Is your IT department the last to know?

Remember the last time you needed a real person to give you directions?  Some people provided milestones and markers, making it easy to find your way.  Others were a lot more vague and in the end, not very helpful.  How often did you end up completely on the other side of town, nowhere near where you wanted to be, and you had to go back and retrace your steps trying to figure out where you went wrong?  This only resulted in increasing your stress level and causing you to be late.  Such was was life before the wonderful technological advancement of auto GPS systems.

You’ve spent a lot of time selecting a vacation spot on the beach you’ve never been to before.  Your flight has arrived and you’ve picked up your rental car.  Now what?  How do you get to your final destination?  Do you just drive until you hit the coast and start searching?  No – you were also smart enough to plan and have a GPS to help you find your way.  Your final destination has been input and the course plotted.

With proper preparation, your IT department  can be like the GPS in your car — planning the best route to your destination, avoiding slowdowns and getting you to the beach by lunch.  However, if IT doesn’t have all the information to plot your company’s course, or is not given the information in a timely manner,  you can end up bogged down in traffic or taking the scenic route instead of the interstate, ruining your trip with frustration and disappointment.

Carrier IT departments need to have a firm understanding of where the business wants to go so they can design their target architecture in order to plan the best route to get there.  As you know from adjusting your car navigation system, the best route to your destination isn’t always the most direct, or the fastest.  Traffic jams of requirements documentation, technology learning ‘S’ curves, and poorly timed stop lights can make the most direct routes take the longest.

Management should not decide to venture into a new line of business, issue a policy, and drop the policy off with IT to enter into a non-existent system.  The result can only be chaos in a poorly planned and hurried repository saturated with wasted money and time. Without proper notification and planning, a carrier’s IT department becomes reactive instead of proactive, definitely limiting their capability to support the business and help the organization grow.  This dramatically increases the difficulty to introduce new lines of business and does not  improve your company’s ease of doing business for your agents and customers, pushing them further away.  Even the most strategic, brilliant, masterful business plan fails if you don’t have the technical infrastructure to support it.

By keeping IT part of the business planning process, they can help plot the best course and work with you to build a platform for the future that can support your growing organization.

Do you see the recession as an opportunity or are you panicking?

The Dow was down about 200 points earlier this week – is that bad or good? The Dow has been picking up fairly consistently over the past 6 weeks or so and this is probably just an “adjustment” rather than another freefall. Is the glass half empty or is it half full? Many people see the down economy as a time to hunker down, sell off their assets and bury the money in Mason jars or hide it inside their mainframe. But for those with the stomach for it, this down economy brings a lot of opportunities; a lot of bargains.

Any insurance organization looking to improve IT services can find a lot of good deals on hardware, services, and especially back office systems. However, most insurance organizations, because they are intrinsically risk averse, don’t want to spend the money now, but instead wait and see what happens. When things do turn around, they could find themselves behind the curve, rather than leading the way. A lot of companies are looking for band-aids for their IT problems, quick fixes to get them through the storm. Rather than just repairing the mast and patching the hull on your ship, wouldn’t it be better to have a new, stronger, and more stable ship ready for sea when the storm subsides. Or, even better, fully prepared to weather the storm if it continues, and head out for the deadliest catch.

Another benefit to purchasing during a down economy is that as a mid-market carrier, you are likely to get a lot more attention from technology vendors and a better team now because you become a big fish in a little pond, and every customer is extremely important. Because you’re in more of a command position, you can negotiate better services and even more free upgrades because it also becomes an opportunity for the vendor to improve their product.

We’re all confident that the economy will turn around, it’s just a question of when. There are those “economic experts” that say September; those that say next Spring; and more that say Summer 2010. If any of them are right, its really not that long a period of time – about the same amount of time it takes to implement a system.

When it does, your agents, your customers, and most importantly, your prospects, will be there to move forward with you. So talk to technology vendors now, because just like the car companies, prices have come down and there are deals to be had.

Bust For Big Three Auto Could Be Boom For Warranty Insurance Companies

With the big three US automakers impacted by the recent recession and becoming very unsteady – closing dealerships, factories, laying off workers, discontinuing lines, and possibly even filing chapter 11 – consumers are faced with a conundrum; To buy or not to buy, that is the question.  The only way for automakers and dealers to get out of this mess is to move cars.  However, will consumers want to purchase a car from a company that may not be around long enough to back their warranty, let alone provide service after the warranty has expired?

For those risk averse consumers that still want to take advantage of these “fire sales”, a great way to get that warranty back is to purchase an extended warranty agreement on their vehicle.  These warranty agreements are backed by warranty insurers like Mercury Insurance, a.k.a. Certified Car Care, Great American Insurance, or Federal Insurance, a Chubb company.  An extended warranty essentially replaces or broadens the manufacturers warranty coverage so that consumers do not have to bear the full burden of repair costs to their vehicles.  Just as with any other insurance, each company’s coverages and benefits are different.  Edmunds’ offers a great description of warranty coverage and how to shop for it.  Here’s an excerpt:

Do you have to pay the bill up front and get reimbursed?  Does the company whose plan it is offer any payment to the repair facility via a credit card over the phone so you don’t have to pay any out of pocket expenses?  How easy is the plan to use at the repair facility that will be dealing with it?  Being on the phone, on hold, waiting to get authorization could cause a major delay in getting your vehicle repaired in a timely manner.  Will a representative from the auto warranty company have to come out and inspect the vehicle?  That will also add delays to the repair process.

The automakers misfortune could become an opportunity for warranty insurers.  Assuming premiums remain reasonable, and there’s no reason not to, warranty insurers could see their business quadruple.  For those insurers that have automated their systems for application and claim processing, they will be in good shape to keep up with the large increases in demand and processing requirements.  The departments that cover these types of policies are no where near the size of the bread-and-butter departments like General Liability.  Those insurers that can keep up with the demand with automated functionality for application entry, quote, and issuance, as well as claim submission and adjudication, should become very profitable.  For those companies whose systems are not ready for the bubble, it could become a nightmare threatening the viability of the company due to reputation and service damage.  Once they cannot keep up with the demand, those requests will dramatically decrease and potentially go away completely.

This can also be another opening for frontline agents.  When consumers come in to request auto insurance, agents could seize the opportunity for the up sell and offer warranty insurance to cover that newly purchased US auto, or any auto for that matter.  Most consumers will expect to hold on to vehicles longer, making the warranty insurance coverage a very attractive option.  Agents are probably already representing carriers that offer this coverage and could easily add this arrow to their quiver.

Can Insurance Help People Go Green?

About two months ago, Google released its latest mobile technological advancement – Latitude.  Now everyone with a mobile device (which is just about every living soul over the age of 14) can track, or be tracked, by their friends and family.  On the other hand, in a more malevolent approach, your boss can spy on you; or can you spy on your boss? 

Nevertheless, it is another method where “Big Brother” can keep tabs on where you go, how often you go there, and how long you spend there.  Parents can track their teenagers to make sure they’re in school, they went to the friend’s house they said they were going to, or if they’re at the lack watching the submarine races.  However, other than the boss and employee relationship, does this technology also apply to the business world, or to be more specific the insurance industry. 

Auto insurance carriers, including Progressive, are offering Pay As You Drive (PAYD) programs.  This means that instead of the typical rating methods of garaging and vehicle types, auto policies, both personal and commercial, could be rated based on where you drive, and how often you drive, making your insurance use based, rather than ownership based.  At least one company rates based on the miles you drive, but by inserting a GPS device into the vehicle, using existing technology such as GM’s On Star, or using your cell phone with Google’s Latitude, carriers can track your every trip.  This could potentially be expanded to use based paying in other vehicle industries like car rentals.

Under the typical ownership based rating, insureds pay the same premium whether they drive 5,000 or 50,000 miles per year.  A 2008 Brookings Institution study revealed that if premiums were based on use, driving would decline by 8% nationwide, saving $50 billion to $60 billion each year.  Reduced carbon dioxide emissions would also result.  Everyone wants to offset his or her carbon footprint.  Each time I fly in and out of Cleveland, Continental offers me the option to pay a few dollars more to offset the carbon emissions for the flight.  Most companies are now telling everyone how their packaging is made from recycled materials and how they help the environment.  Like most people, I recycle, and I try to drive less, but that’s more because I’m too cheap to pay for the gas.  Going green is mainly something that people try to do on their own.  However, the Insurance industry is moving toward a new concept that could help push people in that direction.

Insurance litigation in the economic downturn

I heard a report on the news this morning that in a recent survey, lawyers have indicated that they expect a dramatic decrease in business in 2009 and do not anticipate earning income at the same levels they earned in 2008.  Really?

That may be true for mergers & acquisitions, and other similar purchase related transactions, but I do not believe the current economic downturn will have a similar affect on the insurance industry.  In fact, I believe it will have the opposite affect.

I think the upsurge in litigation stemming from the collapse of the credit markets and the mortgage industry could surpass levels ever seen before.  Litigation during these times could include some of the highest settlement amounts, parties sued, and parties suing.  Insurers are bound to get caught up, due not only to defending their interests, but also mainly due to their policy responsibility of defending insureds for litigation brought against them.

Some insurance carriers are gearing up for that increase in defense costs.  The Hartford is already battening down the hatches in preparation for a litigation hurricane.  As the insurer for The Peanut Company of America, they have gone to Federal court for clarification on the liability coverage in their policy, in preparation for the litigation defense costs and settlement payments for the over 1800 product recalls and related illnesses.

People are losing their jobs and can’t make their payments on their Lexus because they over extended in the boom of ‘07.  So those vehicles end up on eBay, on fire, or in a chop shop.  Insurance SIU departments see a swell in claim counts.  The number of injuries in car accidents goes up.  These are times when an insurer’s Corporate Performance Management (CPM) and the ability to analyze their own data against their goals, along with incorporating automated processes can really pay off and keep expenses down.  The identification of fraud also becomes key to insurer’s weathering the storm.  Lawyers send people to the same doctors and vice versa.  I remember a case of fraud where a doctor was reported to be treating 1600 people in one day.  So, who gets involved in all these areas – lawyers.  Both on the claimant and on the carrier side.

Traditionally economic downturns are the biggest catalyst for increases in insurance claims and insurance fraud – people need money.  The decrease in policies written, coupled with the increase in policies cancelled for non-payment of premium, is not as dramatic a cost change as the increase in claims.  People still recognize the need for insurance and recognize the importance of maintaining that policy.  However, insureds, and claimants, feel they’ve been paying the premiums on their policies and now they need to get some money back.

I can’t see insurance lawyers experience that much, if any, drop in revenue during this recession.

The Benefits to Insurance Carriers of Automated Workflow Processing

Do you still distribute paper files and mail the old fashioned way?  I see this all the time.  Even Underwriting departments have people that distribute paper policy files to Underwriters for review of applications, renewals, MVR and CLUE reports.

Why do so many insurance organizations still use a manual distribution method for workflow - especially in the Claims arena which has transactions that are so heavily paper based? There are so many problems created by paper files and mail being stacked on adjusters’ desks for handling without regard to priority.  An insurance organization takes on too much risk:

• Increased Error Rates
• Increased Operation Costs
• Reduced Service Response Time
• Extending the Lifecycle
• Raising Adjuster “Burn Out” Rate and Increasing Employee Turnover and Training 

When I was a claims adjuster, every day was the same – about 10:30, after the morning mail was opened (which I had to go to the post office and retrieve because I was a “field adjuster”), a stack about 3 inches tall, wrapped in a rubber band, would be dropped on my desk like a ton of bricks.  At least the claim file numbers were written on them which the administrative staff would spend about 90 minutes researching.  Then I would have to take that stack of mail, and start retrieving all the paper files from cabinets associated with that mail – PIP applications, damage appraisals, attorney correspondence, medical bills, etc.  How was I supposed to go out in the field when I had all those paper files back in the office?  You couldn’t take them with you because they weren’t allowed to leave the office IN CASE THEY GOT LOST.

Granted, this was a long time ago, and I had to consider myself lucky that at least I had a mainframe system into which I could enter my reserves, payments, notes and confirm coverage.  But these days, not storing files electronically and making them accessible remotely is almost inexcusable.  All that wasted time and productivity.  I probably could’ve handled twice the case load and closed files twice as fast if I could have been out in the field all the time.

Like so many of their policy brethren, many modern claim systems include automated workflow and straight-through processing features that insurance organizations with legacy systems can not, or do not, utilize.  But these legacy systems don’t necessarily have to be replaced in order to implement these types of functions.  Many independent automated workflow systems can work right along side existing legacy systems and push work forward.  I know carriers that implement a simple document management system with high speed scanners that scan and distribute 10,000 – yes, ten thousand – pieces of mail every day.

There are those claim managers that are considering making a change to their claim administration system, and may want to increase the priority of the automated workflow function in their search criteria.  By introducing an automated workflow, many insurance organizations have improved productivity by as much as 100%, recognizing savings to the hundreds of thousands of dollars, and supported a 20% increase in business with existing staffing levels.  The additional benefits to an Insurance organization of a workflow utility are that it can:

• Implement continuity in processing,
• Decrease processing costs, and
• Increase efficiencies to improve Service-level Agreements (SLAs) with customers, agents, and company departments. 

Insurance organizations can also benefit by increasing the collaboration of resources using a document repository. A single repository would enable organizations to reduce resource costs associated with searching for non-existent data or recreating data that is unable to be found, such as loss control guidelines, rating specifications, or even just the office fire procedures.  Call center and other service-related expenses can also be reduced by providing customers with access to their documents via the Web for policy documentation and/or claims forms.  In addition, field workers would be more efficient by being able to review and transfer documents remotely, reducing claim processing times and expenses, and allowing for claim payments to be issued more promptly to customers; spending more face time with insureds, claimants, and agents.  Face time is always good for business.

One final note, Enterprise Content Management (ECM) and Workflow can also be utilized as a knowledge broker between the many systems and departments within an Insurance company, and can become an important source for Business Intelligence (BI). It can provide consistent searchable metadata for proper document retrieval that can be used to support Dashboards and other BI reporting tools for executive management, resulting in improved productivity even at those levels. 

But that’s all right.  You keep paying rent on that office space for file cabinets and maintaining resources to pass paper around.  I’m sure you’re not losing market share or unnecessarily increasing your expense ratios.

Top 10 Reasons for System Implementation Failure

Insurance carriers are not typically custom development or system integration experts – their business is insurance, not software.  There are some national carriers that have built their company around providing insurance directly over the web and have created proven methods of software development and integration.  That is not the case for most, especially small- or mid-size carriers.  These carriers see the need to improve  products, speed to market, and flexibility. They address the underlying system needs by buying, building, or a combination, and introducing new systems into their technology ecosystem.  Unfortunately, too many times these projects fail.

There are many different reasons why  system implementations to fail, but this is the top 10 in my experience.

1)       No experience running an RFP to begin their selection. The RFP was pulled from the internet, modified slightly and sent out.  Out of 4 responses, three eventually dropped out, so they went with the one remaining, never taking a close look at what they were buying.

2)       Inadequate Project / Program Management Process. The project was driven by hard completion dates without having a valid work breakdown structure for a project plan to really understand what it would take.  One high level executive ran the project, and no one was empowered to reveal that the emperor had no clothes.

3)       The software development company was located in Europe and the stateside representation was a consulting company that did not understand the carrier’s business.

4)       The carrier failed to properly check the vendor’s references of successful installations, of which they would discover there were none.

5)       The carrier wanted to perform too much of the work themselves, learning as they go, and not allowing the experts to do what they do best.

6)       Tried a big bang (All lines, all states, and all systems on day one).

7)       Scope management. Tried to put everything in the first release afraid that if it was not there, they would never get it.  As a result, they got nothing.

8)       The carrier’s requirements were actually pretty good, but they did not know how to manage them. They could not set and hold on to their agenda, rather than letting the vendor set the agenda.

9)      Not enough involvement in the process by the business.  After the selection all the work was done in a “black box” and what was delivered was not what the business wanted.

10)   Poor or no Quality Assurance process.

Business Change vs. System Change: The Slippery Slope

(Wouldn’t It Be Nice If…)

Wouldn’t it be nice if vendor product administration systems could be configured to your exact specifications, screen designs, workflow, automation, and include flick of a switch integration. Wouldn’t it be nice if the system was intuitive enough to know that most of your business uses the same forms, limits, and deductibles, except in a small number of cases. Wouldn’t it be nice if the implementation was as easy as installing music software and you only have to run the setup.exe file and you’re ready to start writing business or administering claims.

That would be nice. But its not realistic. Implementing a new system to support your business is laborious and requires the proper attention by the proper people; otherwise, garbage in – garbage out. Underwriters, Claim Managers, Agent Relations people, don’t want to deal with putting in a new system, they just want the system in and working. But what does “in and working” mean? Many companies often do not recognize the magnitude of what they are undertaking. They go through the process of selecting an off-the-shelf product and believe this is what they really want. “This works for us and we can move forward with this.” Most of the time, that’s true. Unfortunately, most of the time its also true that the business then decides that there are many shortcomings in the new system and wants to reinvent it using five simple words: “Wouldn’t it be nice if…”, and IT must respond. This starts the snowball down Customization Mountain and before anyone realizes, the requests for changes are so frequent, and often so unnecessary, the hopes of what will be in production are unrealistic. The pedestal upon which the system has been placed is so high, it cannot be reached.

Wouldn’t it be nice if the user could put on a helmet, and the system could read their thoughts to enter the data and move through the system. Just like Clint Eastwood flying the Russian aircraft in the movie Firefox.

But what are the reasons for some of these changes? Why does the business need so much customization for a system they spent so much time and money selecting?  When asked these questions, often the business response is, “Because that’s what we do now.” Doesn’t that defeat the purpose of implementing a new system if you just want to keep doing what you’re already doing? That’s like buying a new horse to pull your trailer of goods, instead of a pickup truck. You’re not taking advantage of the features, functions, and new technology of the system, if you don’t also look at Business Process Adoption. Changing your business processes is most often much more cost effective than system customizations and will reap longer term benefits for the company. System changes increase maintenance time and costs with upgrades, not to mention being the major source of costs overruns and project delays.

Try to remember that vendors build systems to satisfy everyone; and you can’t satisfy everyone all the time. Go as close to the base product as possible, even putting that into production first, then look at making necessary changes. Your success rate will be much higher and your budget won’t get blown out of the water. Don’t try to rush everything into production on the first go-around. Take it in pieces and concentrate on delivering successfully using as much forward-thinking implementation as possible, such as using SOA in your existing architectures and platforms.

Then management will say: “Wasn’t it nice that the system went in on time and on budget.”