Let's say your business strategy demands that you implement a new policy administration system. The current system won't fill the bill because it wasn't architected to take advantage of the Internet and/or modern database systems and/or XML interface. Or you're putting up a new line of business and it makes sense to use a modern platform. Or you want consumers and/or agents to have access through your Web site and that's a stretch with your current technology.
One alternative is to use what someone else has already put together and so take advantage of the vendor's economies of scale. But even with rich configuration options the package may not suit your needs — that is, your business strategy. You could surrender part of your strategy to fit into a package but then what's the point? Or you could contract for custom modifications or do them internally but then you may not be able to take advantage of new releases of the vendor's base system as they come out. You may be stuck out on a limb.
Another alternative is to do it yourself. But how? Do you have the technical talent and can you keep them? What happens if the project gets out of hand and goes on for years without delivering a working system? Should you contract out to a big name consulting firm? Can you afford it? Will they deliver?
Buy a package? Do it yourself? Get something — but not what you want or try to get what you want — but end up fired. It's a problem.
For at least a generation smart technical people have been aware of and trying to offer solutions to the buy/build dilemma - in insurance and other areas. Third and then forth generation languages offered a leg up. Object-oriented programming and add-in modules were another step. Remote Web services - the ability to access data and functionality from a third party promises to obviate the need for some development projects. And modern development environments from Microsoft, IBM, and others can be a big help. But these are all generic approaches and don't provide specific insurance-space leverage.
Another approach - and one we've seen several times in this industry - is for some clever person to point out that it makes no sense to do insurance from-scratch development over and over because we already know a good bit about the problems and solutions. It would make much more sense to create a toolkit that already has these elements available and a configurator that would allow insurance business analysts — not programmers — to supply the specifications. The toolkit would then create the actual software needed to run the applications. The toolkit wouldn't be a software development environment. It would be a policy administration system generation environment — a powerful, insurance specific "wizard" you could use to create custom systems. Then you could have it all — what you want and with little risk. A pretty attractive idea — don't you think?
Of course there are some potential problems and risks with toolsets and we'll look at them below. But first, it's time to introduce Severan and its new toolkit for creating Web-based policy management systems — FocalPoint V2.
Severan, located in Exton (Philadelphia) and Harrisburg, PA, was formed in 2000 by émigrés from Merchants and Business Men's Mutual Insurance Company. Charles Talmadge, Severan CEO had served as CEO of the Merchants company and Bill Gregory, VP of development, had been VP of IT. The remaining Severan staff of ten is populated by carrier and vendor veterans, some with 30 years in the field. Software development itself is done offshore under the direction of Gregory. Severan is privately held.
Severan was founded with the idea in mind of creating a toolset that would make it very easy for carriers to create their own full-function policy administration systems — using business analysts rather than programmer. Its first product FocalPoint V1 was written for the AS/400 marketplace and is in use by three carriers today. Late in 2000 the Severan folks concluded, correctly I think, that the real opportunities lay in the Web world. They took what they'd learned in creating V1, focusing on delivering the same broad functionality, but now with a different approach to both the toolset and how the systems would be delivered to the end user. The new product, FocalPoint V2, is scheduled for release in June.
Severan says its market is P&C carriers with direct written premium below $750m — not because the software wouldn't create appropriate and scalable systems for larger carrier but because large carriers often have large IT staffs with an appetite for doing their own development. The software uses Microsoft's SQL Server or IBM's DB2 and with the load balancing services part of the Web server environment, the applications should be scalable to high policy and user volumes. By the way, Severan isn't in the business of Web hosting but can put carriers in touch with organizations who make that their business.
Because FocalPoint V2 creates Web applications, carriers using it can solve three problems at once: ubiquitous access by carrier staff; agent access; and insured access. Security setting and the ability to have multiple versions of the same on-line form make it possible to serve a number of different constituencies from the same system and configuration base.
One could think of FocalPoint V2 as having two main elements. The first is the Configurator, written in VB and the tool that business analysts use to specify what a system will contain and how it will act. The second is a set of server-side Java code that actually runs the application from conventional Web servers out to user browsers. Based on the specifications analysts have entered, the Configurator creates the application's Java code.
What kind of systems is FocalPoint V2 intended to create? In a word, comprehensive. I'm certainly no expert on Focal Point V2, having spent only a few hours going through the configuration process but I was impressed that Gregory was able to answer in the affirmative virtually every question I raised. The system handles rating, ACORD and policy forms, billing, commission accounting, statistical reporting, ceding reinsurance, claims, access to external data sources, ACORD XML-based interface — and out of sequence endorsements.
To set up a new line of business, one begins by defining relevant elements of the database — that are used later in rating, forms, and other areas. Next one describes the various entities that may participate in the process — the carrier (or carriers), agents, bureaus, reinsurers, and so on. Given these basic definitions, one can go on to lay out the policy itself, including the rating process, forms, and statistical reporting specifications. Then comes claims handling, producer contract definition, reinsurance arrangements, billing plans, and security. Once these specifications are in place, the Configurator can generate the Java code to run the application on the Web server.
Under consideration for a follow-on release of FocalPoint V2 later this year is automated underwriting, imaging, workflow management, and a comprehensive set of line of business templates. That last point is worth more comment. FocalPoint V2 is a toolset — not a finished system. That's part of its virtue — but that means that carriers who use it have to go through an exhaustive specification process and that's not for everyone. In order to give carriers a head start, Severan will create and offer line of business templates that carriers can use as a starting point for their own policy specifications BOP and Commercial Auto templates are ready now. In most cases, that should substantially reduce the time carriers need to spend while still allowing the flexibility that's attractive about the product. And for those carriers who would like to outsource the configuration process altogether — at least for the first go-round or two — Severan is establishing relationships with third party consulting organizations who can supply those services.
What are the downsides? That Severan is a small start up, of course — but it has done something that's very clever — and shouldn't be ignored simply because it's new. A number of the concerns I raised to Gregory, for instance the lack of support for automated underwriting and workflow are already in the development queue. I think the environment needs more sensitivity to the management of the specification process — especially regarding maintenance over time. The system can track specification versions and does have a publish/lock down feature but real management of the ongoing use of the product would at present have to handled outside rather than within the system. In other words, the toolset may be great for defining policy systems but it doesn't pay enough attention to the management and documentation of that ongoing process. After hearing me describe this concern while watching a V2 demo, Gregory got to thinking and now reports he's begun writing specifications for a layer to answer the need.
Any carrier that needs a new, Web-native policy system and is interested in the toolset approach would do well to look into FocalPoint V2 and Severan. You can find them at www.severan.com. By the way, their Web site is minimalist at best and only a placeholder for what I assume they'll want to do with it in the future — but you can find the contact information you need.