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Reconnecting With Agents

Technology transformation brings Penn National Insurance back to profitability.

Founded in 1919, regional P&C carrier Penn National Insurance (Harrisburg, Pa.; $546.4 million in direct written premium) was in danger of expiring at the end of the 1990s; its then-CEO advocated a merger in which Penn National would not be the surviving entity. He resigned when the board of directors disagreed, and Dennis C. Rowe, a 30-year veteran of the company, was appointed the new CEO.

The carrier reached this dire situation due to "a growth-focused strategy that didn't look at the back-end profitability as carefully as it should have," says Rowe. In order to bring the company back to consistent profitability, Rowe launched a strategy to strengthen partnerships with its independent agent distribution force.

New Executive Team

As part of a new executive team, Rowe appointed a new CIO, Jane Koppenheffer, with whom he proposed a transformation project that would replace legacy policy processing and claims systems and create the company's PennConnect agent portal.

To ensure success, the initiative was approached with an unprecedented partnership between IT and business. In the past, "There had been a feeling of distrust between IT and the operational units; operations was never on the same page as far as what the projects were, who had ownership and who initiated them," Rowe explains. Also, IT traditionally had been charged with developing cost/benefit analysis and presenting it to the operating units, Rowe explains. "We flip-flopped that and put the onus on the operating units."

The project officially started in January 2000, and by August of that year had produced its first deliverable, the Penn-Connect agent Web site, complete with claims inquiry. "We later added billing inquiry and then decided to provide additional information to our policyholders," says Koppenheffer. "We created a site for them called the Online Insurance Center, which went live in June 2001."

In July 2001, the carrier implemented an Advanced Solutions (Conyers, Ga.) Image-Right imaging system for claims, followed by an implementation for commercial lines in July 2002. A new Allenbrook (Brunswick, Maine) Phoenix policy processing system went live in April 2002, and a new claims system was built on a Fiserv (Orange, Calif.) workstation solution, which went into pilot in September 2003. The carrier also implemented new PeopleSoft (Pleasanton, Calif.) financial and accounts payable systems, which were live by January 2004. "We're also undertaking a new HR and payroll system using Lawson Software's [Saint Paul] product," Koppenheffer says.

Penn National's business and IT units collaborated to create a profitability model that generates reports showing the four-year profitability of each agent. As a result, about 25 percent of the carrier's agencies - which produced only about $20 million in premium, less than 4 percent of the company's total - were terminated, according to Koppenheffer.

Stellar Results

In the wake of the technology transformation, Penn National has posted stellar results. From 1998 to 2003, the company's total revenues grew from $408 million to $546.4 million; net income skyrocketed from $1.6 million to $35 million; and the combined ratio after dividends dropped from 113.9 to 101.4, outperforming the industry every year other than 1999.

The biggest factor in that success is technology-driven agent partnership gains, according to Rowe. "The delivery of those products and services is so embedded in the technology today that if it's not up and running and working, it doesn't matter how well you're priced or how good the products are, you're not going to get high marks from your agents," he says.

Dennis Rowe, CEO, Penn National Insurance

MANAGEMENT PHILOSOPHY: "I'm a firm believer in taking delegation all the way; pick the right people, get your staff in place and let them do their jobs without interference. I think that's at the root of our success."

LAST BOOK READ: The Da Vinci Code,by Dan Brown.

HOBBIES/PASTIMES: A sports fan in general, Rowe likes to play golf and spend time with his four grandchildren.

AFFILIATIONS: Rowe has been an advocate and spokesperson for the Association for Retarded Citizens, United Way and the Art Association of Harrisburg.

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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