Donegal Insurance’s 7 Keys to Successful Acquisitions

Sanjay Pandey, Donegal Insurance Group

In an environment of increasing mergers and acquisitions, it has become critical that P&C carriers master the art of information technology integration. At Donegal Insurance Group (Marietta, Pa.; more than $600 million in 2011 premium), we have faced that challenge with the addition of four new companies to our processing environment over the last four years, on timelines ranging from six to eighteen months depending on parameters of the integration and resources available. Here are some guidelines we've developed for supporting a successful merger:

1. CLOSE WORKING RELATIONSHIP: The key to success in an integration is to foster a close working relationship between the staff of the newly acquired company (newco) and the Donegal integration team at the outset. This helps ensure cooperation as the project moves forward.

2. CLEAR DEFINITION OF INTEGRATION PARAMETERS: Clarity in the parameters of underwriting and rate rules and guidelines at the onset is critical. Defining these issues is critical to retention and underwriting profit. First having established a close working relationship was essential to getting that done.

3. WELL DEFINED TIMELINE: As you develop your plan, it's very important to clarify to the acquiring company management both the resources required and the duration of the merger. The acquiring company may see this as a project, but newco sees it as a fundamental change to its business. The acquired company needs to know that the acquiring company will devote adequate resources to make the project move, keeping disruption to a minimum.

4. PROJECT MANAGEMENT: As you draft your plan, be sure to keep as many separate teams working in simultaneously as possible. Tie these sub-initiatives together within the plan and as a responsibility within the PMO. For instance, breaking out personal lines, commercial lines, accounting and claims will increase participation in both the acquiring company and newco, creating several benefits as a consequence. These teams each report to their regular line management. They will keep those folks informed and involved with the conversion process. It also enlarges the number of contacts between the acquiring company and newco staff.

5. INFRASTRUCTURE: Merge the two companies' phone and IP networks as early as possible as an aid to the company merger. The ability to use instant chat functions, share documents, share calendars, etc., will improve coordination. Being able to schedule meetings without a lot of back-and-forth traffic is no mean improvement.

6. POLICY CONVERSION: Early definition of the policy conversion efforts (both active and history) is critical to the plan. The conversion needs to be planned and staffed at the same time as the overall project. For conversions of smaller numbers of active policies, building a fully automated conversion may not be worth the resources, but a semi-automated approach may be utilized. It is possible to take an existing interface (such as the AL3 download done for agents) and use a separately produced report from the old system to have staff enter missing items. For larger efforts, the classic mapping/conversion of new and renewal policies works best as staff entry is too time consuming. Converting history should be completed after the rest of the project goes to production — that will avoid doing double entry on the unconverted policies. We allowed six months for late transactions and claims to close before converting the history data.

7. CUSTOMER FOCUS: Make the transition easy for your customers. We have learned to group conversions to all personal or commercial lines within a given state so that the agency staff can work with a single web interface. We also use a consolidated web presence for both our insureds and agents when doing the conversions. While both old and new systems live under the covers, the objective is to make that as transparent to the customer as possible.

[For more of Sanjay Pandey's insights on making regional P&C companies competitive with national carriers, see Donegal Insurance Group Leverages Technology to Attract Insurance Agents.]

Donegal started its first conversion with Peninsula Insurance in 2007. Two years later, we began the conversion of Sheboygan Falls Insurance Company. We followed that with Southern Mutual Insurance Company in 2010, and in 2011, we started the conversion of Michigan Insurance Company. In each of these conversions, we were able to increase integration speed due to the lessons learned on early conversions. While Michigan Insurance was by far the largest conversion taking 15 months, we were able to decrease the time spent by applying the lessons learned, which are represented by the guidelines discussed above.

If there is a single important takeaway from our experience, it is that the upfront decisions and planning have a dramatic effect on the duration of the merger. We’ve learned a great deal over the last four years and look forward to getting the opportunity to do more of integrations.

About the Author: Sanjay Pandey is VP and CIO of Donegal Insurance Group. A transformational leader, Pandey has successfully coordinated several technology-related enhancements that allow Donegal Insurance Group, a regional P&C insurance carrier, to successfully compete with larger companies.