When Mike Natan came on board as CIO of OneBeacon Insurance Group two years ago, he inherited a large, failing IT project intended to support a new commercial P&C package. "At that time, I looked at the project, and basically killed it," he says. "It was clearly runaway. It wasn't going to deliver."In May, the Boston-based regional insurance company rolled out a new Web-based policy administration system, which will not only support the company's new commercial package product, but all of its commercial and personal lines as well.
Called Policy INSIGHT, the system was developed with Sapiens International Corp., a Rehovot, Israel-based technology provider with U.S. headquarters in Cary, N.C. Based on Sapiens' eMerge rules engine and IBM Corp.'s Websphere, the new system provides several state-of-the art advantages over the legacy systems it is replacing:
* Web-based agency support. The new system enables independent agents to quote, bind, endorse, issue and renew policies in real-time via the agency Web portal.
* Rapid product configuration. The system enables OneBeacon to configure new products and make rate and rule revisions in hours rather than weeks.
* System integration. The system integrates with several internal and third-party IT systems to gather billing and reporting data, Dun & Bradstreet and motor vehicle registration information, and credit reports.
* Single platform. The system serves as the framework for additional lines of business, which can be added to the platform easily and quickly.
* Reduced costs. The system reduces training time for agents and users, as well as IT maintenance costs.
Several challenges
The insurance industry as a whole is facing several challenges, says Dan Trajman, president of Sapiens. For example, a few years ago during the stock market boom, insurers' investments performed well and contributed to overall profitability. Now, with the market down, carriers are trying to squeeze more savings from operational efficiencies.
In addition, customers are asking for "on-demand" services, he notes. For example, "clients are looking for immediate quotes; they don't want to wait two hours or two weeks for a quote."
As a result, insurers are struggling to respond to the market quickly, as well as to streamline their operations for cost savings. But their biggest obstacle is their inflexible legacy systems, which are often batch-oriented, with no Web access, Trajman adds.
When OneBeacon, formerly CGU Corp., was acquired in June 2001 by White Mountains Insurance Group Ltd., Hamilton, Bermuda, management quickly recognized the company's legacy systems were weighing it down.
"Part of the reason we undertook this (new policy administration system project) is that we are really trying to go from being a $4 billion company to a $2 billion company," says CIO Mike Natan.
Shortly after the CGU acquisition, the newly named OneBeacon began taking steps to shed non-core operations and become a profitable, but smaller regional insurance company.
An IT turnaround
In November 2001, the company transferred business operations in 42 states and the District of Columbia to Liberty Mutual Insurance Group-keeping operations in only seven Northeastern states. In 2002, the company replaced its management team, hiring 100 new executives, while it also reduced staff from 7,300 to 4,500 employees.
In addition, the company increased prices, re-evaluated risk on renewal policies, eliminated unprofitable products, accounts and agents, and began deploying new technologies that would contribute to overall results.
"We were faced with having to do a turnaround of this IT operation," Natan explains. "Specifically, IT was too expensive and we weren't delivering. Our systems were inadequate."
As a result, the company developed a three-year plan to replace most of its major legacy systems. "We need to reduce to a single platform wherever possible," Natan says.
When the company assessed its options for the new policy administration system about a year ago, it was looking for a Web-based system that would require less work for the IT department.
"We needed the system to be Web-based and user-friendly," Natan says. "We wanted to roll it out to 1,000 agents in months-so we didn't want huge deployment delays."
The company also wanted the new platform to be as maintenance-free as possible. "With the old systems, IT is in the middle of everything," he says. "If you want to make a rate change, you have to get IT involved. If you want to change the rules-change the product-it's a big IT effort. Our objective is to get IT out of the picture as much as possible."
After choosing Sapiens and co-developing the system over the past year, OneBeacon rolled out Policy INSIGHT, along with its new commercial package product, to independent agents in Maine. Commercial auto is also on the platform.
Now, agents can quote, bind, endorse, issue and renew those policies in real-time. And the company is making the application available to all its agents in the Northeast throughout this summer.
OneBeacon can configure products and change rules on the system in hours, instead of weeks spent developing hard code. And the company can add new product lines easily to the platform.
In fact, over the next year, the company plans to move most of its commercial and personal lines onto the platform. Those lines include auto, workers' compensation, umbrella, personal auto and homeowners.
Industry leader
In all, as part of its overall turnaround plan, the company will retire approximately 50 legacy systems over the next few years. The newly launched commercial system replaces seven legacy systems, and when personal lines are added to the platform, 10 more legacy systems will be retired.
"Our major plan over the next three years is to take production support costs-the costs of keeping our systems running-from $130 million in 2001 to $71 million in 2004," Natan says. "A lot of that reduction comes from shutting down a lot of systems, and having newer systems that are easier to maintain," he says.
It also comes from reducing headcount. The company began with 750 in its IT group. By the end of 2004, that number will be 350.
"We strongly believe this (new policy administration platform) will help OneBeacon go from industry laggard to industry leader in terms of its use of technology," Natan says.
Other technology initiatives will also help the company pull ahead. OneBeacon has standardized its front-end development on Websphere, for instance, enabling it to develop customized portals for underwriters, claims adjusters and other insurance professionals.
The company implemented a Web-based claims processing system last year with Bermuda-based Accenture. The claims desktop automates routine tasks and enables OneBeacon's adjusters to adhere to best practices.
The final frontier in the company's IT turnaround will be to replace its financial systems, Natan says. At press time, the company was evaluating vendors. "We implemented a PeopleSoft human resources system last year," he says. "So PeopleSoft has a strong leg up."
