During 2005's July 4th weekend-a time typically filled with barbeques, fireworks and celebrations, Employers Direct Insurance Co., celebrated, but not for the same reason most other Americans were celebrating. This particular weekend marked the moment Employers Direct began its quest for improved efficiency through automation by going live with Guidewire ClaimCenter from San Mateo, Calif.-based Guidewire Software Inc.Headquartered in Thousand Oaks, Calif., Employers Direct was founded in January 2003 to meet the workers' compensation needs of California employers, including those of hotels, restaurants, country clubs, new car dealers, manufacturing companies, specialty supermarket chains and retailers. Employers Direct operates via a direct-to-consumer model.
"It's a very high-touch kind of business," says Greg Schueman, Employers Direct's vice president and CIO. "And that's very different from a lot of the small comp businesses where they're really looking at high transaction volumes that can't have a high-touch personal relationship."
While that high-touch relationship is important to Employers Direct, so is increasing efficiency, notes Schueman. When the company opened its doors, its founders were looking to put in a basic set of systems that would enable them to get started and test the waters. In 2002 they picked up one of the last licenses for a COBOL AS/400 suite from now-defunct Data Coordinators in preparation for writing business in 2003.
"The base vanilla system did not have the rich functionality that we desired," says Schueman, "but it worked for our intended purposes in workers' comp."
As a full claims, policy, billing and commissions system, "it did everything for us," says Schueman. "But by that point we knew the organization was going to be very successful." The company's long-term strategy was to invest in better systems, and after evaluating a number of options, Employers Direct decided on ClaimCenter.
ClaimCenter uses business rules to optimize the claim process and automatically monitor all operations in order to catch exceptions and eliminate errors. Available as both a standalone claims system and as a set of individual components to complement existing systems, its architecture is supported by Web client, XML-based configuration or Web services.
Employers Direct began implementing ClaimCenter in October, 2004 and completed the project in July, 2005. Customization extended the possible six-month implementation time, notes Schueman. "Our business was slightly different than what (Guidewire) had done before that," he says.
Schueman admits learning at least one lesson from the implementation of ClaimCenter: the importance of testing customizations before going live. "There were a few bugs that got through," he says. "They weren't significant, but they were annoying."
In less than one year, Employers Direct can attribute hard numbers to its efficiency strategy. "We went from processing about 600 to 800 claims the prior year, to about 5,000," says Schueman. "Yes, our staff number increased, but it wasn't the same rate that you would expect had we been on the old system."
AIMING TOWARD THE FUTURE
Employers Direct's success with ClaimCenter implementation triggered the next step toward the goal of automating across the enterprise. The company is in the process of upgrading its current version of ClaimCenter and adding Guidewire's PolicyCenter and BillingCenter to its insurance suite, which will run on a Linux Red Hat enterprise platform.
PolicyCenter manages underwriting and policy administration processes, including new policy applications, quoting, renewals, changes, cancellations and reinstatements. BillingCenter manages the end-to-end billing process, including complex and customized billing arrangements.
Built on a double-entry accounting foundation, BillingCenter receives billing instructions from PolicyCenter and determines the amounts due on a policy or account, manages payments made by policyholders, links these payments to the amounts due and manages the commissions payable to agents from these receipts.
Schueman's "go-live" goal for the enterprise implementation is late 2007, but he is more focused on doing it right. "It's a big project, and we take it very seriously because there's a whole sequence of steps to execute. We're not going to set an arbitrary date and rush to that, but rather, make sure we're ready, and do it right in partnership with Guidewire. That way, we'll gain the kind of performance and process efficiencies we're looking for," he says, which are somewhere between 20% and 25%.
Schueman is confident with those numbers because he will apply the now-proven "test more" lesson previously learned. "This time, when we're doing our upgrade, we'll have a dedicated test team," he says. "We have an offshore test team, and we also have our user acceptance test team of Employers Direct employees."
Employers Direct uses what some call a western method of accounting as opposed to the eastern method. "The western method determines how to calculate earned premium based on the amount of elapsed time in the policy period for the overall premium value," says Schueman. "We recalculate the earned premium based on the current in-force premium at that point in time for the total amount. The eastern method is more complex because you calculate based on the base policy premium plus make individual calculations for any changes due to endorsement. This is particular to the workers' compensation insurance line and specifically some of the western states." PolicyCenter will be able to work with this unique element," he says.
The company hopes to reap additional benefits from the "test more" lesson, especially those that apply to Employers Direct's quoting process. Currently, the information, held in its customer relationship system (CRM) system, is rekeyed into the company's quoting application and then rekeyed again into its policy administration system. PolicyCenter will eliminate those manual steps. Instead, says Schueman, PolicyCenter will quote, submit and bind information from the CRM system.
"At that point it's done," says Schueman. "There's never any triple entry of data that occurs today; that's an example of the efficiency that we expect to gain just in the quoting process."
AT A GLANCE
Company: Employers Direct Insurance Co.
Location: Thousand Oaks, Calif.
Business: Investor-owned direct writer of workers' compensation insurance for privately held companies in California, including hotels, restaurants, country clubs, new car dealers, manufacturing companies, specialty supermarket chains, and retailers
Employees: 160
Business Case: Saw an opportunity to increase efficiency
At Issue: Growing business required automation across the enterprise, while enabling the company's direct sales force to focus on high-touch relationships with customers
Solution: Initial success with Guidewire's ClaimCenter motivated Employers Direct to implement Guidewire's insurance suite
