Since writing its first insurance policies in January 1993, AmFed Companies LLC has been an aggressive pursuer of new business-always on the lookout for niche market opportunities.As a result, AmFed recently went on the hunt for "best-of-breed" software products. It sought to create an affordable, modern-day policy administration system that it could use to pursue new business.
The goal was to produce an outstanding IT system at a fraction of the cost of a complete end-to-end system from one vendor.
"We had the opportunity to bid on some new business but our information technology system was built for our primary line of business-worker's compensation," explains Brenda Thornton, executive vice president and CIO of AmFed Companies LLC, Ridgeland, Miss.
"We had an IT system in place that we designed 10 years ago from scratch, and it was written in a language called Progress," Thornton explains.
"We did it in a rush and designed it only to handle workers' compensation. It wasn't designed so that we could easily add new lines of business. And workers' compensation is quite different than other insurance lines."
In addition, AmFed's decade-old information technology system was causing some business problems. The insurer had a backlog of policies, and mistakes were being made because of manual processes. Moreover, the only way to add new business lines was to add more employees, which management judged too costly.
Matching its resources
AmFed needed a Web-enabled system that would enable it to quickly introduce new lines of business and to take advantage of the rapidly changing insurance climate in its home state.
The managing general agency for nearly 30 insurance companies quickly determined that it couldn't afford the typical $1 million price tag for an end-to-end software solution.
However, the company needed software that could be developed and deployed quickly; would enable agent access to the Internet; and could be maintained and modified in-house.
"First, we needed technology that would enable us to enter new lines of business very quickly because we aggressively go after opportunities," Thornton explains. In addition, AmFed wanted agents to be able key in information from their offices through the Internet, rather than using phone, fax or mail.
"There was no way to Web-enable the old IT system without a complete rewrite of all the character-based programming language," Thornton says.
AmFed also wanted its IT staff to be able to modify and maintain the software in-house. "We need to be able to turn on a dime when an opportunity comes up. In order to do that, you can't be dependent on somebody else," she adds.
While AmFed had developed its wish list, it didn't have the IT staff capacity to create and build a new system to handle new property and casualty lines of insurance from scratch.
With an IT staff of six in a company of 150 employees, it's very difficult to design a new system and keep everything else running on a day-to-day basis, according to Thornton.
Following a careful review of 10 insurance software system providers, Thornton chose Bolivar, Mo.-based Duck Creek Technologies Inc. for its policy administration tools. Duck Creek's Example Platform Product Suite enables AmFed to build and maintain its own insurance rating and issuance systems.
The four applications (Example Author, Example Server, Example Express and Example TransACT) run on Windows 2000.
Duck Creek's software provides a Web-enabled system that can support AmFed's varied roles as a carrier, managing general agency and third-party administrator. "Because we had unique requirements, we needed a system that could support our business regardless of which hat we were wearing-MGA, third-party administrator or carrier," Thornton explains.
Specifically, Duck Creek's information technology bolsters AmFed's ability to perform policy administration tasks-from issuing a quote for insurance to binding. AmFed will be able to issue, endorse, cancel, renew, and reinstate a policy with the new system.
"My job was to find the 'best of breed' software that I could put together at the best price to get an end-to-end solution. We didn't want to pay one of the larger (software providers) $1 million for an end-to-end policy administration solution," Thornton says. "Right now we have less than $250,000 invested in our new system."
AmFed has put together add-ons to the Duck Creek technology including Carlsbad, Calif.-based Document Sciences Corp.'s xPression software for print management. AmFed created its own internal billing system-affectionately called Duck Bill-which is used in conjunction with the Duck Creek technology to produce invoices for billing purposes.
"I looked at a couple of billing solutions," says Thornton. "One was $300,000 and I said, 'That's absolutely crazy.' So we modified our own in-house billing system."
The new system uses Crystal Reports, a popular reporting and analysis software for the Windows operating environment from Crystal Decisions, Scotts Valley, Calif. The software can retrieve data from more than 30 types of databases using a Web browser to generate reports for management.
Piecing it together
The technologies were integrated by using WebSphere (a family of Web application server products from IBM Corp.), and an XML data stream from Duck Creek software to Document Sciences for printing. An XML data stream from Duck Creek to Duck Bill is used for billing purposes. And XML or SQL data input is used to produce Crystal Reports.
"We needed additional software because the Duck Creek technology doesn't perform print management or billing functions and it can't generate management reports," explains Thornton.
"It's important to remember that the Duck Creek technology is a fantastic tool; it's not an end-to-end policy administration solution." But it enables companies to develop new lines of business quickly, she says.
As a result of needing to piece together software systems, "it hasn't been smooth sailing since Day One. That's for sure," Thornton says.
The new IT system was built specifically to handle the first line of business from that effort called Dwelling Fire. The homeowners' insurance line was originally set to go live internally in February, but it has been delayed.
What caused the delay? "Integration challenges are the biggest hurdle that we have had to go through," explains Thornton.
"Currently the biggest integration challenge occurs whenever we add something new in Duck Creek. We then have to make the change in DocSciences as well, otherwise DocSciences won't print," says the CIO.
Document Sciences is working with AmFed and Duck Creek to resolve the issue, according to Jack McGannon, Doc-Sciences CEO and president.
When the new system is up and running, AmFed will dramatically reduce mailing costs for sending out policies. The new system will also boost productivity because AmFed will be able to shift the initial keying of data for policy quotes to the agency level.
Speed to market
And, by buying-rather than building-the Duck Creek software, the IT department will save considerable money. If AmFed had developed the software, it would have had to hire two or three more programmers.
"That's $200,000 in on-going expenses per year," explains Thornton. "This way we pay for the software one time plus maintenance."
The biggest benefit, Thornton says, is that the new system will improve AmFed's ability to get products into the market more quickly.
"I believe we will be able to bring up a new line of business in a month or less," she predicts. "It's totally unheard of in this business to be able to start a new line of business and have it up and running within a month.
"Once I get proficient with our new systems, I think I'll even be able to bring up a new line of business within a week-instead of months or up to a year," she says.
A $250,000 cash outlay for software is a powerful number for companies that do their own research to come up with a new IT system, says Thornton. "If we can save $750,000 by going through the migration and integration headaches, it's worth it."
It's just getting there that is painful.
Brian S. Moskal is a Chicago-based business and financial writer.
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