Insurance Networking News - July/August 2009

INDUSTRY PRIORITIES

Keeping up with top-of-mind executive concerns

and IT is being asked to sunset low-value applications, and continue to collapse and virtualize their data center platforms,” she adds.

Chris Masi

Rick Roy

—Blue Cross Blue Shield, Vermont

—CUNA Mutual

tems unification initiative that combined three claims systems, rolled its membership and billing systems into one and put all of its systems on the same software. Yet, like most insurers, the company has been pressured to find even more cost efficiencies, so it established a team of business and IT leaders to evaluate how well IT investments were satisfying business objectives tied to the carrier’s continuous improvement initiatives.

“We’ve had a full plate with IT projects, especially with the adjudication system, slated to finish this year,” says Chris Masi, who, as document management and automation services supervisor, represents the business side. “We already had a CRM system in place, but we were tasked with improving on that while meeting the needs of our member base. Ultimately, the changes we proposed became a business decision.”

That business decision included moving its document management and workflow solution outside of the BCBSVT infrastructure, and forming a contract with Hyland Software, Westlake, Ohio, for its OnBase OnLine hosted solution. BCBSVT already owned the software licenses, so the entire system was migrated to Hyland’s data center. Today, the carrier pays only for the hosting services.

“Using Software-as-a-Service, there is little to no upfront capital investment,” notes Masi, “and although we use the on-demand software largely in the claims area, the images stored in OnBase are used regularly by about 75% of BCBSVT work force. Our OnBase solution is really owned by the business.”

CREATING EFFICIENCIES

Smallwood agrees that reconciling technology to the underlying business need is key to improving the state of the IT budget.

“There was a trend where the business went shopping,” she says. “They saw a solution at a tradeshow and wanted it. But the CEO is aware that this is not always the best approach. The business must articulate the needs, but it’s up to the IT department to provide the most appropriate, reliable technology, and find it at a reasonable price, because ultimately, that’s where accountability for failure lies.”

The pressure CIOs may feel to find a reliable solution at a reasonable price is being abated somewhat by cloud computing, which is quickly becoming a more viable choice for insurers trying to show immediate IT cost savings.

At Tower Hill Insurance Group LLC, Gainesville, Fla., cloud computing is one

of the ways the company is reducing IT spend, but not by necessity. As a result of the mass exodus of insurers following the turmoil related to several P&C catastrophes, Tower Hill has become one of Florida’s largest writers of residential property insurance, and keeping up with the company’s growth has become a “good problem,” according to Brian Elsmore, Tower Hill’s CIO. Elsmore says that for the past two years, the company’s IT budget has been “running flat,” except for one area: a recently expanded storage area network (SAN) that will be used to accommodate growth.

“Hardware turns old quickly,” Elsmore says. “If I had made the decision a couple of years ago to put an infrastructure in place, we wouldn’t need the cloud, but when we do a large project, we’ll push data out there.”

Elsmore predicts the company will spend less on provisioning of disc space as a result.

Transition Partners’ Pettibone cautions that there are kinks related to access, data quality and security to be worked out on cloud computing, but that may be true of other data management issues, such as virtualization and server consolidation, too.

“You get a certain distance with virtualization, but some insurers are running into organizational issues that impede virtualization, so we are called in to do the utility work, but tend to run into politics,” he says. “Consolidating applications sometimes requires software changes, which hits the pocketbook in surprising ways, and instead of cost saving, the insurer may face hidden additional costs.”

SMA’s Smallwood says that, nonetheless, a lot of insurers are being pressured into looking at data infrastructure, collapse and consolidation of their servers.

“In many cases, the install base of maintenance applications is under fire,

NEGOTIATING PRICE

As Tower Hill continues to experience growing pains, the pressure remains to cut costs at every turn. Elsmore reports that the company continues to take advantage of the slowed economy in order to negotiate better pricing for IT-related purchases. With a fleet of 150 outdated BlackBerrys in hand, its mobile carrier quoted $200 each to upgrade.

“We are not normally a big enough company to drive discounts,” he says. “But we found if we upgraded six months earlier, we would spend only $1 each per device.”

In addition to looking at hosted services and better pricing, Tower Hill has taken advantage of market conditions to recruit newly available IT talent. Not surprisingly, however, most insurers are struggling to maintain the headcount they have.

With an eye on keeping the most appropriate talent, CUNA has found other cost efficiencies by leveraging some of the better pricing offered by vendors and partners.

“On the application development side, we’ve worked with our larger vendors not just on rate concessions, but other concessions, such as time, locale, etc., and placing people at their costs to keep the right people engaged,” notes Roy. “We slowed down our hiring, reduced headcount a bit from attrition and we have had to reduce some of the outsourced contractors attached to those projects that were assigned reduced spend.”