Outsourcing's Not Growing Older, It's Getting Better
Fixed-Cost Pricing
Another selling point was the fixed-cost licensing arrangement struck with 3i. Along with the flexibility of modifying the system on its own, Hallmark enjoys "the flexibility of a cost model that's not directly tied to the growth of the business," Birdsall says. "Those two things together give us the capability to better estimate our costs and contain them."
In terms of solving its systems challenges, the PREMIA/ISO Rating Service solution, "provides us with basically a brand-new system for a fraction of the price of an entire [purchased vendor solution] that would require interfaces into many other systems," Birdsall says. While a hard go-live date has not been set yet, the solution should be up and running by late this year, he notes. Hallmark expects to see a return on investment within three years. "By the end of five years, we will have saved eight figures," Birdsall adds.
Birdsall reassured his board's confidence in those predictions by thoroughly vetting 3i's capabilities. "They have a pretty robust methodology and are good project managers," he comments. And while 3i's professionals' strong accents sometimes present a communication challenge, they have mastered the language of insurance, according to Birdsall. "When you use the terminology, they know exactly what we have to deal with," he says. "They know the issues, and their system is architected around them."
Dallas-based Unitrin Business Insurance (UBI; $174 million in 2004 gross written premium) faced similar challenges and considered similar options. "It was difficult to maintain our antiquated system to the current expectations of the marketplace—things like Web-enablement, keeping up with form changes and being able to make rapid adjustments to pricing," says Jack Lubner, president, Unitrin Business Insurance. "Because of its complexity, we were finding it difficult to do anything more than basic maintenance."
The multiline commercial P&C carrier considered a vendor-supported out-of-the-box system or a proprietary solution, but found those options costly and beyond the capabilities of its existing IT organization. "We couldn't bring together enough people to build out what had to be done," Lubner explains.
Speed Need
The magnitude of the project was not the only challenge. "What we were looking for was speed to market," Lubner emphasizes. "We needed a fast solution; we needed a solution that wouldn't hit us in our constrained IT resource pool; we needed a solution that was scalable to our evolving business model, which included having increasing numbers of people being able to fully function from remote locations."
UBI began considering an outsourced solution in late 2003 and signed a contract the following spring with long-standing vendor partner CSC (Austin, Texas). The solution, centered on CSC's POINT IN technology, supplied UBI with policy administration, billing and claims systems; statistical reporting; print and mail distribution; and first-level customer support. Another key feature was the implementation of an agent front end, dubbed X-Sell-A-Rate, powered by the vendor's POINT IN Agency link software, which enables agents to perform "once-and-done" transactions over the Internet.
Implementation began in January 2005. By early in the fourth quarter, the system was deployed for all 30 of the states in which UBI does business, and the Web front end was implemented. By early fourth quarter 2006, all policy conversions will be complete.
The Web interface has enabled automation of small account business, cutting processing time by as much as 50 percent for the approximately 2,000 agents who use the site, according to Lubner. That automated underwriting allows UBI's underwriters to concentrate on midsized accounts generally written by a more specialized cadre of agents. The solution enables higher-value allocation of IT as well.
"Today, our IT department isn't maintaining large systems; it's about development of a Web environment, database environments—the kind of collateral systems from which you use exported data from the BPO," Lubner reflects. "Now all I need to have are highly mobile troops—I don't need all the maintenance-oriented pieces."
The overall value of the solution is difficult to calculate, according to Lubner, in part because of the way its efficiencies have reshaped the organization. "We have consolidated from regional offices to a central office; we've downsized—we've reduced support for print and mail, we've reduced agency help desks and billing, because CSC handles all that," Lubner relates. "We're a much leaner, more efficient operation in the outsourced environment."
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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