When insurers, producers or other firms participate in a merger or acquisition, it’s often the initial instinct of IT or other groups involved in legal and claims technology to start planning integrations of legacy technology systems immediately. Much as these technologies need to be combined, doing so without looking at the big picture can be shortsighted and actually can impede the overall integration of the two companies or increase the associated costs. A better approach is to use the merger or acquisition as an opportunity to assess the two entities and the desired state for the joined company, and then integrate the technologies in a way that supports the overarching strategies of the newly combined business.

The Pyramid of Priorities

Prior to the merger, the legal and claims management departments in each company had their own group of stakeholders, including internal clients and leadership, as well as external stakeholders such as regulators and policyholders. They also possibly had different strategies and tactics regarding how they dealt with these stakeholders. Furthermore, each company had its own institution- al philosophy regarding its approach to legal and corporate risks. And finally, each company had its own set of people, processes and technology within the law department that enabled it to serve its stakeholders and manage risk according to the institution’s risk profile. These factors: stakeholders; risk; and people, processes and technology, form a hierarchy of institutional priorities.

Technology is important within this hierarchy. It’s a tool to assist the people and processes that manage the institutional risk and support the institution’s stakeholders. Trying to integrate disparate technology systems without first addressing the issues that the technology is meant to support is a cart-before-the-horse situation. At best, it represents a lost opportunity; at worst, an expensive mistake. Real technology needs or opportunities to integrate multiple technology systems may be overlooked; users may balk at the technology or find it ineffective for their real needs; costly investments may be made in useless systems; or the technology may simply fail to do what it was meant to do.

The most successful integrations will address the pyramid of priorities from the top down. First, the stakeholders must agree on the combined legal and corporate approach to risk; not just how it was managed by the original companies, but how it should be managed by the new, combined company. Some of the most common risks faced by insurance companies include:

• Producer/insurer licensing compliance • Market conduct compliance

• Contract compliance

• Governance compliance

• Dispute exposures

• Legislative and regulatory monitoring

• Financial compliance

• Staffing issues

• Technology

• Disaster recovery/business continuity

• Niche compliance issues, e.g., record retention, privacy and cyber-security

The supporting law department also must agree on the combined approach to risk and on the people, processes and technology needed to address it.

People, Processes and Tech

Conducting an assessment of each of the two joining departments, looking at where they are and where they should be, the gaps between those states and how to resolve them, is the way to accomplish this. There are a number of questions to consider during the assessment; these include:

• Who are the clients and how do they align?

• What services and skill sets do the departments need to offer their services?

• Are the departments aligned with the business units they serve? Are they embedded, geographic or centralized? What is the best alignment for the goals of the combined company?

• What are the clients’ service expectations?

• How do the departments deal with outside entities, such as outside counsel and vendors?

• What processes are in place for exposures?

• What technology is available to support these processes?

Does it integrate with systems inside and outside the department? How can technology facilitate desired processes for the combined company?

Today’s technology offers considerable flexibility and customization. Many software products can be integrated so that they can input to or retrieve information from one another, resulting in improved consistency, reduced work redundancy and more defensibility in litigation because of demonstrated processes and consistency. Many are web-based and therefore lower cost, have virtually unlimited storage capacity, allow smoother upgrades, require less IT involvement and allow external access.

These many benefits can be realized when technology is selected and implemented as part of a holistic plan, with specific goals in mind based on a clear understanding of the combined organization’s priorities and needs.

Bret Baccus is a senior director at Huron Legal. David Deal is an attorney with Holland & Knight LLP and is a Chartered Property Casualty Underwriter.


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