Main Street America's Ron James Talks Modern Policy Administration Technology

During a career spanning more than 30 years -- including senior IT positions at Harleysville Insurance, Zurich, CSC and his own consulting firm -- Ron James has seen the evolution of policy admin systems at close quarters. Since assuming the CIO role at The Main Street America Group in 2009, he has shepherded the rollout of the Jacksonville, Fla.-based P&C carrier's Main Street Station personal and commercial lines systems. James recently spoke with Insurance & Technology about the evolution of policy administration technology and the decisions insurance CIOs face about their future policy admin capabilities.

What benefits do modern, configurable policy admin systems offer insurers?

James: The newer policy administration systems bring real value to the industry by getting close to the customer. In personal lines in particular, a great deal of work can now be done by customer service representatives (CSRs) who are licensed agents. The closer we can get rate, quote and issue [capabilities] at their fingertips, the better off we'll all be in the marketplace.

Customers today have the expectation to get accurate and up-to-date quotes in real time and conclude business quickly, rather than having to wait a couple of weeks, as was normal in the past. The older way meant filling out and processing paper forms, which underwriters would review and then enter the results into the system. The systems we have today leverage highly complex rules processing for rating and underwriting, quickly making sure that selection is done appropriately and that we can give the policyholder or prospect a number that we're willing to stand behind and write the risk.

The market is simply demanding greater product speed to market, and legacy systems are slow and expensive to maintain. The newer systems have a lighter technology burden, allowing actuaries and other product executives to define products and make sure that the proper rules and rates are in place, as opposed to having to bring in a COBOL programmer.

How do the newer systems address changing service expectations on the part of distributors and customers?

James: Service expectations are higher than they have ever been. People want to get their applications processed now. With the point-of-sale capabilities of newer systems, you're able to meet customer and distributor demands for application processing and information or document requests quickly. They also pave the way for extending service out to a variety of mobile platforms.

What considerations do carriers face as they seek to balance the benefits of new technologies with the remaining value in legacy environments?

James: Every CIO faces this dilemma: Do I just take the back-end systems I've had for 20 or 30 years and give them a new look and feel? Do I completely replace the old mainframe architecture? Or do I do some combination of new and old? At Main Street America we're basically building out a new, distributed point-of-sale architecture. The fact is that the advent of multivariate rating has driven the old mainframe, COBOL-based systems to their limits. To rate and underwrite on this basis you need the technology to support perhaps 450 or 500 different risk factors, as opposed to maybe 100 in the past. The problem my peers face is to move from legacy rating to multivariate rating. New policy administration-related products in the marketplace offer rating and underwriting rules engines bundled in or as components that can be integrated, so there are different ways of making it happen.

Is the industry ready for policy admin capabilities delivered via the cloud or other non-traditional alternative delivery methods?

James: The more these solutions demonstrate their value at carrier implementations, the more the market will move in that direction. ... [But] I think it will be a few years before we see this really take off. All other reasons aside, most carriers continue to support their own policy administration system environments because there's not a one-size-fits-all alternative solution. [For more on the viability of alternative IT delivery methods, see page 14.]

What are some of the sourcing considerations that insurers face when pursuing policy administration modernization?

James: We utilize offshore capabilities for a multitude of reasons. Probably the most important one is getting the right experience or expertise with regard to a given policy administration vendor product if we need to scale up for a big implementation and can't afford to hire all the people we would need. After the initiative reaches a steady state, we can scale down and our internal professionals can take over the support issue. We want to make sure that we're teamed up with flexible offshore capabilities, and we use [Bangalore-based] Wipro for a lot of that.

Tell us about the policy administration capabilities that you've rolled out since you became Main Street America's CIO in 2009.

James: When I arrived [in 2008] we were starting to deploy both our commercial system, based on LexisNexis [formerly Insurity], and our personal lines system, based on OneShield Dragon. We have already rolled out the systems to most of our states. We phased our implementations in order to get the states on a new-business basis, get the renewal functionality in, and stabilize both our internal environment and in the marketplace, and then start to move on to legacy policy conversions. That's a big task because when when you shut the legacy systems off, you're moving 20 years of information onto the new platforms.

Over the past 24 to 36 months we have brought these systems out to the marketplace. We are currently engaged in a significant training effort both internally and with our independent agent customers because the systems do operate very differently than the legacy applications.

How can you ensure that you'll continue to adapt the systems according to your distributor customers' needs?

James: We implemented Agency Technology Councils in late 2009 for commercial and personal lines. The Councils are a way for our distribution force's CSRs who use our technology every day to tell us, "Well, this is good; this needs improvement," or whatever their insights happen to be. The Agency Technology Councils met twice in 2010. Each council consists of six producers representing our independent agency distribution force of 1,500, as well as several members of our IT, product and field distribution teams.

The [user interface] is custom-coded, so we have to take care that it meets our customers' needs. There are tradeoffs with the way the thing works architecturally and with what the customer is looking for. So we explain those considerations, and our customers come up with ideas that take those limitations into account.

When do you intend to sunset your legacy systems?

James: We anticipate working through the conversion process during the next 24 months, but of course the business would like it done yesterday. However, it takes time to do it right to preserve the integrity of all your statistical and financial information. Moving customer data from the legacy systems to systems with multivariate rating requires a lot of technology work in order to prevent a dislocation in the marketplace.

What are some of your next steps and longer-term plans for the evolution of policy administration capabilities at Main Street America?

James: The next steps will be building operational data stores and revamping our warehouse systems. The multivariate rating capabilities bear on this -- we need to follow the performance of all the rating factors. In order to understand how they are working in the marketplace, you need to make sure you glean all the information recorded by the systems, and then apply business intelligence to all the statistics that you're compiling. This fuels a continuous improvement process, making sure on an ongoing basis that we're evaluating the data that we gather and that we have the right rates and rules for our customer set.

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