The challenges inherent in big corporate changes can be a losing proposition, but they can open doors to great opportunities.When Merastar Insurance Co. of Chattanooga, Tenn. became an independent property and casualty firm in 2004, CIO Ken Lytle grabbed the chance to update the company's aging systems, and devised a five-year plan that will replace its technologically grizzled V4 legacy system, which runs on an AS/400, with all-new applications.
"At the end of the five-year process, we expect to be fully off the 400, and have all our systems running on SQL, Java, PHP and server-based technologies," he says.
Merastar has changed hands five times in the past 30 years. The company was created by Provident Life Insurance in 1974 and called Provident General Property and Casualty. Four or five years later, Lytle says, Provident sold the company to Northwest National Life, which kept it a few years and then sold it to Geico.
Subsequently, Geico sold the firm to two of its past presidents, and they in turn sold it to Prudential in 1998. Five years later, Prudential sold it back to prominent industry executive Jack Byrne, one of the two former Geico presidents who owned it previously.
Today, Merastar writes about $62 million in P&C premiums and has approximately 175 employees. It sells personal auto homeowner's coverage in every state except New Jersey, Massa-chusetts, Hawaii and Alaska. Many of the company's policies are marketed through employer-sponsored affinity groups, says Scott Harris, Merastar's vice president of claims.
"For example, one of our accounts is the Disney Corp. We market personal auto and home insurance to Disney employees," Harris says.
When Lytle began assessing new technology, Harris's department was the obvious starting point. Merastar's split from Prudential left it with no claims organization, and it made sense to build the new department and the technology that would support it in tandem. On a broader note, adds Lytle, independence suggested an altogether new systems approach.
"Under Prudential, we were distracted by bureaucracy," he says. On its own, Merastar could focus on what it needed to do to run the company, rather than on what it needed to do to please Prudential.
A Rules-Driven System
Merastar began its search for a new claims system by gathering information from trade magazines and Web sites. It narrowed the options down to four, then two, and finally selected ClaimCenter from Guidewire, a San Mateo, Calif., software developer.
Of particular interest was the system's ability to be manipulated in a way that helps management control and direct the operation as a whole, says Harris.
"It's a rules-driven system," he says. "It allows the management team to set up certain activities for adjusters to complete in the course of handling claim files." That keeps managers on top of the workload and helps monitor performance. If certain activities aren't completed, managers can step in.
The technology was appealing, too.
"We wanted something that was modern and state-of-the-art, i.e., current-century technology that would put us as far ahead on the curve as we could be," Harris recalls. "ClaimCenter is Java-based, it runs on an Internet platform, and we wanted something we could access via an Internet browser."
Totally Integrated
Start to finish, implementation took about nine months, on time and on budget, despite some tricky integration issues with Merastar's legacy system.
Until it's replaced, V4 generates most of the printed statistical reports for the company, so ClaimCenter had to tie into it. It also had to interface with First Notice, a Boston-based outsourcer that handles initial claims reports and sends them to ClaimCenter.
As Merastar retools its other systems, ClaimCenter will need to integrate with them, as well. "Our philosophy under the V4 system was that everything had to be totally integrated and we had that- front to back," Lytle says. "Now, as we move into the server world, one thing I'm insisting on is that we end up with as high an integration point as we had before. When you call up a claim, you get the policy. When you call up a policy, you can get the claim information. You don't have to go through different apps to get there."
Lytle gives credit to Guidewire's consultants Ted Krzyk on the project management side, Deloris Chappell on the technical side, and others as needed for helping make the implementation run smoothly.
The trick, says Alex Naddaff, vice president for professional services at Guidewire, is to agree on project goals before the work begins.
"In Merastar's case-and this is true with most of our customers-they were able to tell us what they wanted," Naddaff says. "We give them input from the industry perspective-from what other customers are doing."
Though the software supports best practices, it doesn't lock users into specific procedures, Naddaff adds. "What's reflected in the Merastar implementation is 75% Scott Harris's vision. The other 25% is his vision tweaked, based on our industry experience."
On the IT side, staffers gained knowledge and experience in ClaimCenter and Java and PHP as a deliberate offshoot of implementation. The goal, Lytle says, is to move maintenance in house after the current maintenance contract with Guidewire expires in five years, and to equip the IT staff with tools they'll need in the future as Merastar updates and integrates other systems.
Knowledge is Power
"Any time we purchase a package, we insist up front that there be a knowledge transfer from the vendor to our folks," he says. "We had ongoing interaction during the implementation and we set aside several weeks for Guidewire to train our entire staff on their APIs. We sent the staff to a Java training class, and we also had the vendor come back and do some more training on the Guidewire product itself."
On the user side, almost everyone in the 35-person claims department got involved in testing the system before it went live, Harris says. "When people could see all the things the system was capable of doing, it generated some enthusiasm."
Since the claims department at Merastar is new, Harris hasn't much in the way of past performance to compare ClaimCenter with, but he says the new system will go a long way toward helping his department meet accuracy and customer service goals.
"It's certainly going to improve our claims' cycle time," he says. "The system requires that a great deal of information be input into the claim, and I think that with more information, the adjusters become better decision makers and deal with claims more quickly and accurately," he continues.
"ClaimCenter also lets us store images electronically as part of the claim file. For example, we are going to image medical bills to make them part of the electronic claim file. We'll have the pictures that are associated with the accident as a part of the electronic file. All the documents that we send out to a customer will be part of that file. Multiple users will be able to look at those documents without having the physical file, and that will also improve our process greatly."
Already underway in Lytle's five-year plan is implementation of a policy administration system from Steel Card of Santa Barbara, Calif. Of course, ClaimCenter will be integrated with it.
"Just the auto piece is about an 18-month project," he says. "Then we'll start the home piece, which will probably be another 18-month project. We expect that by the last few months of the home installation, we'll know enough to start looking at our stat reporting and billing, and then start building things like a data warehouse."
Bob Mueller is a freelance writer based in Grand Beach, Mich.
