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P&C System: Modern World, Modern System

Armed Forces Insurance decided it needed to replace its legacy policy administration system to improve efficiency and meet the evolving needs of a diverse personal lines customer base spread over the entire nation.

Early in Leavenworth, Kan.-based Armed Forces Insurance's (AFI, est. 1887; $80 million in premium) history, the company opted not to respond to the changing demands of its military officer customer base. The personal lines P&C carrier's leadership decided that insuring automobiles was too risky, shaping AFI's business for the future. Today, AFI is at another crossroads, and this time its very survival may be at stake, believes COO Del Chisolm, who arrived at AFI three years ago.

Today, the direct seller has a more diverse customer base within its 50-state (and Washington, D.C.) territory, including military officers, noncommissioned officers, enlisted personnel and Department of Defense employees and their families. To handle the complexities of its customers and address consumer service demands, AFI needed to overhaul its legacy mainframe policy administration system, according to Chisolm. The legacy system had seen few upgrades, owing to costs and complexity, resulting in the need for manual processes to compensate for its innate inefficiency, he explains. Various shortcuts that had been taken to improve the system were poorly documented, and data was difficult to access, Chisolm adds.

"We were limited in our ability to respond to market changes and bring competitive products to our changing membership," Chisolm says. "The system was really hurting us - not only from an efficiency standpoint, but also from our ability to grow in the marketplace and respond to members who wanted to do self-service over the Internet." The company had failed at two previous replacement attempts in 1999 and 2002, so AFI engaged Edgewater Technology (Wakefield, Mass.) to conduct an RFP process as well as help with the requirements process and on-going program management, Chisolm says. The carrier received 30 responses and viewed presentations from about a dozen vendors. Based on both cost and capability, Chisolm relates, AFI selected IDP's (Wyncote, Pa.) Acies/one system, which uses the complete Microsoft (Redmond, Wash.) Developer Environment, including SQL 2000, .NET and a suite of processing tools. "We were particularly attracted by the SURE underwriting product that was part of the package," he says.

AFI's contract with IDP is for $7.2 million over five years. The implementation begins with personal auto, claims and several key interfaces, according to Chisolm. Homeowners' insurance will go live by 2008, and dwelling fire and other lines of business by 2010. In addition to Acies/one, AFI plans to replace its general ledger, accounts payable and billing systems, as well as build a data warehouse, he notes. Local vendor Network Integration Services (Lenexa, Kan.) is building the data mart, and Fiserv Insurance Solutions (Cedar Rapids, Iowa) will provide the billing capability, Chisolm relates, adding that the cost of the replacement initiative will reach about $30 million by the time it is completed in 2010.

"It's a significant investment on the front end, but in the long run it will enable us to reduce expenses and improve our efficiencies," Chisolm comments. But ROI will be determined by growth. The carrier will be able to continue to provide its characteristically highly personalized service over the telephone, but now it also will be able to offer the Internet-related services to its members that Chisolm believes are critical to AFI's survival. "The market isn't going to wait for us," he remarks.

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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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