August 03, 2012

Starr Companies is an insurance organization on the fast track. The New York-based P&C insurer has an ambitious plan to expand into new markets — while expanding its product lines at the same time.


Optimizing the New Outsourcing Model.
As the role that technology and the IT organization play in the insurance enterprise becomes increasingly strategic and influenced by consumerization, the traditional value of outsourcing as a cost-saver is being expanded. Meanwhile, new outsourcing opportunities are emerging around cloud and web-based initiatives, mobility, real-time interactive customer service, and data management. What is the new thinking in insurance about outsourcing and what are the new opportunities - and risks - in the current hyper-connected global financial services environment?

With specialty lines that include aviation and aerospace, marine, professional liability, accident and health, and political risk, Starr Companies ($2.4 billion in gross premiums written) has been growing rapidly over the past several years, building domestic operations in the U.S. and ramping up to expand into Latin America and Asia. In addition to setting up shop within these new marketplaces, Starr Companies also is adding new product lines to its offerings, the latest of which is workers’ compensation.

“Workers’ comp is a very highly regulated environment and insurers need to have sufficient staff to handle the reporting requirements before they can write one dollar of business,” says Starr Companies CIO Mike Toran. “But we wanted to avoid recruiting additional staff, if possible, while still meeting regulatory requirements.”

Buy/Build/Lease Mind-Set

The carrier’s aggressive and ambitious expansion in multiple areas drove Starr to consider outsourcing, primarily to help speed its products to market while ensuring regulatory compliance, to hold down costs, and also to avoid expanding head count as it grew. Starr Companies recognized that partnering with service providers to help it deploy its workers’ comp offering could also support its domestic development activities and help the insurer reach into new markets better than it could on its own.

Starr’s IT group has typically taken a buy/build/lease view of the world, says Toran, and has remained open-minded in its approach to handling staff functions as it builds out solutions and infrastructure. In September 2011, Starr Companies’ IT team modeled the staffing issue internally and arrived at a minimum staffing requirement, and then compared both the benefits and the drawbacks of either going with a business process outsourcing (BPO) provider or hiring staff and keeping the initiative in-house.

“We modeled that internally and realized the minimum number of staff we’d have to hire to meet that minimum,” says Toran. “When we then compared it to BPO, we realized that although the cost savings were evident on the BPO side, … we would get some efficiencies by bringing in a large outsourcing organization with considerable expertise in this area. The staff-related advantages were huge.” For Starr Companies, the business and IT sides of the company have been in sync when it comes to building the business. “For the most part, we took an objective view of the potential capabilities of an outsourcer versus doing it internally, and at the likely price points,” Toran notes. “The numbers drove the decision.”

Toran looked at applications themselves versus the BPO operations and narrowed the choice to five vendors that appeared to have the best quoting systems for Starr Companies’ users. However, many didn’t offer a cloud-based option, which narrowed the field further. Ultimately, Starr Companies selected CSC’s software-as-a-service Workers’ Comp system. CSC hosts the solution for the insurer, which also uses CSC’s BPO services for its regulatory reporting and statutory filing.

Toran says there were several factors driving the decision to go with CSC. First, “CSC has the depth of industry experience and there’s good bench strength there, besides the product itself being very good. They run themselves more like an insurance enterprise than a technology company. And while the other service providers offered very good technology, CSC was the only firm that came to the table with the BPO. For something like workers’ comp, we felt this was very important,” Toran explains.

Rapid Deployment

Starr Companies was up and running with its workers’ comp offering, supported by CSC’s hosted solution, within three months of signing the contract in September 2011. Its first piece of business was quoted in mid-December of that year — an extremely rapid turnaround, according to Toran, who says there were no bumps in the road, just benefits.

“The hosted solution is working for us,” he says. “Workers’ comp requires talking to different states, assorted file feeds, data integrations and EDI. If you host that internally, that’s a lot of overhead for your internal IT area to manage. So for that line of business, a cloud model was very appealing.”

[Insurers See Clouds on the Horizon.]

Starr Companies’ business plans were predicated on having the ability to offer workers’ comp. “There are some markets where we don’t write comp as a stand-alone, we write it as a companion,” Toran explains. “Right now, we are writing what we budgeted, and we are able to write some of those other lines and watch those lines hit their numbers.

“We sometimes joke that we have reservations about an outsourcer living up to its PowerPoint presentation,” Toran adds. “CSC has been coming through for us with its insurance company mind-set and then on its BPO — and that’s what sold us.”