Like most large U.S. insurance carriers with aging technology platforms, CNA Financial Corp. was faced with a critical decision: How to modernize a legacy claims system to meet 21st century business requirements. And like other insurers, the Chicago-based commercial carrier is banking on technology that integrates multiple disparate systems, streamlines adjuster workflow, provides more timely management information, and reduces claims and IT costs.
"Most insurance companies have an amalgam of mainframe systems and older client/server systems, with maybe a little Web technology here and there," says Richard Affenit, vice president of claims technology at CNA. "And CNA was the same as most other insurance companies."
Although separate business units within CNA had presented cases for upgrading their siloed claims systems in recent years, it wasn't until 2002 that the company was in a prime position to invest in an integrated claims solution that would meet its broader corporate needs. That's because CNA's IT group, led by CIO John Golden, had established an enterprise architecture framework in 2001.
"CNA's IT department had begun building out some core infrastructure at the enterprise level, putting in place some basic components-imaging, workflow, and Web technologies," says Affenit. "That laid the tracks for additional technology going forward."
Having the enterprise architecture already specified was an important precursor to overhauling the company's claims system, according to Affenit, who joined the company in 2002. "When I walked in, I didn't have to define enterprise services for imaging, enterprise services for workflow, or Web services. Those were already defined."
Instead, Affenit came on board and was able to focus immediately on articulating the vision and requirements for a new claims system-one that would support claims processing across the company's various business lines.
"What we came up with was essentially a replacement for the company's siloed claims technologies, along with a lot of new functionality to really help people monitor progress in handling claims, guide them through the process, and help the leadership understand the performance of the department on a day-to-day basis," he says.
The vision for the future
The company's vision for the new claims system consisted of enterprisewide claims and document management and integration with the company's underwriting systems.
Rule- and role-based workflow and controls would enable automated assignment of claims and tasks. Adjusters' online diaries would automatically populate with tasks and dates as they're assigned. And management would have near real-time financial and performance information at their fingertips.
Coming up with that vision and strategy-or roadmap-took several months of evaluation, involving roughly 100 people, on a part-time basis, across the business units.
"The roadmap is the beginning of the story," Affenit says. "We really focused on: What is our key business strategy? Instead of diving straight into the technology, we began to define what we wanted to look like as a claims department."
To that end, the team conducted a SWOT analysis (identifying strengths, weaknesses, opportunities and threats) and a gap analysis. These exercises revealed that CNA's claims group had several strengths: The staff was creative and experienced, the management team was strong, and the department had strong relationships with customers, agents, brokers and vendors.
But the assessments also uncovered weaknesses in the department. Claims processes were inconsistent across different product lines. Coding errors were numerous. First notice of loss and policy data were incomplete. Priorities changed frequently. Accountability was inadequate. Feedback with underwriting was lacking. And the company had no "big picture" of claims and operations performance.
The department's shortcomings were not unique to CNA, Affenit stresses. "Frankly, these weaknesses could describe claims processing at any insurance company," he says. "This is the fourth carrier I've worked in my technology career-and they are almost identical in terms of these issues."
What is unusual about CNA's story, however, is the success the company had in developing and delivering its new claims technology according to its roadmap. Early in 2003, the carrier implemented a Web-based desktop for adjusters that brought a lot of the existing application systems into one place.
The company then rolled out its new claims system in September 2003 to approximately 700 users in the Southeast region. Currently, the company is deploying the system to roughly 3,000 standard lines users across the country-including claims adjusters, claims supervisors, support staff, office managers and executives, and underwriting, finance and actuarial staff.
The track record
"The track record for delivery of systems of this scale for carriers of this size is not a good one. There are lots of failures," says Marcus Ryu, vice president of consulting services at Guidewire Software Inc., the San Mateo, Calif.-based firm CNA selected as its claims technology provider. "We're especially proud of having delivered the system with the exact scope, on schedule and under budget."
That's unusual, he says. "If you drew a map of projects in claims and underwriting over the last 10 years, you'd probably find less than a quarter of them met all those objectives." (Editor's note: CNA's system actually went live one week later than planned, but that was due to the hurricane activity in Florida.)
This first phase of the project was called Claims Foundation, because it delivers a lot of functionality to users, but is also intended to be the basis for lots of other improvements going forward, according to Ryu.
Entirely Web-based, the system provides a unified desktop for data and activity management for all staffers at CNA involved in the claims process-from first notice of loss all the way to settlement. In addition to basic functionality, such as self-directed diary and notes, it handles: receipt of a new loss; segmentation and assignment of new losses; generation of a work plan; capture of structured data associated with claims; automated escalation of claims; data quality assurance through management intervention and workload balancing; identification of subrogation opportunities and potential fraud.
The system is integrated with about a dozen other CNA systems, including a document management solution, three first notice of loss systems, the company's back-end claims mainframe, numerous policy systems, and several ancillary systems.
In addition, it runs on CNA's enterprise architecture-and coupled with Tivoli access manager framework, the system enables users to sign on once to access all claims applications.
"This eliminates a major pain point for users before this project," says Guidewire's Ryu. "Sometimes, they had to log in 10 different times."
Indeed, CNA plans to reduce claims costs-not only by reducing claims payments-but by significantly improving staff productivity.
The system should also positively impact the customer, as well as agents and brokers, because they will get answers to their questions faster, says Affenit. Reporting to regulatory agencies will be more timely with higher quality data, and the system, hopefully, will enable the company to retain good employees.
"One problem we've seen in the past is people would come to us and say, 'This is really difficult technology to work with. I don't want to work here,'" says Affenit. "Having technology that enables people instead of stifling them is really a competitive advantage when it comes to keeping and developing qualified people."
Adjuster and support staff productivity is improved by the system's more intuitive interface, which eliminates the workarounds that they struggled with before, notes Guidewire's Ryu.
"For example," he says, "with CNA's old mainframe system, users had to memorize codes. Now, everything is in plain English, with intuitive buttons or drop-down menus." And, with single sign-on, users don't have to log in to separate systems.
What's more, rule- and role-based workflow and controls enable the claims department to operate by exception management. "That means instead of a manager, supervisor or director having to dig through reams of paper trying to find that needle-in-the-haystack issue that they need to get their arms around and manage, the system elevates those issues to their attention," says Affenit.
Claims supervisors have much more visibility into the entire claims operation, which will help CNA reduce claims leakage, according to Guidewire's Ryu.
"For every claim, the supervisor knows not only what the adjuster is doing-but also what the recovery specialist is doing, or what the fraud specialist is doing," he says.
Data quality is improved by automated monitoring of claims progress and claims events through business rules, which results in lower leakage, Ryu adds. And, automated task management leads to earlier identification of subrogation, which is another area of leakage for carriers.
The visibility CNA's new system provides affects several layers of management. Not only can unit managers see the organization of the work and the scheduling of activities to handle claims, but in the near future, higher level executives will also have access to information they've previously had difficulty retrieving.
"For the first time, first-line leaders and higher level executives have a dashboard providing them with information about how the department is performing," he says. "We no longer have to dig through last month's or last quarter's reports to figure out what's going on."
Another first for the company: Adjusters and underwriters will be using the same information at the same time. "It's critical for adjusters to have access to the latest policy information to make coverage decisions on a timely basis," Affenit says. "And, it's critical for underwriters to have access to the latest claim information to make underwriting decisions on a timely basis."
Providing timely access to more information is a process that will continue over the next 18 months, as CNA replaces other components of its existing technology and rolls the system out to its global and specialty lines users.
"As we go forward in time, building out the technology roadmap, we will have access to financial information-such as reserving payments-and a better view of the overall financial state of claims," says Affenit. The company will also have a better view into its relationships with third-party providers, such as independent adjusters, he says.
"We've delivered a big jump in technology capability over the past year that we will continue to build on this year," he says. "And, in 2005 and 2006, we will make another big push to deliver another big chunk of technology."
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