Inside a Claims System Revamp: Q&A With Auto-Owners SVP Bob Buchanan

P&C carrier Auto-Owners Insurance didn't come to its decision to replace its legacy claims system overnight. SVP Bob Buchanan explains how it ended up selecting Guidewire ClaimCenter.

What is the claims processing model at Auto-Owners Insurance?

Buchanan: We write business in 26 states, and we currently have 87 claims branches. Branch and field claim representatives — who primarily handle all lines — manage claims day to day with support and leadership from their local office, their regional office and the home office [corporate headquarters in Lansing]. Our independent agents are important partners as well — they get involved in the claims handling process, especially during the initial first-notice-of-loss (FNOL) stage.

What claims technology and infrastructure does Auto-Owners currently have in place?

Buchanan: We currently have a mix of technologies supporting our claims handling. At the core, we have a Cobol batch/CICS-based system to administer claims. We started building the CICS [customer information control system] in 1992; the batch code has been running since 1947. In all we have 12,142 programs and 77 CICS transactions.

We have web-based FNOL and claims inquiry to make it easy for our agents to participate in the claims-handling process. We began an effort to go paperless a couple of years ago, and we should complete the branch-by-branch conversion from paper to electronic images by the end of this year.

You have said that you didn't set out to replace your claims system simply because it was legacy technology. What prompted Auto-Owners to look for a new platform?

Buchanan: There are four main business reasons that prompted us to take on this initiative: We want to be able to continue enhancing our service by improved automation; we want our claims representatives to take advantage of the advances we see in mobility and tablet computing so they can be better, faster and more efficient in taking care of the customer; we wanted to give our claim representatives the same kinds of tools they are used to in their personal lives — smartphones, tablets, web, etc. — and yet make it as transparent as possible, enabling them to focus on the customer and not the technology; and we wanted to equip our claims associates with tools that enhance our capture of claims information.

In addition, from an IT perspective, we wanted to implement a technology foundation to help increase our agility and improve our time to market for claims system enhancements. We've been No. 1 according to J.D. Power for the auto claims experience four years in a row, but we always need to be looking for ways to get better.

You ultimately selected Guidewire's ClaimCenter, but not until after first embarking on a custom-built system. What happened?

Buchanan: We did go through an assessment of our options and decided a couple of years ago to begin custom building some aspects of claims handling, such as our FNOL for Quick Claims [a proprietary process for evaluating if claims can be handled in 24 hours], and improving our agency inquiry system. We implemented these recently, and they have been received well by our agents.

As we completed the first phases, however, we asked ourselves if we should continue our current approach and begin development of other core claims administration capabilities, such as claims assignment, claim financials and post-settlement activities. We also looked at the demands that would be placed on our IT and business people.

When we evaluated our options, we recognized that claims administration systems available today have come a long way since we first started looking at them — products are more advanced; they are highly configurable and bring a lot of ready-made capabilities for integration. In other words, they have become "platforms" — sort of like toolkits on steroids to develop functionality. At this point we decided that licensing a product made more sense than continuing down our current build path.

What distinguished Guidewire and the ClaimCenter solution in your evaluation of claims platforms?

Buchanan: We brought in a company that specializes in architecture and strategy of enterprise applications and integration focused on the insurance industry. After a thorough review of our various choices, we decided to license Guidewire for our claims administration platform [for auto, home and business lines]. We spent less time on a broad search, and more time on a deeper evaluation to find the best fit. We quickly narrowed our choices from about eight to 10 vendors down to three, and we asked ourselves:

• Is the solution proven? Does the vendor have substantial working installations?

• Does the system have all the configuration and integration capabilities to meet our needs?

• Does the company have strong leadership?

• Is there cultural compatibility?

• Doe the vendor want to add Auto-Owners as a client and make us successful regardless of the number of other clients it has?

• Does the vendor have a philosophy of promoting self-sufficiency in their clients?

While all three of the companies scored well in these areas, Guidewire had a slight advantage.

What is the status of the implementation?

Buchanan: Once we made the selection, we lost no time in getting things off the ground. The project has already started and is well under way. We expect to implement our first lines of business in about 12 to 18 months.

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio