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The Same New Erie

Erie is transforming its IT shop to retain its tradition of excellent service, while controlling costs.

Technology transformation will help Erie be more responsive to market needs, says CIO JohnSommerwerck.

Big Shop

COMPANY: Erie Insurance Group, in excess of $3 billion direct written premium and $3 billion policyholder surplus.

LINES OF BUSINESS: Personal and commercial property and casualty insurance, life insurance.

ANNUAL IT SPENDING: $38 million (excluding e-commerce initiatives).

KEY INITIATIVES: E-commerce initiative including replacement of policy management system, implementation of CRM system, with real-time functionality.

IT ARCHITECTURE: Sun Microsystems (Palo Alto, CA) Sun Solaris processing environment; Microsoft (Redmond, WA)-centric software platform, including Outlook/Exchange e-mail system; Cisco (San Jose, CA) Ethernet network; Dell (Round Rock, TX) desktop hardware platform; Computer Associates (Islandia, NY) technology for asset management and software distribution; Mercury Interactive (Sunnyvale, CA) Suite; Docucorp (Dallas) document management system; CGI's (Toronto) Ratabase; HNC's (San Diego) Blaze; DWL's (Toronto) Unifi; SeeBeyond (Monrovia, CA).

TECHNOLOGY PHILOSOPHY: "Our business model is built around people and the service they provide, and technology does nothing more than enable our people to provide the best possible service at the lowest possible cost," says CIO John Sommerwerck.


At the end of the 1990s, Erie Insurance Group had the luxury of knowing exactly what it wanted to be. Founded in 1925, the carrier specialized in personal lines insurance, automobile in particular, with a burgeoning business in commercial lines. Erie's commitment to excellent value and service had earned it a loyal customer base, and the firm wanted to keep it that way. The carrier's CEO Stephen A. Milne (now retired) realized that, paradoxically, in order to continue to be the kind of company it had been, Erie had to undergo some change. If the firm were to continue to keep service up and costs down, it needed to undergo a technological transformation.

To that end, Erie's executive management team brought in John Sommerwerck, formerly of Rochester, NY-based Excellus Health Plans, to be the carrier's CIO in May 2000. "The first thing I was chartered to do was assess where we were and work out a strategic technology plan," he says.

At that time Erie was "what I would call a 1980s IBM mainframe shop," Sommerwerck relates. "There was quite an eclectic combination of technology-and I use the term loosely," he says. Of the firm's 21 branches supporting its independent agent distribution force, only five had PCs, and the rest had 3270 green screens. Many employees only had typewriters. "I would describe us when I got here as a 'big little shop,'" Sommerwerck says, "by which I mean an environment where we were big in what we were doing, but we relied on typical little-shop practices."

To begin to lift the firm out of this state of anachronism, Sommerwerck consulted with the business side regarding its objectives, in order to determine how to proceed in overhauling the entire IT organization. That led to a "five-year integrated road-map" that addressed two key initiatives that the firm defined in the context of an e-commerce initiative, says Sommerwerck. "One was the replacement of our policy processing system with a new online system. The second was the implementation of a customer relationship management platform." That CRM "umbrella" was to be the basis of the user interface for all the carrier's constituents, including agents, employees and—eventually—policyholders.

Infrastructure Upgrade

To accomplish those objectives it was clear Erie's IT infrastructure needed to be upgraded, which led to the identification of four key transformational projects that have recently been completed. First, implement a new network infrastructure; second, deploy a standard desktop; third, implement a standard PC-based e-mail system; and, finally, put in place supporting components for IT asset management and software distribution.

Erie now has a Microsoft-centric platform, Sommerwerck reports. "We run Microsoft Redmond, WA Windows 2000. For an e-mail system Erie uses Outlook/Exchange. The network is a Cisco-based San Jose, CA, fast Ethernet-based solution." Erie uses Computer Associates (Islandia, NY) products for asset management and software distribution, and all employees have Dell (Round Rock, TX) desktop computers running Windows 2000.

With the infrastructure in place, the overhaul of Erie's policy management system and the implementation of the CRM platform could go forward. During the 1990s the firm had rolled out two platforms to its agents. The first, a DOS-based fat-client application called Data Sharing, allowed agents to work on their PCs during the day and synch up information at day's end. The back office would process the data overnight and send the results back in the morning. Later in the decade, the system was upgraded to a Windows-based platform called DS Pro, which ran identically to the original system, apart from the Windows platform.

"We decided that we had to replace those two components so that we can have a real-time policy management system, and provide to our agents and employees a single view of our policyholder," Sommerwerck explains. "Right now I support some seven rating systems, so I have problems with overall maintenance and making sure all the engines come back with the same rate." Also, policy management functionality was siloed by line of business so that there was no way of tracking all the policy relationships the carrier had with any particular customer. The CRM remedy Sommerwerck proposed was "to provide a coordinated interface to all these systems so that we would know about all the relationships, including claims and billing issues, so that when employees or agents were interfacing with the policyholder, we would all have a common coordinated view," he says.

Erie's policy management system will be replaced through a best-of-breed software approach, centered on Toronto-based Castek's policy processing system. To that, Erie has added a Docucorp (Dallas) document management system, CGI's (Toronto) Ratabase product and HNC's (San Diego) Blaze rules engine.

CRM Rollout

Erie selected DWL's (Toronto) Customer and the Unifi product suite. "Those two products together provide us with the front end to our entire user constituency," Sommerwerck remarks.

"We tie it all together with SeeBeyond Monrovia, CA e*Gate Integrator, which is our transformation and routing process management engine," Sommerwerck says. "We will then write adapters to all our existing legacy systems." Among the advantages of this approach, he adds is that "at some point in the future when I'm ready to change my claims management system, I won't have the old-style spaghetti links. I'll be able to simply replace the adapter and the e*Gate integration engine will then make sure that all the new components are integrated appropriately."

Erie is proceeding with a limited first release of its CRM solution, in what Sommerwerck calls a "crawl, walk, run." "The 'crawl' is the summer 2002 rollout of inquiry capability using the DWL product suit, the 'walk' will be the elimination of the need for Data Sharing/DS Pro, and the 'run' starts with the full product suite, using DWL, SeeBeyond, CGI, Blaze and Docucorp.

"We're going to some 15 agencies and about 50 employees, and we're going to prove out the inquiry capabilities, make sure everything is working and that our education and distribution processes are up to snuff," he adds, stressing that with the thin-HTML-client application, the distribution challenge is a different one from in the Data Sharing/DS Pro days. "It's more making sure that as we move into production our new testing procedures"—using Mercury Interactive (Sunnyvale, CA) Suite—"are working so that we're ready for release two," due in the first quarter of 2003.

Today Erie does about a 70/30 ratio of personal/commercial lines business, in 12 states, with auto insurance still a strong component and commercial lines growing rapidly. In many ways Erie is the same company it always was, and the technology initiatives under Sommerwerck's watch are intended to keep it that way.

Just as the old Erie supplied premium service, the new Erie "will be able to continue through a mechanism that will allow us to be more responsive to market needs," he says. As the firm carries its business into new states, and "as we want and need to make changes, we'll have a single place to do it: a single rating engine, a single mechanism to ensure that our folks are as productive as they can be," Sommerwerck continues. "We've done a very good job of providing automation support for our personal lines, and the new policy processing system will give us that same support for our commercial lines," he says.

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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