Contrary to public opinion, the IT department typically can't foretell the future. IT teams usually can analyze the effectiveness of an existing systems implementation, but for some, rather than using a crystal ball, it's more a matter of acknowledging what works and what doesn't.Thanks to growing requirements and a fundamental technology shift, an insurance consortium faced such a challenge when the implementation of a policy administration system dragged on for years.
One consortium member, tired of waiting, went its own way and expects to deploy the first phase of its new system within eight months of starting work on it.
"Right now, we're on an IBM mainframe platform, and our systems are all state-of-the-art COBOL and VSAM. At least, they were state-of-the-art in 1972 when they were put in," jokes Gregory Kocek, CIO of Texas Farm Bureau Mutual Insurance Co. in Waco, Texas.
The firm's legacy system, built on IBM's Palace architecture, was one of the first insurance packages. "It's really old," Kocek says.
The Texas Farm Bureau, like many state farm bureaus, was created in the aftermath of the Great Depression as a not-for-profit group aimed at giving farmers a political voice and helping them obtain cheap supplies.
In 1950, Texas Farm Bureau Mutual was set up to provide farmers in that state with a source for property/casualty insurance. Later, it joined Southern Farm Bureau Casualty and Southern Farm Bureau Life to form an insurance consortium that sells P&C insurance in six states and life insurance in 11.
Today, Texas Farm Bureau Mutual alone writes about $600 million in premiums-mostly for property, home and auto insurance-for more than 300,000 clients. It sells through 800 independent agents in 12 districts across the state, and although those agents are housed in county farm bureau offices, the company itself operates independently.
Away from thick clients
Almost 60% of insurance companies use policy administration systems that are more than a decade old, according to an Insurance Networking News survey.
The Southern Farm Bureau consortium's system, which Texas Farm Bureau Mutual shared, was old enough to buy liquor in 1995, when the group decided it was time for an upgrade.
Implementation began as a cooperative effort among the different companies in the consortium.
The companies chose a client/server administration system that was to have been based in Southern's headquarters in Jackson, Miss. Some of Texas Farm Bureau Mutual's IT staff, which currently numbers 90, was part of the implementation team, Kocek recalls.
"We had people assigned to that project full-time for several years. Texas folks were either working remotely or relocating to Mississippi."
But the requirements list kept growing as the project progressed, and over the course of implementation, "the world went to browser-based and away from the thick-client and client/server architecture," says Kocek.
The whole project took a different direction-and by 2002, seven years after implementation started, nothing had been deployed. Kocek notes that Mississippi was supposed to be the first state to deploy, and it finally did deploy last year.
Frustrated by the delays, Texas Farm Bureau decided to go its own way. It looked at about 40 different vendors and eventually narrowed the field down to two.
"One was on a .NET server-based platform; the other was Sapiens [INSIGHT], which runs on the enterprise server," says Kocek.
"Our board made a decision to bring the mainframe back here. That was a mandate, and it kind of forced our hand in that it made sense to have the new application run on the same platform as the legacy application," he says.
Apart from the single platform, Sapiens' INSIGHT offered two other features that especially appealed to Kocek. "Number one, we wanted the product to work across multiple functions, multiple applications-not only P&C, but claims and billing as well. And, we wanted it to have a toolset so that we could customize it. Between the legislature and the way the business works, we knew that we'd have to be able to make changes rapidly."
The toolset, which Sapiens calls eMerge, is a business-rules engine that sits at the core of the developer's INSIGHT products. Users break processes into specific steps, or events-and then, using an English-like language, code them into eMerge rules that govern those events.
The rules operate in the background, and technical and business people can make changes quickly without having to use code. "It's a lot easier to change these rules, rather than having to go back and change COBOL and recompile and test," Kocek says. "That's a very painful process."
First-phase implementation began in late spring of 2005, and Kocek is targeting the end of this year or early 2006 to roll out the first policy administration and billing deployments for the company's personal and general liability lines.
"These are lines that are still manual at this point-and I mean manual," he says. "There's no automation whatsoever. Further, they involve small dollar amounts, probably less than 5% of our total premium, and we wanted to make sure we started out small. Also, there's no conversion effort, since these lines aren't automated right now."
Extending Its reach
The second implementation phase, scheduled to start in January, will include claims and reinsurance components of INSIGHT, and will extend policy administration and billing to the rest of Texas Farm Bureau Mutual's lines.
"Our intention is to have everything up with one common architecture when we're done," Kocek says.
The company is working closely with Sapiens consultants, he adds. "We have a knowledge transfer methodology in place. Our goal is to be able to take over and maintain these systems as we put them in, and then next year to be able to design and code on our own, using the toolset."
Kocek has taken the mainframe, an IBM 330 MIPS, and logically partitioned it into z/OS on one side to run the legacy applications, and Linux and WebSphere on the other. "Linux will actually display the Web pages from the big server, where all the Web pages will be rendered from the Sapiens software," he notes.
During the transition from legacy to Sapiens, the two systems are being integrated at several key points. There's a legacy statistical reporting system for reporting results to state regulators and the IRS, and a claims system for confirming that a policy is in force.
The integration, Kocek says, is fairly simple. INSIGHT has a repository from which data can be extracted and formatted to work with the legacy applications.
"We don't have to understand fully the guts of how the Sapiens software works," he says. "We just have to understand this intermediate repository where the data ends up." Once implementation is finished, plans are to shut down the legacy system.
Primary users of INSIGHT will be the company's agents. "Today, a lot of the applications taken by the agents in the field are done on a piece of paper and mailed here to the central office," Kocek explains. "With this system, the agents will actually be able to take all the information, enter it into the system and generate a policy right then and there."
Close to the speed of light
To make the process go even faster, Texas Farm Bureau Mutual has replaced the satellite network it was using to communicate with its agents with landlines and terrestrial systems-a combination of T1 lines and forms of DSL and cable.
"The state of Texas is huge, with some pretty remote places," Kocek says. "This should give us the speeds we need so they can do their jobs right in their offices without calling Waco for help."
Since INSIGHT's rules engine does a lot of the work in the background automatically, the new system is proving to be rather simple for agents to learn.
The firm is bringing in 15 to 20 of its agents for training and system testing, and the plan is for them to train the other agents. Texas Farm Bureau Mutual allotted three days for training, but it found that the agents were able to cover nearly everything in a single morning. "These new systems really are a lot easier to use," Kocek says. "It's really click and go."
The company's investment in its new policy administration system is substantial, and it's a bit early to count returns on that investment. But Kocek notes that Texas Farm Bureau Mutual's accountants have run a cost-benefit analysis that projects payback in less than two years. Apart from speeding policy creation, he reckons "it should cut down tremendously the amount of paper that has to be handled, and it will also cut down on the errors that are made between the time information is taken down on a piece of paper and keyed in by somebody else."
Bob Mueller is a business writer from Grand Beach, Mich.
