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Building credibility: five insurance technologists discuss project management, the Internet, legacy systems and other challenges, plus their evolving role in the industry. (Cover Story: Information Technology).

At a time when leveraging information is more critical than ever for insurance companies, technology leaders are finding their way into executive decision making and confirming their right to be there by the results they produce. They know that partnering with business units is key to their success and that through those partnerships, information technology professionals can and should bring about innovation.

"IT for IT's sake, R&D departments, that's a thing of the past," said Scott Eisdorfer, senior vice president and chief information officer, The Navigators Group, Rye Brook, N.Y. "You have to be a partner with the business."

And within that partnership, IT departments have to be nimble and cost-effective to adapt to constantly changing business requirements. "There's a great quote by [Charles] Darwin, which is 'The most successful species are not the strongest or even the smartest; they're the ones most adaptable to change,'" Eisdorfer said. "Two years from now, things are going to be different. The years of the three-or four-year project are over. The problem either changes or doesn't exist by the time you get to the finish line."

Eisdorfer was one of five insurance technologists who met to discuss their challenges and their role in the industry at a roundtable hosted by A.M. Best Co. in February at the Olde Mill Inn in Basking Ridge, N.J. Other participants were Wayne Ritz, senior vice president and chief information officer, Harleysville Insurance, Harleysville, Pa.; Dennis Sellers, vice president, Business Information and Technology, Atlantic Mutual Cos., Madison, N.J.; Jane Koppenheffer, chief information officer and vice president, Information Technology, Penn National Insurance, Harrisburg, Pa., and Christopher Valuntas, chief information officer and vice president of Information Technology, Penn Treaty Network America Insurance, Allentown, Pa.

Paul Tinnirello, executive vice president and chief information officer at A.M. Best, moderated the discussion.

In addition to adaptability, the technologists exchanged views and predictions about their credibility with chief executive officers, their role in the company, their baffles and truces with vendors, how they handle legacy systems, how they use the Internet and a host of other subjects.

To be as adaptable and innovative as they have to be, the roundtable participants said IT professionals have to know more than technology--they have to know insurance, too. "Our IT people all have to take at least one insurance course," Koppenheffer said. "Eventually you get to a certain level where you need to have your CPCU [Certified Property/Casualty Underwriter] designation. The idea is that when an IT professional has business knowledge and you hear a business person struggling with an issue, it's not so much IT coming up with the solution as it is sitting down with the business people and jointly developing a good solution."

At Harleysville Insurance, Ritz and several of his staff members have lunch every other week with the senior vice president of one of the company's business units and several of his or her staff members. "It's been a boon for my people to understand the business better so that when they are exposed to a new or different technology, they can say, 'This might help solve this problem.' Plus it gives the end users more exposure to us."

Among the roundtable participants, Eisdorfer was the only one with a strictly technology background. "But somebody told me when I was about 25 years old, 'You're an insurance guy that happens to work in the IT department,'" he said.

Knowing the insurance business enables IT professionals to create their own new products and services and gives them more credibility with top management. "When we offer input on a project's scope or time frame, the business units are more likely to accept our recommendation," Ratz said. "I think most failed CIOs are individuals who grew up in the programming area and were used to taking directives and never said, 'No, that's not possible.' They didn't have the necessary exposure to the business, which didn't build their credibility," he said.

The IT department at Penn Treaty recently experienced a gain in credibility. "Over the past three years, we have improved our credibility with management by explaining what steps need to be taken to meet their requests and the number of resources required, by following up with them on a weekly basis on all major requests and by addressing any concerns or issues," Valuntas said.

For Sellers at Atlantic Mutual, the key to credibility is the partnership relationship. "Ten years ago it was more adversarial, where the business people would say, 'They're probably going to sandbag us, so if we want it in a year, let's say six months.' The programming guys say, 'These guys are going crazy on the business side, so let's double when we can really do it.' So there's no trust. The key is setting expectations appropriately," he said.

Getting the Job Done

Once a project is agreed on and the parameters set, execution becomes paramount. "Everybody's always focused on technology, and they never really discuss people management or project management, which I think is the most critical factor to success in IT," Valuntas said.

Penn National Insurance, however, valued project management enough to create a corporate project manager position, Koppenheffer said. "Projects have been a lot more successful, because these managers really do have project management skills," she said.

Harleysville Insurance also relies on corporate project managers, who "tend to be people who drive great requirements, sometimes because they don't understand and they dig a little deeper," Ratz said. That's in contrast to bad project managers, who try to design a solution long before they've finished the requirements, he said.

Project management is important to Atlantic Mutual, particularly because the company requires a cost benefit analysis before a project is started and also because it is committed to shared resources, Sellers said. "If you don't have good project plans, you don't know when those resources are going to be available again," he said.

Tinnirello noted that project management is more of a business issue than a technology issue. "Good project management really depends on having a leader who makes sure the work gets done," he said.

Measuring IT Success

If the projects are successful, then IT should be successful, but success needs to be measured, and that's not always easy. The roundtable participants agreed that the broad measures of their success were delivering the benefits to the business and not exceeding their budgets. Beyond that, Koppenheffer said her department was judged on whether it brought the right people to the table to help develop solutions, whether it added value and whether it was creating a sustainable infrastructure that would allow the organization to move ahead.

"For our own staff, it's by area," Koppenheffer said. For example, "people responsible for customer satisfaction are very specific-number of help-desk calls answered in a minute, those kinds of things. As an organization, we have continued to raise the bar from a performance expectation standpoint, not so much in terms of individual projects, but of each person. I think that's probably across the board that the magic eras are gone and now it's a lot of hard work and more hard work and more hard work," she said, alluding to the time in the not-so-distant past when top management thought the things the IT department created bordered on magic.

Sellers said that his department also has expense ratio reduction goals, and how well they meet those goals is part of the measurement of their success.

Surviving the Dot-Com Bust

IT credibility and measurement of success could have taken a nose dive over Internet sales of insurance, but the roundtable participants said their departments came through unscathed, mainly by focusing on the Web as a way to connect with agents. "About four years ago, we affirmed our commitment to the independent agency system, rather than distribute our products via the Internet," Harleysville's Ratz said. "Instead, we made the conscious decision to use the Internet to support the sales, marketing and administrative functions of our agents."

Valuntas and Koppenheffer said their companies felt the same way about their independent agents. "We were trying to empower our agency force, providing them all the Internet technology that we were creating, and really pushing it out to our agents to provide to the insureds ultimately," Valuntas said.

Penn National Insurance held several agency focus groups to ask what they would like the company to provide before it put out its first Web site, Koppenheffer said. "Customer service expectations are increasing among the insureds. We're first focusing on tools for the agents that they can use when the clients contact them, but also providing things like the ability for insureds to pay over the Web, to supplement the times when the agents aren't available," she said.

"We have about 1,800 agents connected to us via the Web," Ratz said. "Between 70% and 80% of all of our personal lines transactions are entered via the Web, and about 40% of our small commercial policies are entered over the Web now."

Navigators Group "dabbled in a couple of the dot-com operations early on in our Lloyd's syndicate," Eisdorfer said. "We partnered with three other syndicates, and the cost of entry was very low. It frankly didn't work out very well, but we learned a lot. We sat on the sidelines for a couple of years; now we're getting back into it again.

"We will be focusing on leveraging Internet technology to improve our efficiency, more than as a primary means for procuring business," Eisdorfer said. "We will see additional business as a result of these initiatives, but the greatest benefit is going to be that it's more efficient for our partners to do business with Navigators than our competitors."

Atlantic Mutual was heavily involved with the dot-corns in conjunction with its agents and some partners around the single-entry, multiplequote concept, Sellers said. While that idea ultimately received limited acceptance in the dot-com arena, the company was able to take its knowledge and its technology and create its own agency interface." I would say the credibility of our operation has probably increased tenfold, and [the operation] is getting more support because we are using it strategically to support business operations, rather than just generating financials and stuff like that, which was viewed as an overhead," he said.

Providing a Web site for insureds is a lower priority for the technologists. "As our ultimate customer, the insured drives our product development, but other than that, we really consider our agents our customer," Sellers said. "We try to keep our public Web pages fresh, but we're really spending most of our resources in operationally focused, agent interfaces."

Navigators Group's insureds include major cruise lines, directors and officers of regional sized companies, supertankers, Greek shipping owners and small contractors in California. "Most wealthy Greek ship owners have neither the time nor the inclination to enter specific risk data into a Web site. They want to call the agent, and let the agent handle it," Eisdorfer said.

Valuntas said Penn Treaty envisions offering a few services over the Internet to its insureds, who are senior Americans. "But aside from providing claims information, maybe some policy information, billing information, being able to set up online payments, we really don't see it moving too much beyond that," he said.

"We haven't yet determined our position on giving our end user direct access to everything they want to see because it's not the highest priority to us by any means," Ratz said. "I'll certainly invest in this effort, but I'm not going to go broke just to support the Internet. We had an Internet site reporting claims that was very unsuccessful. We believe the personal touch is still very important for that. To me, technology is just expanding the basic things; it's not replacement."

In House vs. Software House

Despite predictions from some trade publications that by 2010 there will be no in-house development of software, roundtable participants said they knew better than that. "I haven't found a silver bullet out there in the 30 years I've been in this business," Ratz said. "We will continue to build solutions where appropriate and buy solutions where appropriate. I don't think there is any one solution for a large organization. It must be a blend."

Atlantic Mutual has had similar experiences. "We needed to build a new policy-writing system, and my bent was to go out and buy one," Sellers said. "Luckily for us, we couldn't find anybody. I mean, we found a lot of vaporware--a lot of promises and they want to learn what we know on our dime. So we've really built all our systems in house, and even the skeptics have come around.

"Another problem we've run into is integration. If you're trying to buy something off the shelf, integration into your other systems can be difficult if you've built them yourself," he said.

Penn National Insurance has been package oriented because of its size, but it's ramping up to do more inhouse development, Koppenheffer said. "Our focus for this year is building skills, not so much from a programming standpoint, but from a business standpoint--how to write requirements, how to do use cases when you're starting with a blank piece of paper, as opposed to comparing somebody's package," she said.

Some participants have found success working with vendors in particular situations. "Most of our IT infrastructure is outsourced to a single vendor, but the relationship's pretty strong," Valuntas said. "We do all software development in house, except for specialized software that is acquired."

Ratz said he would consider buying software for support systems, such as imaging, customer relationship management and investment accounting. But for personal lines, commercial lines, billing and claims--"I just don't see any solutions out there, and we'll re-engineer what we have," he said.

Dealing with vendors and vendor selection caused all of the participants concern. "Talk about not wanting to pick up the phone," Valuntas said.

When it comes to actually choosing a vendor, however, balance sheets and financials are important. "There's a very real possibility the company you're partnering with can have terrific technology, great people, strong staff--and not exist in a year," Eisdorfer said. "You hear about flight to quality in the insurance business, and I believe there's a degree of flight to quality when choosing software vendors, as well."

"I think the financials are very important, but we also want to talk to some customers that are using what they say they can offer," Sellers said. "We also look for smaller companies. We found that dealing with the big companies, you don't get really good service."

"Even for a company our size, if you look at their rates and what the big firms want to do for you, they're price prohibitive in many cases," said Ratz of Harleysville Insurance. "I don't think any of the big firms have come up with great solutions. There's a lot of creativity in this world, but there are also probably 20 of every piece of technology out there. You've got to choose carefully."

Living With a Legacy

Opinions about how to deal with legacy systems--particularly mainframes--differed greatly. "It's really quite remarkable what you can do with a legacy system," Eisdorfer said. Two of Navigators Group's underwriting, claims and accounting systems are client/server applications and one is a legacy system, which the company is re-engineering. "We're leaning toward the .Net strategy at the moment--as opposed to Java--and if anyone can tell me for certain who's going to win this battle, I'd like to hear it," he said. The company plans to first re-engineer the front-end processes, including quoting and issuing, and then see where it goes from there, "We have that as a choice as opposed to finding a whole new solution, and the cost is a fraction of what the new system would be. And, perhaps even more important in the hard market we're in, much less intrusive to the business people."

Valuntas said Penn Treaty is re-engineering its legacy systems and building a new technology infrastructure in Java. Koppenheffer said Penn National is moving off its mainframe into a client/server Web-based environment. "It is difficult for some of the business people," she said. "We need to get past some of the statistical reporting and financial reporting that are major projects that will have to be done in order to complete the new system."

"I threatened to drive down to our computer center and blow up our mainframe," Sellers said. "I'm very anti-mainframe, because they're not nimble, they're hard to change and they're hard to integrate. When you have a mainframe, it's a black box. You feel you have no control over it. We've almost completely shifted to the client/server environment. The business people feel they have more influence and can impact those systems."

At the close of the discussion, the participants agreed that even though they disagreed in some areas, the talk was stimulating. "I've learned a great deal just out of hearing from everybody else," Koppenheffer said.

"Getting out of the office and out of the trees and taking a step back to find out what other people are doing is very valuable," Eisdorfer said. "You start to think about things, perhaps a little bit differently than you do in your own office, and, obviously, talking to other people who are dealing with the exact same issues that you re dealing with is helpful, if not always reassuring."

RELATED ARTICLE: Dennis Sellers

* Position: Vice President, Business Information and Technology

* Company: The Atlantic Mutual Companies

* Headquarters: New York

* Primary Products: Commercial lines, including commercial package, workers' compensation and general liability; personal lines, including private passenger automobile, residential and personal property; and marine.

Scott Eisdorfer

* Position: Senior Vice President and Chief Information Officer

* Company: The Navigators Group Inc.

* Headquarters: New York

* Primary Products: Marine and related lines of business; general liability for contractors; management and professional liability.

Wayne Ratz

* Position: Senior Vice President and Chief Information Officer

* Company: Harleysville Insurance

* Headquarters: Harleysville, Pa.

* Primary Products: Personal lines and commercial lines, focused largely on retailers, building trades, service businesses, wholesalers, property managers and light manufacturing.

Jane Koppenheffer

* Position: Chief Information Officer and Vice President, Information Technology

* Company: Penn National Insurance Headquarters: Harrisburg, Pa.

* Primary Products: Personal lines and commercial lines, including workers' compensation, commercial automobile, fire, general liability, commercial multiple peril and marine.

Christopher Valuntas

* Position: Chief Information Officer and Vice President of Information Technology

* Company: Penn Treaty Network America Insurance

* Headquarters: Allentown, Pa.

* Primary Products: Individual fixed and defined-benefit accident and health insurance policies covering principally long-term care.
COPYRIGHT 2003 A.M. Best Company, Inc.
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Title Annotation:project management in insurance industry
Author:Whitney, Sally
Publication:Best's Review
Geographic Code:1USA
Date:May 1, 2003
Words:3102
Previous Article:Best's rating changes.
Next Article:Playing hard ball: independent agents are taking advantage of the hard market to grow their businesses through referrals, retentions, focused...
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