well as newly established lifetime customer value measures. the company analyzes the specific techniques used in these agents to attract a large number of high-value customers.The Web Carbon Copy project at Erie Insurance was chosen for Model Insurer because of the best practices of more efficient document/content distribution. Combining back end operational data and public information with advanced analysis and predictive modeling results in a new model of distribution management based on customer lifetime value to the company. improved use of channels. customercentric view of the insurance process and moving away from a transactional or product approach. Their practices are then communicated throughout the distribution force in order to build on success. Quantifying lifetime value includes developing a holistic.
edits. Because of capital and time constraints. ensuring continued benefits into the future. The data layer is also configurable via metadata definition. This growth strategy required the development of a personal auto insurance proposition that could be delivered directly to consumers via the Internet. and underwriting rules. the ROI of direct marketing efforts has been increased by 14. This enables rapid changes to the user interface.Decisions concerning marketing practices. the project team developed several application innovations. The site is hosted on CSC’s infrastructure and serviced with its back office BPO virtual company support. retail location. and self-service their personal automobile insurance needs online. lifetime customers across the Farmers book of business. Copyright 2010 © Oliver Wyman 31 . Information Ordering. Additionally. form selection. Additional flexibility is obtained through the use of the ACORD XML standards. This includes licensed customer service representatives and underwriters. it was necessary to enter this new distribution channel with a virtual company business model. field valuation. POINT IN. the business layer is configurable and offers utilities for altering navigation. and use of metrics. The solution combines several of CSC’s standard products (Agency Link. To accommodate this need. The Data Analytics project at Farmers was chosen for Model Insurer because of the best practices of data transparency. This concurrently delivers the stability benefits of an established vendor environment with the flexibility of a modern platform. and agent remuneration use lifetime value factors. POINT IN Rules. improved use of channels. Document Production. A key element stressed throughout the requirements was the need for configuration flexibility to enable quick adaptation to market changes. many of the newly developed application pages are metadata driven. Efforts to date have increased the number of high-value. purchase. For example. and Media Management) with an open source portal (DotNetNuke). information ordering. online print. As a result. FBL Financial Group Supporting a startup business with necessary automation without incurring all costs of a traditional support structure FBL Financial Group is a multi-line Property Casualty insurer which sought to expand its target market to address the Gen X and Gen Y segments. The new Protectant Direct program includes a web application which allows consumers to quote.
Facebook. After a broad vendor search. Harford Mutual surrounded its in-house legacy policy administration system with new functionality. Harford Mutual Insurance Company Using multiple technology solutions to increase ease of use for independent agents In 2007. ensuring a match between quoted and issued premium. Ratabase. delivers a level of ease of use which has increased submission rates and resulted in revenue growth. FBL expects to retain and build on these relationships as their clients’ needs evolve over time. named RapidWrite. the effort also implemented address scrubbing and geocoding to enable risk concentration considerations during the property underwriting process. This capability also assists with ongoing management of risk aggregation. Finally. they selected AgencyPort’s web-based solution. to streamline the interaction between the company’s agents and its downstream systems. The resulting system. YouTube. AgencyPortal. It also alleviated a major auditing concern by making rules highly visible and allowing for a very positive separation 32 Copyright 2010 © Oliver Wyman .The new web application also features third party URL tracking tags that allow the client to identify and evaluate the effectiveness of their marketing strategies originating from Twitter. This enabled the policy administration system to use the same rating engine as the web portal. The Protectant Direct program at FBL was chosen for Model Insurer because of the best practices of optimization of infrastructure and improved use of channels. It is also expected that some of these additional needs will be met by expanding the relationship to include FBL’s more traditional agency distribution channels. Harford Mutual also undertook the major task of totally replacing its existing rating engine with a more service-oriented architecture rating package. and various other web advertising sources as analyzed via Google Analytics. This facilitates real time underwriting decisions and decreases cycle time. Harford Mutual Insurance Company began looking for ways to work more efficiently with its 400 independent agents. from CGI. An assessment of the current automation solution determined that major enhancements were required to meet agent expectations. A rules engine in the portal product ensures automated routing of information to the appropriate decision-making points within the carrier organization.
and commercial automobile by over 54%. Quote-to-bind ratios across all three lines have risen in excess of 7% above 2008. allowing rules to be built and maintained easily by a business analyst. Since its launch. Support for ACORD XML schema is built in to the AgencyPortal Toolkit. and increased revenue or market share. Copyright 2010 © Oliver Wyman 33 . The implementation of RapidWrite has allowed Harford Mutual to demonstrate its commitment to their agency force to meet and exceed the requirements for ease of doing business. workers compensation by 16%. In terms of 2009 submission activity. use of industry standards. BOP is up 22%. agent utilization of the insurer’s web portal has increased by almost 80%.of responsibility in the rule definition and development process. Harford Mutual was chosen for Model Insurer because of the best practices of improved agent/customer satisfaction and adoption.
case files.Infrastructure/Architecture Overview The Infrastructure/Architecture Component seeks to recognize companies that use technology to solve their business challenges by adding new tools to existing environments. The scope of the project included insurance operations activities in Claims. platform modernization through “wrapping” old technology with new. and service-oriented architecture (SOA). Copyright 2010 © Oliver Wyman 34 . This toolset was used to automate existing document handling in each of the targeted areas. By introducing workflow management. it was necessary to replace the existing imaging technology that lacked the functionality needed to modernize their infrastructure. Processes prior to the implementation of this project were best characterized as activities powered by people and paper. Key elements include enterprise data strategy and enterprise data models. Web services. New Business Processing. Core insurance operations areas relied on paper documents. This category recognizes that it is not always feasible or prudent to completely replace a legacy application and that significant value can be realized by introducing modern capability that works in conjunction with older technology. KCL acquired Hyland OnBase for its anchor enterprise content management (ECM) component and Open Text’s Right Fax and DataCap’s Rule Runner to augment the ECM tool set with other capture and automation components. KCL extended a document management project into a business process redesign implementation. To continue to meet service commitments. and Licensing and Contracting. Customer Service. and procedures. Model Insurer Components Kansas City Life Insurance Company Using enterprise content management (ECM) technology to modernize applications across multiple processes Kansas City Life Insurance Company (KCL) has been committed to providing "Security Assured" and high-quality service to customers for more than a century. Multiple interface points with the existing core administration system were established. content.
and risk management through proper development. KCL reached beyond a focus on the technical components of the project. higher productivity / lower staff expenses. with ambitious growth plans. testing. edgeConnect was deployed to replace LV='s online Copyright 2010 © Oliver Wyman 35 . with the system directing work through various stages of the process. which would act as a replacement front end for the legacy system. LV= Using a standard presentation layer across the business to increase online channel revenue from multiple lines of business In 2007. and final preparation for customer delivery. and relationships. UK Carrier LV= (formerly Liverpool Victoria) was looking to significantly increase revenues by expanding its product reach via its online channel. CSRs can now focus on customer service rather than handling and managing paper-intensive processes. They employed a blend of systems.Results extend throughout the enterprise. The ECM project at Kansas City Life was chosen for Model Insurer because of the best practices of more efficient content management. disciplines. and project management. Agency licensing department processes are now 80 to 90% paperless and complete 90% of applications within three days. commitment. Initially. Work was prioritized incrementally and resulted in quick wins. As part of its online development strategy. In this implementation. including administration. underwriting. Benefits realized to date include: US$3 million in net accumulated savings 12% reduction in Insurance Operations staffing. creativity. more rapid user acceptance. and exponential gains as the project progressed. The new business activities lifecycle is now automated. teamwork. LV= chose to implement a SOA-based presentation layer solution from edge IPK. and 60% of claims can be paid within four days Customer service representatives have virtually eliminated any backlog for work requests and have one touch access to all policy file documents for each policy holder. called edgeConnect. An estimated 10% of claims are auto-adjudicated via straight-through processing.
The increased development speed and agility of the system have resulted in direct distribution benefits. The Hartford. annuity. In 2008 LV= decided to extend the use of edgeConnect across its General Insurance product range as its standard presentation layer and as a component of its overall SOA architecture. decreased time to market. Connecticut-based carrier specializes in products for high net worth consumers and business owners. LV= decided to extend the technology across the LV= Group which encompasses P&C. At the same time. The growth in the online channel has increased by 500% in just under 2 years. Life and Retirement products. The separation of the front end "Point of Sale" processes from the quote engine has given LV= the agility to respond quickly to changing requirements (both regulatory and market). IT development and maintenance costs have been significantly reduced. LV= was chosen for Model Insurer because of the best practices of optimization of infrastructure. The Phoenix Companies Consolidating multiple systems into a single front end in order to increase efficiency and improve customer service Phoenix Life Insurance is a manufacturer of life. and alternative products distributed through a variety of nonaffiliated partner relationships. Research by independent web benchmarking research company (eBenchmarkers) shows that the website has moved from 23rd place to 2nd place in a ranking of UK insurance websites. LV='s online business has dramatically increased since the project was launched. and improve use of channels. The company is also now able to support mobile platforms that require WAI accessibility compliant applications.presentation layer for all its auto and household products. In 2009. Launching white-labeled products is much quicker because of the ability to provide multiple presentations from a single process. The product is now fully integrated with the LV= mainframe quote engine with data delivered via a Web Services Layer. 36 Copyright 2010 © Oliver Wyman . Channel usage has shifted from 20% online and 80% call centre to 80% online and 20% call centre. Also. the time required to deploy with new aggregator partners has been reduced LV= is now viewed as a leading company in the UK online market.
The software enables the CSR to immediately access all customer information including portfolio. use of industry standards. Rather than replacing its existing systems. CSR call times have decreased by 15%. Audits of customer calls reveal greater consistency. policy data. and the company has reduced CSR training time on Variable Life account processing by 60%. The first phases of the initiative involved combining common inquiry elements from all seven systems into a single presentation. Phoenix opted to aggregate the data into one Web-enabled interface that presents a single view of the customer using a vendor product (CSC’s Customer Service Accelerator (csA)). requiring call center representatives and back office users to keep multiple host system sessions open on their desktops. Unitrin Direct Using business process management to modernize applications across multiple processes Copyright 2010 © Oliver Wyman 37 . Phoenix’s customer repository. Phoenix had accumulated multiple policy administration systems from several vendors. A process change was then implemented that added transaction processing to the call center. Phoenix Life Insurance was chosen for Model Insurer because of the best practices of optimization of infrastructure. and PerformancePlus for producer management. contact history. thereby creating the need to memorize all the codes from many different systems.Over the years. As a result of the implementation. Automated Work Distributor for workflow. The new system aggregates data from seven systems. and higher productivity / lower staff expenses. This eliminated a previous handoff step to back office processors. four policy administration systems. This yielded immediate benefits because customer service representatives were able to answer the majority of the calls completely with this data. producer information. and workflow data within one interface. ACORD based data structures are used for SOAP/XML-based messaging. Customer-facing CSRs now handle transactions in a one-and-done manner while the customer is on the phone. Every system represents the same data element differently.
enabling the underwriting department to comply with time-sensitive service level agreements and regulations. Workflow was integrated with the company’s automated call system. Following a competitive search process. management. Unitrin Direct needed to increase the number of complete. users from claims. the company selected a document management and BPM/workflow software vendor to interface with its existing technologies. policy administration software (Decision Research Corporation’s DecsionMaker system). By scanning the bar codes on returned mail and using the data to instruct their calling system to make automated calls requesting address updates. 38 Copyright 2010 © Oliver Wyman . customer service. data redundancy.The Unitrin Direct insurance companies (“Unitrin Direct”) sell automobile and homeowners insurance directly to consumers and through group-sponsored voluntary benefit programs. customer information was updated more quickly and for a lower cost. Finally. Optical Image Technology’s DocFinity Workflow serves as the hub around which a complete and integrated solution is built. Policy data is now available immediately to the claims department. and customers have benefited from the ability to track and view where a policy is at any point in the underwriting process. manual processing and filing resulted in inconsistencies. human resources. the company introduced business process management (BPM) capability to address two goals: significantly enhance its competitive standing and position it for cost-effective growth. The strategy for the project was to focus initially on Underwriting. the area with the greatest need. In 2005. and errors. staff. To ensure the solution would ultimately serve other business areas as well as underwriting. correct policy applications and process them more quickly to remain competitive and grow. Customer service was dramatically improved by the ability to access information securely and immediately over the Web. In the workflow environment at that time. and third party document capture products. making personal auto and property insurance simple by offering people the choices they want with the convenience they deserve. and then leverage the tool across the enterprise. Unitrin Direct is dedicated to providing its customers outstanding service and quality coverage at competitive prices. and other areas were involved in the planning process. The integration and leveraging of information stored in various applications has dramatically improved the underwriting processes.
As Unitrin Direct builds on its success in underwriting by expanding the solution enterprisewide. The benefits of the underwriting implementation extend across many areas.Automation of mechanical and mundane tasks has enabled Unitrin Direct to repurpose specialized staff to tasks that required higher-level critical thinking and analysis while providing better customer service. the company saw a 50% increase in productivity related to the handling of correspondence within its underwriting department. Unitrin Direct was chosen for Model Insurer because of the best practices of increased productivity / lower staff expenses. After implementing the solution. and solicitation of end user feedback. human resources. Involving staff from multiple departments in the project planning process has proven to manage employee expectations. including customer service. finance. and licensing. The platform enabled the company to be one of the first auto insurers to introduce electronic signatures. and ease adoption in the wider user community. Copyright 2010 © Oliver Wyman 39 . Unitrin Direct has been able to process 15% more new business within time standards with less than half of the number of administrative employees. The greatest return on investment results from Unitrin Direct’s ability to work more cost-efficiently. Workflow automation has already been expanded successfully into the Claims area and is being used for some processes in nearly every other area of the enterprise. The automation of processes and the analytical tools that workflow reporting provided enabled Unitrin Direct to process new business reviews on a daily basis (rather than once a week). mitigate the risk of nonacceptance. more efficient content management / document distribution. management anticipates similar cost savings and improvements in multiple areas.
Call center customer service was scaled back significantly. Given recent economic difficulties. when business reasserted its control over an IT side that it regarded as running off the rails. Ninety-nine per- Copyright 2010 © Oliver Wyman 40 . After a few years of tight budgets and tight oversight. Atava is a new business proposition. otherwise they would likely not have succeeded. Model Insurer Components Atava. asset management tracking applications) that are helpful in this area. the dedicated team at Atava stripped away the trappings of traditional models. Based on market research. In 2007. the insurance industry is now looking to IT to help weather the storm rather than be a place to arbitrarily cut costs. Winners of the Model Insurer component in this category are insurers that have demonstrated excellence in a project specifically targeted at building a lasting foundation for IT management across all of their projects. a global insurance company operating in 33 countries. simple. organizational structures. While there are technology systems (project management tools. the most critical elements to success are best practices. it launched a business targeted around their chosen group of customers. and focused on an “I will do it myself” online service model. and IT realizes that its only meaningful metric is whether it enables the business to do so. Atava created an insurance proposition that is fun. and corporate culture. serving the niche demographic group of singles and couples between the age of 20 and 40 years old who live in urban areas. The business side has started to understand that it is reliant on IT to operate and compete effectively.IT Management Overview IT governance leapt to the fore after the technology crash of 2000–2001. RSA Scandinavia Combining the scale of a traditional company with the flexibility of a startup to build a new proposition Atava is part of the RSA Group. All Model Insurer projects have some element of IT Management embedded within them. Given a clean slate to start a new business. and the self-service element of the website was increased. a new partnership emerged.
All of Atava’s technology is delivered with only six full-time employees. and optimization of infrastructure. decreased time to market.3%). Based on the TIA core policy administration. The company has undergone several cycles of process improvements and technology updates as it both grew and adapted to the market.1% (to 88. Among these. In 2008. PMI Group Using an advanced testing utility to improve system delivery and business results PMI Mortgage Insurance Company’s Quality Assurance (QA) team provides testing services for all 12 PMI Group IT applications. one of its vendors announced the withdrawal of support for its existing Copyright 2010 © Oliver Wyman 41 . this staffing level is expected to remain fairly constant as the company continues to grow. a long-time TIA Technology partner.cent of traditional services can be done by the customer. and the resultant cost savings were reinvested into a lower priced product for this price-sensitive segment. In addition to this. Because of the flexibility of its outsourcing and the use of the parent resources. This allowed it to maintain a lean organization and enjoy the benefits of a large and efficient parent network. A homeowner product and a launch into the Danish market were accomplished in the next nine months. the team at Atava “bought” various support services such as claim handling and actuarial pricing from the parent company. In order to support Atava’s lean. Atava was able to develop and launch products with the speed required by the startup. Since its launch in 2007. the call center is also partly externally outsourced. the SAS Institute TIA business intelligence interface and SMS services are the latest contributions. A motor and two additional personal lines products were introduced to the Swedish market within nine months. the IT operation is outsourced to Affecto. virtual organization model. Atava itself saw a growth in gross written premium of 342% in 2008. Atava was chosen for Model Insurer because of the best practices of higher productivity / lower staff expenses. To overcome the dilemma of a startup insurance company with low economies of scale. Atava has been a contributing factor to RSA Scandinavia’s 16% increase in premium in 2008 and an improvement in the combined operating ratio of 3.
Standardizing and automating processes have brought consistency across the application landscape that enhances execution efficiency. repeatability. Finally. AS400 (midrange). Test design and execution cycle times have been reduced by leveraging advanced utilities in the QTP package. Some of the key success metrics from the project are: 42 Copyright 2010 © Oliver Wyman . The review highlighted the need to design a best in class test process to improve quality and reduce time to market. test and defect management into a single quality platform Quick Test Pro (QTP): An advanced automated testing solution for creating and managing functional and regression tests Windows SharePoint Services: A web-based application used as a repository for PMI knowledge management repository and process documentation CS Diff Tool: Analyzes changes which have been made between two revisions of the same file or folder Databases: DB 2 and MS SQL Platforms: Visual Basic (client server). The framework combines several vendor products to create an infrastructure unique to PMI that improves testing quality. and continuous improvement. The components of the testing environment are: Quality Center: A Hewlett-Packard product that combines requirements. This increases test planning time. PMI QA undertook an assessment initiative to identify the current automation challenges and design the optimal solution for future needs. This provided PMI with the opportunity to revisit its test automation strategy and capabilities. efficiency.testing product. but decreases rework and increases quality. The PMI QA team partnered with Infosys to develop a test automation framework that supports all applications across PMI’s applications landscape. accountability. A key process involves a partnering between the IT department and business users for business capability testing. and predictability. a common testing framework across projects reduces training overhead and improves resource flexibility by giving PMI the flexibility to move QA analysts across projects and applications. and J2EE (web applications) Several unique features of the framework combine to deliver business value.
45% improvement in test scripting efficiency due to standardization and easy to use framework components 50% increase in automation test coverage due to improved test design. increased quality. Best practices are shared across applications and an enhanced knowledge management repository has been implemented. speedy and comfortable by renovating insurance products. This results from the improved cycle time.. Ltd Overcoming critical challenges in a complex project Tokio Marine & Nichido Fire Insurance Co. it also has the challenge of updating processes and tools to ensure that they continue to meet current market demands. The vision was to “make all the business process simple.. As with other long-standing businesses. PMI was chosen for Model Insurer because of the best practices of solicitation of end user feedback and review. increased library functions to support additional technology components. and systems from scratch. and higher productivity/lower staff expenses. resulting in cycle time reduction and enabling effort and budget (re)allocation that increases coverage 85% increase in cross-utilization of professional staff across the applications landscape due to increased scripting standardization and enhanced documentation The most significant nonquantifiable benefit realized as a part of the project is the very high degree of satisfaction expressed by PMI’s business user community.” This vision yielded three key objectives: become the “preferred insurance company for their customers. and implement an operational model which enables them to underwrite properly and handle claims fairly and rapidly. and the level of standardization achieved by the new automation framework.” In other Copyright 2010 © Oliver Wyman 43 . decreased time to market. Ltd (TMNF) has the distinction of having provided P&C insurance to the Japanese market for over 130 years. The Business Innovation Project was launched in 2004 to update an aging system and business process platform. and better utilization of tool features 150% improvement in execution efficiency compared to the previous automated environment. make their processes easy to understand. business rules. Tokio Marine & Nichido Fire Insurance Co.
This resulted in additional needs and significant rework. motivated project team members. Communication tools were put in place. engineering-based approach to project management was instituted. TMNF’s CEO actively promoted the program and expressed the vision for process simplification in multiple forums. By any standard. Scandals in the market resulted in regulatory requirements. 44 Copyright 2010 © Oliver Wyman . The pent-up demand for improved automation caused system requirements to inflate to three times the original estimated volume. As is common with such massive projects. Additionally.words. Business representatives were held responsible to analyze and clarify requirements. He also brought this message and understanding repeatedly to the company board level. this was a complete renovation of the company and its automation. Another issue surfaced as user acceptance testing progressed. The total investment over a six year period exceeds US$650 million. Scope creep became scope explosion. and a standard reporting discipline was applied across all of the workstreams.” In that approach. The first was a collaboration framework established with the business called “Application Owner System. Unsolved problems began accumulating and there even began to be a sense that TMNF would not be able to accomplish the project. this was an audacious goal. This leadership strengthened business support. His personal branch office visits stressed the importance of the transformation and the business value of a process-focused business. Twenty project managers were assigned to the program. Increased quantitative management improved estimation and capacity management. and reduced resistance to change. and team members received training on the new system development methodology and effective information exchange. a feature that needed three IT resources would only progress if there was at least one business resource committed to its implementation. The number of test cases and problems found were far beyond expectations. Three initiatives served to rescue the project and drive it to implementation. For example. a more architecture-based. requirements began to increase beyond the capability to deliver them. Second. forces from the external environment impacted the project. They were also heavily involved in testing and validation. Finally. metrics were established that maintained a constant ratio of business resources to IT staff for approved requirements. two years after the project began. executive support for the Business Innovation Project was pervasive and very visible.
Over 60% of the company’s processes were affected. a platform was built with multicountry. A product model was designed which established common product structures across countries. Zurich Financial Services Standardizing process and technology on a regional basis in a manner that allows for local differences Zurich Financial Services launched a pan-European platform to support the geographic region that includes the UK. These uniform models were then adjusted to meet local insurance regulation and market needs. Spain. Ltd was chosen for Model Insurer as an example of how an at-risk project can be accomplished through the best practices of risk management through proper development. Using the Accenture Insurance Solution (AIS) as a base. Phase II. located in Copyright 2010 © Oliver Wyman 45 . This was accomplished through a combination of advanced automation and adjustments to the IT organization and its processes. The technical expertise and project management skills required to make this transition were established in a single Center of Excellence.1% to 99. testing. addressing new fire products. multicurrency.000 to 70 The Business Innovation Project initiative at Tokio Marine & Nichido Fire Insurance Co. and project management. processes and systems. Comparing 2005 results with 2009 results in key areas demonstrates the value of the implementation: Straight-through processing increased by 8% Cashless transactions rose from 42. processes.5% Agency management system use increased from 60. involving new automobile insurance products.4% to 90. and systems launched in November 2009. A centralized product factory was established that used skilled product developers to build and maintain the insurance products.Phase I.. multilanguage functionality. The Europe General Insurance (EGI) region consolidated on to a single IT platform in 2006.5% Open manual reconciliation transactions decreased from 350. Switzerland. and new agency systems was live in May 2009. The business challenge was to gain the benefits of scale from consolidation while also delivering a product with the required local customization and variations. and Italy. Germany.
Zurich Financial Services was chosen for Model Insurer because of the best practices of higher productivity / lower staff expenses. Underwriting decisions are rule-driven and automated. Product rules have been fully documented. and risk management through proper development. IT operations and development were also centralized.Barcelona. testing. and project management. and there is increased control over required variations between geographies. resulting in time and consistency benefits. Spain. a sophisticated allocation process was instituted. A workflow utility guides a user through the system and has standardized process across products. In order to accurately spread costs across individual profit centers. 46 Copyright 2010 © Oliver Wyman . The consolidated platform has yielded cost savings between 20% and 25%.
underwriting. American Modern recognized the requirement to employ modern and innovative technology and business solutions to enable business processes that were highly automated and relatively “untouched by human hands. These days the traditional line between a policy administration system and other systems has become blurred. rating. or new business automation as part of their offering. No matter how impressive an insurer’s distribution and claims systems may be. In planning its business strategy. included a web-based insurance transaction processing Copyright 2010 © Oliver Wyman 47 .Policy Administration Overview Policy administration systems are often called core systems. named modernLINK. in most cases the overall effectiveness of the company’s IT environment comes down to the capabilities of the policy administration system in three key areas: Launching and modifying products quickly and inexpensively Supporting electronic distribution and improved workflow Providing access to detailed information for business intelligence. and with good reason. agency portals. They are at the core of an effective technology strategy for insurers.” This involved major investments in infrastructure. business solutions. Their long-term initiative. It is licensed in 50 US states. Model Insurer Components American Modern Insurance Group Replacing a legacy platform in a budget-neutral manner American Modern Insurance Group is a specialty insurer in niche markets with a multichannel distribution strategy. and business processes. While an end-to-end replacement may be in order. Many vendors include product configuration. a Model Insurer also knows to look for the core functionality that will help run the business. workflow. human capital.
48 Copyright 2010 © Oliver Wyman . Selected components (client management. A detailed and defensible business case was developed and continues to guide the decision-making process. Legacy systems replacement. The implementation was then scheduled in a phased manner based on a self-funding approach so that the IT budget was not materially impacted. are in: Business processing productivity: Self-service options available over the web will reduce the instances in which home office personnel complete transactions. the replacement of aging legacy systems. and billing) are used together and in combination with American Modern’s existing and developing infrastructure. and improved data capture will ensure appropriate rates for new and renewal business. The business case commits to efficiencies that contribute to improved profits and support of growth without equivalent increases in headcounts. a more robust rules engine. renewal). Benefits are being tracked and projected to 2016. Improved billing: Revisions to existing bill plans and redesign of billing notices are expected to significantly reduce mailing costs and account reconciliation efforts. The implementation of a policy system based on a flexible architecture was a key enabler of modernLINK. The policy administration initiative at American Modern was chosen as a Model Carrier component because of its unique self-funding approach. rating. along with modernization of the technology. and set up new users. resulting in a savings of nearly 20. was facilitated with support from Innovation Group and its services-based (SOA) software. endorsement.000 hours of effort per year.platform. and enhanced information management. consistent application of underwriting rules at each phase of the policy lifecycle (new business. Innovation Policy. substantially increasing written premium. the benefits from higher productivity. once fully deployed. Some of the key benefit areas. and lower staff expenses. policy administration. Enhanced underwriting approach: Interfaces with third party providers. American Modern identified needs and opportunities and planned a long-term roadmap. conduct follow-up. Customer retention: Improved customer communications and other process improvements have increased overall retention by at least 1 point.
This leveraged approach enabled CSU’s insurance products to be quickly architected and launched in a significantly decreased timeframe compared with traditional industry legacy systems. The company also now has the ability to launch new states within weeks and new lines each quarter. accountants. underwriters needed to quote. an excess and surplus lines (E&S) carrier. 2008. Because Camilion had previously implemented for CSU. CSU’s E&O product rollout took only three months. the system needed to allow rapid expansion into other states and other classes of E&O. Second. and issue policies immediately. E&O was successfully released in 33 states by December 8. launched as a new company on January 1.The Cincinnati Specialty Underwriters Insurance Company Leveraging a previous implementation to enter a new market quickly The Cincinnati Specialty Underwriters Insurance Company (CSU). to roll out its new E&O products by December 2008. excess liability. and launch the new line. First. CSU went live with another product line. it was necessary to rapidly launch more than 60 classes of E&O across 37 states. The results have yielded significant business value to the company. Internal staff is now able to complete 100% of the product configuration. From start to finish. with two lines of business in five states. 50 policies were issued. and construction E&O. in 33 states. lawyers. The company’s policy administration system would have to support several key requirements. CSU. In April 2009. Finally. In late 2009. Inc. 2008. the company went live with another three classes. Sameday policy issuance and real time delivery of quotes and policies have made CSU easier to do business with. set an aggressive production schedule of just three months to analyze. Net written premium from E&S lines was US$9 million in the first nine months of operation in 2008 and US$14 million in the first year. Within two weeks of launch. it was able to take product architecture developed for previous lines of business within CSU’s central repository and simply make specific changes to it to form the new line of business. bind. in 37 states. More than 98% of CSU policies are issued immediately. consultants. a subsidiary of The Cincinnati Insurance Company. the company saw an opportunity to further serve its independent agents by expanding into the errors and omissions (E&O) product line. CSU approached Camilion Solutions. By mid-year. and Copyright 2010 © Oliver Wyman 49 . test.
The original IT expense base will be reduced by half when all legacy systems are replaced. and it now takes less than a day rather than weeks to produce a policy. Technology maintenance costs are also lower because hard-coded systems do not need to be programmed to accommodate product changes. Calliden Group Limited Consolidating multiple systems to a modern platform which enables growth in a startup operation Calliden Group Limited is an Australian general insurer providing products to small and medium enterprises and selected personal customers through intermediaries. Calliden has decommissioned two old systems. and more consistent processes. Finally. allowing CSU to better serve customers. This has dramatically reduced errors and improved quality control efforts. CSU was chosen for Model Insurer because of the best practices of positioning for reuse. Over the last four years. organic growth and a series of 16 acquisitions have seen Calliden grow from four staff to over 200 and achieve its original US$180 million GWP target three years ahead of schedule. industry legacy policy administration systems. SSP S4i. CSU can complete the entire policy issuance process with one person as opposed to several people involved in traditional. decreased time to market and faster cycle times. This also has allowed IT resources to focus on strategic initiatives instead of coding systems. particularly brokers. In a single year. The modern platform enables the business community to automate their lines of business using the product build utilities of the S4i system. the new platform has decreased costs. In order to simplify its business and position it for future growth. the central repository that holds all product information ensures the control and integrity of product definitions. An additional conversion is on track for mid-2010. Underwriting costs have been significantly reduced. These savings will continue to accrue 50 Copyright 2010 © Oliver Wyman . Calliden can now make product changes overnight which would previously have taken months (or could not have been achieved at all). Finally. Calliden found the compelling need to rid itself of acquired multiple legacy systems and convert onto a vendor solution.CSU no longer relies on the vendor to maintain the application. IT cost savings are approaching US$1 million in the first full year of operation.
with the resultant cost savings. and simpler maintenance.because the new IT operating environment is less complex and involves fewer databases. Previously. Finally. Opportunities to move other lines to an STP environment are now being explored. better access to data. while support costs have been reduced. Sunrise channel usage has increased by some 20%. This has allowed the consolidation of multiple support centers into one location. Copyright 2010 © Oliver Wyman 51 . Another significant benefit is the reduction of business risk. the higher productivity/lower staff expenses. Calliden’s policy administration consolidation initiative was chosen as a Model Carrier component because of the substantial reductions in expenses and cycle times. the company’s products are able to be distributed more widely and efficiently. The new Microsoft platform has increased the availability of support resources and lowered the cost. The system is integrated with the Sunrise Exchange for distribution of products to some 300 insurance brokers (out of a total Australian market of about 800). and the improved use of channels. Calliden relied on a pool of small number of increasingly expensive IT staff which had programming skills in obsolete languages. Calliden now trades 40% of its commercial package business using straight-through processing (STP) and is targeting reaching 80% within the next 12 months.
an agentfacing quoting and processing system.Product Design and Development / Rating Overview The insurance product market is highly competitive. benefit guarantees. for its automobile line of business. In property/casualty insurance. and insurers must be able to price based on an ever-increasing number of variables to find and attract profitable risks before their competitors do. Preferred. Model Insurer Components Erie Insurance Increasing speed to market and decreasing expenses using an external rating engine In 2007. and others. billing systems. insurers must be able to segment risk into increasingly smaller groups. and support of different underlying financial instruments. Erie Insurance (ERIE) began a project to replace the rating engines for six individual quoting and processing systems with a single application. one in-house quoting system. To price effectively. and nonstandard categories are too broad-brushed to provide effective pricing models. document creation systems. and competitive advantage is fleeting. Celent’s past US CIO/CTO surveys show that improving time to market is often in the top three priorities for CIOs. product development is typically focused on new coverages. In life/health. and a batch calculator. riders. one of the most important issues in product development is microsegmentation. two web portal quoting systems. Celent research on the impact of product freshness has shown the positive financial impact of getting products to market faster. effective modeling tools. Ratabase from CGI. Prior to Copyright 2010 © Oliver Wyman 52 . policy administration systems. claims systems. standard. These six systems included a policy administration system. and the ability to bring new products into production rapidly in key productivity and record-keeping systems: rating engines. Effective new product development depends on access to comprehensive risk and modeling data. Another key issue is improving product development capability and speed for complex commercial products.
Increased efficiency: The effort required to construct. test. Throughout 2008 and 2009. and deploy rating logic has been reduced by one third: business areas are performing 85% of the tasks involved with rate changes and rate maintenance. Increased product flexibility: As the result of ease of implementation. sometimes coupled with minor formula changes. The main business driver for this enhancement was to increase speed to market for product changes and introductions. ERIE has been able to implement four new discounts and three very complex. Additionally. System changes to meet certain requirements in the past that would have taken more than 6 months are now completed effortlessly. This includes varying discount and surcharge rating factors by coverage or territory. additional features such as discounts and rating variables are being introduced to products that previously would not have been pursued. and product enhancement is much more efficient and cost-effective when done in one system and promoted for use by all quoting and processing systems. these changes are made during regularly scheduled rate reviews rather than becoming separate projects unto themselves. Because of the flexibility of the rating engine.implementing Ratabase. giving ERIE a competitive advantage. Copyright 2010 © Oliver Wyman 53 . have enabled ERIE to make fine rate adjustments that increase competitive advantage in the market. tested and implemented rating changes for six systems from three different rating engines. support. the company wanted to realize cost savings from moving the responsibility for rate changes from IT to business areas. These table changes. The benefits that have accrued are numerous: Increased throughput: A change that once may have taken four months to accomplish is now completed with a simple table change. Maintenance. and others would have taken a considerable amount of time and effort to complete. Decreased costs: Maintenance and support to perform changes in one place versus three yields ongoing savings from future efforts. Some of these changes could not have been done using their legacy rating systems. large rating routines in 2009 in addition to their normal scheduled rate reviews. ERIE constructed. all 11 states in ERIE’s trading region were converted to the new platform.
with a realized total savings for these activities of 30. the business unit established a repeatable. Additionally. Product managers report that a more complete product knowledge enables increased effectiveness and efficiency in general product development. It also provides detailed metrics and establishes best-practice benchmarks.000 hours per year. As a result. instead of embedded code. yielding limited product extensions with inconsistent success. but the effort to make these types of changes was not cost effective until the Ratabase implementation. measured. This combination of system and workflow delivers the ability to rapidly define. insurers are frequently left with stale and sometimes irrelevant product portfolios.000 hours per year. In addition to implementing the automation tool. Rules determine how products work and how they work in different transaction scenarios. product innovation and management is often reactive. allows Agency Markets to quickly react to or anticipate changing market conditions. Managing these rules. faster cycle times and more consistent processes. Approximately 1000 hours were saved during the annual recalibration of the underwriting model. There is a clearer picture of the business and the 54 Copyright 2010 © Oliver Wyman . Liberty Mutual Agency Markets Changing product development from a reactive to a proactive process to support business growth Liberty Mutual Agency Markets undertook an initiative to address issues related to product innovation and management that are common among insurers. The rating implementation at Erie Insurance was chosen for Model Insurer because of the best practices of higher productivity/ lower staff expenses. The efficiency of pricing & rate change activity has increased. the time savings for new product introductions is approximately 9. and decreased time to market.This type of rating refinement has been desired for years. For many insurers. These product configuration capabilities yield a number of very tangible benefits. The transparency and accessibility of business rules management achieved with the product development application also creates intangible benefits. Using FICO's Blaze Advisor business rules engine. Product refresh rates have doubled from once every four to once every two years. and managed product development process. test and launch insurance products. Agency Markets built a product management utility that innovates and manages insurance products throughout their lifecycles.
Finally. The General Insurance Pricing Engine (GIPE) is a centralized pricing and product tool supporting multiple brands and back end systems as well as several business units for both the personal and commercial lines of business. The tool enables business and actuarial departments to adjust and modify the underlying rates on a daily update schedule if required. It is a module of a software application named the Product Machine. the consolidation of pricing in the engine allows greater control of variations across different channels and brands. The success of the Pricing Engine led to an expansion of the FJA-US Product Machine into underwriting in Suncorp. higher productivity. offered by FJA. This single application replaces multiple legacy rating engines in separate back end systems with one pricing service which supports both real time and batch mode rating. The GIPE addresses multiple objectives. The business need that drove the implementation was to improve pricing efficiency and the delivery of special product offerings in shorter time frames. the company is able to implement changes on a schedule that meets business objectives.impact of product changes. Most importantly. offering a range of products across personal. and decreased time to market. Liberty Mutual Agency Markets was chosen as a Model Insurer because of the best practices of faster cycle times and more consistent processes. and workers compensation. Suncorp Supporting a segmentation approach to the market Suncorp is one of Australia’s largest general insurance groups. commercial. Copyright 2010 © Oliver Wyman 55 . The Product Machine was used to decouple business logic from the back end and move it to a business service layer. Rules now support an infinite number of variations of products and transactions for multiple lines and intermediary channels. It is used for all pricing requests from online and back end systems. The application also automatically documents product business rules and eliminates the need for and expense of creating and maintaining physically separate documentation. The engine supports sophisticated pricing algorithms which enable increased capabilities such as microsegmentation and geocoding.
decreased time to market.An example of the benefit of these capabilities was exhibited with the enablement of flood cover for personal lines. Suncorp was able to shorten the time to market and reduce the cost of updating and maintaining various aspects of its business. and improved use of channels. By empowering the business users and actuaries with the tool. Suncorp was chosen as Model Insurer in the area of product design / development because of the best practices of faster cycle times and more consistent processes. 56 Copyright 2010 © Oliver Wyman .
Neither path is “right” or “correct” as a stand-alone decision.000+ church employee families. In its most broad application. The Episcopal Church Medical Trust and Church Life Insurance Corporation (CPG’s health benefits and life insurance affiliates. respectively) recently undertook a strategic initiative to improve customer satisfaction by leveraging the Internet to bring self-service to 25. More narrowly. see the Celent report The Technology Foundations of Advantage for Insurers. together known as the Church Pension Group (CPG). retirement planning. and Episcopal churches and institutions. agents. and investment budget must be considered in choosing the best approach. and book and music publishing. Much of the discussion above about distributor management and agent portals really falls under this concept of “service” (for more on this. CPG provides pension benefits and services. serve Episcopal clergy and lay employees and their families. Model Insurer Components The Church Pension Group Changing a legacy platform to self-service to realize a business vision The Church Pension Fund and its affiliated companies. property and casualty insurance. life and disability insurance. June 2006). health benefits. technology infrastructure. Copyright 2010 © Oliver Wyman 57 . wellness strategies. service means best-of-breed applications for contact centers. Celent encourages insurers to see the issue of service broadly. as one of the two pillars of their business (the other being risk management) and understand that excellence in service means providing the information and transactional capabilities to all stakeholders (policyholders. and internal staff) as they need them. Factors such as required functionality. distributors.Service Overview Insurers are in a service-intensive business. service means adopting an end-to-end approach and utilizing a fully integrated “suite” administration package.
The benefits resulting from this integration include: A reduction in transaction turnaround time: Prior to WSS. WSS provides real time completion of each transaction.CPG's Web Self-Service (WSS) program allows both internal and external customers to process group health and life transactions in a selfservice environment. and other employer groups can add or change employee benefits and demographic information. and immediately see the results of those changes on their statements. The billing and collections process was also revamped. The labor-intensive work associated with manual transactions was eliminated. similar to online banking or shopping. In addition. Once finalized. Group administrators are now able to view their invoices online. allowing key business processes to be dramatically streamlined and turnaround time reduced. Customer Service operated under a five-day turnaround service level goal. Individuals and administrators of dioceses. parishes. This yields significant efficiencies in new business processing because only a minimal amount of keystrokes are required on the website. Prior to this implementation. changes are reflected on the next month’s invoice. multiple screens were required to complete a submission. The Web Self-Service project moved this legacy environment to a straightthrough process. Internal customer service representatives (CSRs) also utilize MLPS to service paper and phone transactions. transaction requests from individual administrators were printed from a website and manually keyed into StoneRiver’s ID3 policy administration system by CPG employees. administrators are able to view their payment history online. and review and reconcile billing and payment information. 58 Copyright 2010 © Oliver Wyman . Once all changes have been completed. A reduction in the volume and persistency of unallocated cash: The invoice finalization process allows the application of cash to be almost self-reconciling and immediately applied. the administrators are able to finalize their statements or have them automatically finalized by the system. make changes to enrollment. providing immediate access to past invoices. A previously developed website (MLPS) was enhanced and integrated with ID3 using StoneRiver’s ACORD Transaction Server. The finalized statements are stored online. In the previous environment.
Nationwide wanted specialized systems capacity to service this market. an improvement in the customer online experience.An increase in the capacity to grow the business while containing cost: In 2009. Nationwide Using technology to rapidly enter a new market with premium service requirements Nationwide identified an opportunity in a new demographic outside of its traditional market comprised of individuals who fall between "Main Street" and the very wealthy or ultra high net worth. Management set a target date of the end of 2009. improved processing standards and execution. These individuals are defined as emerging / mass affluent. service. The WSS project will allow CPG to fully support this resolution with minimal staffing increases. The greatest challenge for Nationwide was how to make a rapid entry and seize this market opportunity. Copyright 2010 © Oliver Wyman 59 . our Church administrators have experienced greatly improved levels of service. The company wanted to create new products for this line. to be administered by the Episcopal Church Medical Trust. the General Convention of the Episcopal Church passed a resolution establishing a denominational health plan for the Church. improved agent/customer satisfaction. this customer segment also desires the combined benefits in extra features such as travel assistance. and distribution channels. Successfully servicing this client requires a customer service oriented approach in keeping with the company's "On Your Side" promise that tightly integrates products. systems.” The Web Self-Service initiative at the Church Pension Group was chosen as a Celent Model Insurer because of the demonstrated use of industry standards. well-trained staff. An executive in a key client group noted that “supported by highly motivated. In addition. and the aforementioned investment in technology. and have broader coverage needs than typical off-the-shelf products provide and want all their policies placed with one insurer. identity theft coverage. appraisal services and domestic employee background checks. and higher staff productivity. More intangible customer service improvements include 24/7access to online enrollment and invoicing. In addition to desiring extra guidance when placing a claim. and increased overall customer satisfaction.
Settlement. and increased revenue or market share. Using an agile project methodology. and auditors. The implementation supports a phased rollout to additional states. The technology is a serviceoriented architecture (SOA) design implemented with Java 5 technology and 100% Web client and web services interface. the IT and business team members worked together in a “war room” to validate requirements and design the application. billing and distribution management capability. The Hartford Financial Services Group. claims. integrated core system to roll-out and support its Private Client business within 14 months of the beginning of implementation. aging systems that support a critical. The Nationwide project was chosen as a Model Carrier component because of decreased time to market. The complex nature of variable investment pricing and associated trading were the primary drivers of this initiative and a decision to custom-build VIPSTAR was taken after a thorough analysis of commercial software components available in the marketplace. VIPSTAR is a new pricing and trading platform for The Hartford’s investment products and a transfer agency system for mutual funds. Business data definitions use the ACORD-based Business Object Model framework. Several project management best practices were used to ensure a successful implementation.To achieve the required speed-to-market at a viable cost. including the general ledger. Nationwide decided to find and implement a single vendor solution from Exigen Insurance Solutions providing full core systems policy. Trading. For approximately 18 months. Accounting and Reporting (VIPSTAR) initiative began in 2007 to replace The Hartford’s trading platform. Inc. regulatory agencies. Nationwide was able to implement a full. Bringing order to multiple. The VIPSTAR project team included members from The Hartford’s IT and investment and insurance businesses. 60 Copyright 2010 © Oliver Wyman . highly regulated process The Variable Investment Pricing. The application also maintains accounting ledgers for all of the financials that are processed in the system and provides financial reporting data to several areas.
This enabled the project team the ability to address the inevitable “unknowns” before the final switch over. accurate. The availability of this extensive capability provides the business team with the tools to conduct data research without engaging IT. National Association of Securities Dealers (NASD).m. The application has delivered both quantitative and qualitative benefits. Second. Transferring data to downstream systems is necessary to meet compliance and regulatory requirements. the final solution must be economically feasible. The application was fully migrated onto the production platform seven weeks before the actual production implementation. Since the implementation of VISTAR. Copyright 2010 © Oliver Wyman 61 . The largest benefit from this automation is the elimination of pricing or trading errors and the reduction in the amount of time required to make a trade. the offshore trades have been ready by 8:15 a. First. This gives the trading team additional time to address any issues—without missing the trading cycle. without exception.The team agreed upon two fundamental design concepts. and analysis tools. Offshore trades must be complete by 9 a. This was previously was a manual process. A clean release was mandatory because of the interface complexity of the system.m. These dictate that timely. The system has improved cycle time by fully automating the offshore trading and forecasting process. business users processed on both applications. reporting. VIPSTAR introduced self service reporting with the addition of integrated query. The system was then run side-by-side with the legacy application. Prior to VIPSTAR. offshore trades were being done on average at 8:50 a. The conversion of the application was very successful and the implementation of this mission-critical application was seamless. During this phase.m. The application provides complete automated integration to 31 interfacing applications. and state regulations. This was due to the parallel testing approach applied in the final stages of development. any process change or technology introduction should be transparent from an implementation perspective due to the complex nature of the application. and complete accounting data is reported to abide by Securities and Exchange Commission (SEC).
The VIPSTAR project was chosen for Model Insurer because of the best practices of solicitation of end user feedback. pricing.Finally. the process used to add/update new products into the application was rewritten to execute more than 300 edits to replace the manual quality checks done by the investment business team. This is used to provide the current processing cycle status at a “quick glance” to all business areas. VIPSTAR also supports immediate historical trending analysis. This includes metrics such as batch processing statistics. and trading trends. Regarding qualitative benefits. the application provides business users with greater control over the very dynamic activities involved in the trading processes. and project management. testing. 62 Copyright 2010 © Oliver Wyman . It is estimated that this will reduce the work of the product team by 50%. and improved compliance processes. A system dashboard displays real time application status via a web page. risk management through proper development.
well-defined commercial lines and in life/health for low-face amount policies. general agent).000 bonds in force. and a powerful underwriting desktop can help an insurance company make smarter decisions. This allowed for real time approval and issuance. Capitol used a vendor package. The first is to automate the actual selection and pricing of risk itself. In response. This significant number of small premium bonds made it imperative that Capitol have a system which could administer these bonds cost effectively. Capitol Insurance Companies (“Capitol”) had approximately 80. and real time referral when additional underwriting was required. and referral to general agents for bonds falling outside of the underwriting template. Workflows and rules were configured specific to bond type. the company developed Capitol Express (CapEx). automation also has an equally important role in facilitating and improving the work of human underwriters. The key functions of CapEx are real time bond issuance (both new and renewal) based on a standardized underwriting approach without underwriter intervention. Model Insurer Components Capitol Insurance Companies Bringing work processes in line with the expense structure of a book of business In late 2007. 70% of which averaged less than US$500 in premium. However. Copyright 2010 © Oliver Wyman 63 . limits.Underwriting Overview Technology has two key roles to play in underwriting. Driven by the availability of electronic applications and the increased sophistication of rules engines. to enable its underwriting process. automated underwriting is now common in property/ casualty for personal lines and even in some lower-value. OneShield Dragon from OneShield. and user roles (agent. underwriting characteristics. a surety underwriting portal used by both retail and general agents to automate the underwriting and distribution processes. real time declinations.
The implementation has resulted in a significant reduction in underwriting expenses.” Adoption steadily increased over 10 months since going live in five Western states. STP.A key ingredient to Capitol’s success was to create and utilize an Agent’s Council. if a nonstandard request is received. This group consisted of 10 agency representatives. Bond issuance through CapEx is up more than 500% since implementation. and system integration and the improved customer/agent satisfaction and adoption. The feedback from this critical group has also been positive since the nonstandard program gave Capitol’s agents an additional option to get the bond written. a reduction in agent’s time allocated to administrative processing and bond issuance. the system routes it to an external General Agent. In the new submission workflow. 13 agents signed in and tried the system. In the first month. 64 Copyright 2010 © Oliver Wyman . automation. Comments have been received that “the process put in place for CapEx referrals saves multiple steps.” Capitol Insurance Companies was chosen for Model Insurer because of the best practices of solicitation of end user feedback. and another 35 agents have been regularly using the system since the start of the year. Agent feedback has been very positive with comments such as “the system is very easy to use and intuitive. Capitol engaged them intermittently throughout the project to ensure that the system met their needs and to reinforce the importance of their input to the success of CapEx. They validated the initial design prior to the start of development. and is helping to solidify Capitol’s position as a company that is easy to do business with.
more sophisticated customers. The Claims philosophy had evolved from a model of managing indemnity payments to one emphasizing medical management Copyright 2010 © Oliver Wyman 65 . Support the management needs of larger. MEM is a mutual insurance company established by statute and dedicated to benefiting the employers of Missouri. A full case study of the MEM project follows. Missouri Employers Mutual (MEM) Transformational change The Business Imperative Missouri Employers Mutual (MEM) is Missouri’s largest provider of workers’ compensation insurance. The company writes nearly 600 different classes of business in all Missouri counties. Celent has chosen a project that most exemplifies the IT best practices and measurable business results required to be a Model Insurer. The claims management system was one component that was identified for more detailed evaluation. Improve outcomes through better management of care to injured workers. Celent is pleased to give the title of Model Insurer of Year 2010 to Missouri Employers Mutual. Facilitate handling of multistate business. Analysis revealed that the business had changed significantly since the original. A Technology Strategic Plan followed the business planning and assessed the alignment of all technology solutions with the new direction.Model Insurer of the Year 2010 From the winning components. in-house system was deployed. Established in 1995. MEM’s 2006 strategic planning process identified a need to grow market share and a number of tactics to reach that goal: Leverage service as a differentiator in a market with increased competition. Expand capabilities for more complex products.
Finally. there was a desire to fully automate key administrative tasks or to transfer them from IT to Claims. In a previous (smaller) project. At the effort’s inception. 66 Copyright 2010 © Oliver Wyman . Over one-third of the employees in the company used the claims system regularly. A comprehensive program was begun that implemented a number of new approaches to maximize the probability of success.” and months of planning passed without any code being written. Claims data was made available to more than 1. Conversion involved nearly 15 years of open and closed claims history. The final recommendation was to implement the ClaimCenter product from Guidewire. However. A full RFI/RFP process was initiated to assess third party solutions.200 independent agencies and 13. MEM could not afford this result with the Claims project. the IT organization was just formalizing a waterfall development approach.” The risk of a project of this size and complexity was significant for a company like MEM. Total costs were estimated in the range of US$7 million to $8 million. MEM conducted a buy vs. the impact of this project has extended well beyond a system replacement. requirements had lasted “forever.000 policyholders. Automated assignments and authority level management were top on this list. This one initiative employed Agile/SCRUM development methodology. innovative resourcing approaches. Given the size of the potential investment required and the impact on the organization. There was a large backlog of current requests and the inflexibility of the aging system architecture made changes difficult and lengthy. The skills and lessons learned revolutionized the way the company approached this technology endeavor and continues to positively impact many areas of the organization. the Claims implementation was completed on time and under budget. and the decision was reached to replace the in-house system. In many ways. Neither the business nor IT had attempted a program of this scale before. effective change management techniques. build analysis.and minimizing lost time. and a unique governance model. The Project Such a wide scope of change was only possible because of the complete alignment of the executive team and their commitment to the guiding principle that they would do “whatever needed to be done in order to maximize success. In addition. the effort has been transformational for MEM because it introduced multiple new organizational capabilities. continuous business case discipline.
It also allowed team members to gauge the impact of several external market factors (such as the continuation of the soft market and the economic recession) on the expected benefit stream. MEM reviewed its past experience and observed that a significant proportion of project cost resulted from extended decision-making timelines. Copyright 2010 © Oliver Wyman 67 . This guidance was central to the success of the project because of the second innovation—a new governance model. the internal rate of return varied through the project. the company developed a governance model that drove decision-making to the lowest level. It was used throughout the project and provided a common decision framework for each stage. but over time was focused on eight of the critical business objectives that drove the main benefits. To avoid delays and expense. As shown in Figure 1. Figure 1: Internal Rate of Return (IRR) Variation Source: Missouri Employers Mutual Most importantly. a cost benefit model (CBA) was built in the early planning stages. the financial model and its continual use assisted the various teams in their decision-making. this one was not “put on the shelf” once approval was received. As is common in large-scale programs. It initially included a large number of “hard” and “soft” benefits. This empowerment proved to be critical to meeting the aggressive time schedule with a quality product. Unlike many CBAs.Keys to Success The first key to success involved the disciplined and continual use of a financial plan for the project. This focus on the most important areas proved invaluable as the project continued.
68 Copyright 2010 © Oliver Wyman . A matrix was constructed with impact on one axis and scope of decision on the other. This saved vast amounts of team member time and allowed the leadership to focus on top-level issues such as eliminating inhibiting factors and making resource adjustments. where several items came up for decision and leadership turned all of them back to the team. as directed by the matrix. the business case was analyzed to identify what type of decisions would likely be required. All team members. which identified who would make the decision that met these criteria. a Claims Adjuster assigned to the effort in a Business Analyst role had authority to make decisions for how a department would work going forward. Figure 2 illustrates an example of this approach. It is estimated that the Steering Committee level was required on only six decisions over the 14 months of the project. the appropriate role was entered. At the “intersection” of these dimensions. The final matrix assigned over 70% of decisions to individuals.In order to establish a common protocol. Figure 2: Decision Making Matrix (Illustrative) Impact of decision Department KPI Department workflow Scope of decision X Multidepartment KPI X XX% IRR X Corporate KPI X Scope of single sprint X X X X Scope of single release Team Lead Committee X X X Scope of entire program Team Lead Committee Operating Committee Steering Committee Steering Committee X=Individual Team Member / Not Applicable Source: Missouri Employers Mutual The team used real life scenarios to test and refine the model. A Team Lead made decisions on the business rules that drove claims assignments. worked through multiple permutations to gain a clear understanding and to agree on the operating model. For example. including the Steering Committee members. Very few (between six and eight) were reserved for the Steering Committee. An early indication that the model would work occurred at the first Steering Committee meeting.
MEM realized that if the initiative was the top priority for the company. Using the principle “whatever needed to be done in order to maximize success. One half of the time was spent demoing the newly developed parts of the system. Users were unable to clearly articulate their needs in a document form. office space was found nearby for the team. members of the areas impacted by the current development (most often claims and customer service) were invited to a demonstration day. and the second half was for feedback. They also encountered the common problem that when the business finally got to see the results of the developers’ efforts. integration. then it had to fully commit resources to the project.The approach to the assignment of resources in the project was another “first” for MEM. In reflecting on this area of the project. Additionally. Past experience had taught them that splitting an employee’s time between a project and day-to-day tasks did not really work.” business and IT leadership agreed to 100% time allocation and colocation for team members. it was felt that if they did not physically separate team members from their previous jobs. Despite the fact that the company had just completed a new headquarters building. the entire project team met to outline the monthly objectives. At the beginning of a cycle. they would be distracted. MEM adopted an Agile/SCRUM approach. conversion. MEM states that dedicating the business and IT team members and locating them together and offset was not only efficient but also resulted in a number of innovative solutions to specific business process requirements. MEM’s implementation of the Waterfall approach had yielded benefits in terms of documentation and structure. and test and deploy.” Workplans and assignments were then posted on the ten large whiteboards at the offsite location. reports and letters. The company spent months completing requirements only to find at the signoff stage that the original business need had changed. Each track then broke into scrums and planned work for the current “sprint. they could immediately determine that the programmed solution was not going to be acceptable. but it also had some drawbacks. At the end of the month. These teams were further subdivided into smaller tracks comprising both business experts and developers. In order to address these issues. Collocation was also valuable because it enhanced the development methodology that had been chosen for the initiative—the Agile/SCRUM method. This ensured continual visibility into and communication of the current work to all team members. The entire project team was divided into five teams—configuration. The Agile/SCRUM approach allowed MEM to keep every- Copyright 2010 © Oliver Wyman 69 .
The final new technique employed by MEM on the project dealt with change management in the claims area. MEM also needed to find a partner that had claims expertise and. Hiring to meet this need was not economically feasible. knowledge of the Guidewire system. acceptance of a new system was identified as a significant risk. Because of the scope of the project relative to the company’s size. Conscious of these opinions and knowing that quick adoption would drive greater benefits. Initial hesitation quickly faded as the team members quickly gelled and began delivering results.” Such integration was critical. but mostly because it expanded functionality and capabilities.one informed and make mid-course corrections as necessary. At the peak. Even when engaged in discussion of the business drivers for the change. Another difference in the resource management for the project was the use of a distributed resource model. MEM Claims Representatives had been deeply involved in design of the legacy system over the past 12 years. This effort was the first project in which MEM used a distributed resource model. partly because of its design. The company initiated an RFP process to outsource selected project tasks. it was clear in the early planning that MEM did not have the resources to perform all necessary tasks. and the ability for the business to see the system resulted in more accurate specifications. claims leadership launched an extensive change management effort. As one team member stated.” Additionally. “two months into project you couldn’t tell who was from what company. Early on. A key need was to find a company with a good mix of onshore and offshore resources and effective processes for managing the resources that were not onsite. the current trends in workers’ compensation insurance that drove the change. if possible. and how current workflows and automation would not meet future needs. their preference was to “just update the existing system with the new functionality. there were approximately 25 offshore and seven onsite resources. They addressed employee 70 Copyright 2010 © Oliver Wyman . The delivered functionality more closely met business needs. it was known that the new system would require them to perform their work differently. because the offshore staff was handling the majority of the conversion activities and was also involved in configuration and interface development. Executives conducted "road shows" at claim office locations and held town hall meetings at headquarters to review the reasons for the project. MEM selected HCL Technologies because HCL had the most well-articulated approach to the onshore/offshore dynamic and because of its past success with claims and Guidewire implementations.
but that the basic claims management features would be available. Additional abilities would be delivered in subsequent releases. During testing. on the first day of the new system. There were no major issues. a “sandbox” system was established which enabled representatives to have handson time from their desks. The Agile/SCRUM project methodology also assisted with managing change. Many experienced claims experts served as full-time members of the project team. and the new system was available on the next Tuesday morning. the disciplined use of the business case supported the implementation of the governance model by giving individuals a continuous. MEM is still using an Agile model. There were repeated discussions about the internal rate of return at the individual team member and at Copyright 2010 © Oliver Wyman 71 . they returned to their original assignments and became advocates for the new approach. Adjustments that arose were dealt with by a team of business experts and developers operating out of a “war room. It was discussed that. and common yardstick to use in their expanded decision-making authority. all of the functionality of the old one would not be duplicated. As the project approached acceptance testing. Final Thoughts A change management “expert” might have counseled MEM to be less ambitious in its implementation.” In the post go live period. The legacy batch cycle ran for a final time on a Thursday night. a mere count of modifications to individual processes and behaviors would have overlooked the synergies between the changes that occurred during their application. Throughout development. Implementation A “big bang” approach was selected for the roll out. It is common practice to limit the number of changes undertaken at any one time. visible. there were releases every two weeks. The project owner continues involvement in the prioritization of work items. They were also fully transparent concerning the initial delivery of the project. When the project neared implementation. execution. all claims history was converted over the weekend. This approach was chosen in order to speed benefits realization. experts in each branch were involved in test case development. and IT works closely with the business on quarterly updates to the system. For example. However. and validation. through the end of the year. the monthly demonstrations provided the opportunity for many affected employees to see what was coming. Currently in maintenance mode.concerns and challenges openly.
real time exchange of information that enhanced the Agile/SCRUM approach. These demos to the business provided a feedback loop that then validated the decisions. and the company is using all the new approaches in the implementation of a new policywriting and billing platform. Communication at the offsite location with colocated team members facilitated an immediate. Its automation renewal continues. The wide scope of these changes and the resultant success of the project have earned Missouri Employers Mutual the Celent Model Insurer of the Year Award. MEM has now applied the skills and behaviors learned during the claims project to multiple areas of the company. 72 Copyright 2010 © Oliver Wyman . Finally. the new governance method resulted in speedy decisions which were then implemented in a very visible way through the continual Agile demonstrations.the team lead level.
Celent hopes that by aggregating examples of best practices and achieved success metrics from across the industry, it can illustrate the degree to which insurers are making effective use of technology today and provide inspiration to insurers contemplating how to improve their own technology strategies. Readers should take two key messages from this report. First, no one insurer does everything right. Rather, most insurers do some things right. Second, effective use of technology is more important than pursuing technology for the sake of technology. This is the common thread among every selected Model Insurer component, and a decision for which each should be proud.
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Related Celent Research A Snapshot of Innovation: An Insurance Market Scan November 2009 2010 US Insurance CIO Survey: Pressures. Priorities. Priorities. and Practices January 2010 Celent Model Carrier 2009: Case Studies of Effective Technology Usage in Insurance January 2009 2009 US Insurance CIO Survey: Pressures. and Practices January 2009 Copyright 2010 © Oliver Wyman 76 .
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