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4 Ways Insurers Are Taking the Risk Out of Policy Admin Replacement

How can insurance companies mitigate the risk that comes with high-stakes policy administration replacement initiatives? Four insurers reveal their strategies to diminishing risk and optimizing the business impact of new systems.
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Proof and Consequences

Risk Mitigation Strategy: Componentized suite, Greenfield deployment.

Mercury Insurance (La Brea, Calif.; $2.8 billion in annual premium) CIO Allan Lubitz (at right) acknowledges that the company took a somewhat radical approach by implementing Guidewire Software's (San Mateo, Calif.) full InsuranceSuite -- which includes the vendor's PolicyCenter, ClaimCenter and BillingCenter core system components -- rather than beginning with a policy or claims systems alone. Mercury first deployed the vendor's systems in Nevada in 2010, where the insurer had previously not written business. To date Mercury has deployed InsuranceSuite for homeowners insurance in six states and commercial auto in five states.

"By first going into a market where we didn't have an existing presence, we minimized the risk and eliminated the need for a data conversion," comments Lubitz. "We were able to implement all three modules and radically change business processes."

Given the risks historically associated with core insurance system implementations, business people are understandably skeptical, Lubitz suggests. What the successful first rollout proved was that the new technology could improve cycle time, take paper out of processes and create a ubiquitous capability that could be implemented across the enterprise, he says.

"We rolled out for Nevada out of our Austin, Texas, office," Lubitz relates. "It demonstrated in a live environment what was possible: highly efficient and completely paperless operations on a new platform."

Lubitz acknowledges that at the initial demonstration stage, there were some "missing pieces" of functionality that needed to be built out rapidly. However, when the implementation proved successful in Nevada, there was enthusiasm rather than resistance to rolling it out elsewhere.

"To our surprise, the human change management was much easier than expected," Lubitz shares. "We expected an uphill battle, and there was some resistance, but the believers lined up more quickly than we anticipated."

Lubitz credits Agile project methodology as reducing implementation risk, owing to its iterative and collaborative nature. "The combination of Agile and having the appropriate business folks co-located with the IT team enables a give-and-take so there are no surprises at the end," he says. "With waterfall methodology you go into a dark period for months at a time."

Mercury plans to have completed implementation for its existing lines of business and states by the first quarter of 2013, after which the insurer will use the system to launch new lines of business.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio

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