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L&A PAS Replacement: Slaying the Hydra
 

L&A PAS Replacement: Slaying the Hydra

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Edgewater Technology's Stacey Cheese, Insurance Practice Director, and Laura Gleason, Principal Consultant, presented best practices for identifying, selecting, and implementing a strategic enterprise ...

Edgewater Technology's Stacey Cheese, Insurance Practice Director, and Laura Gleason, Principal Consultant, presented best practices for identifying, selecting, and implementing a strategic enterprise PAS plan, including:
* A roadmap for methodically consolidating your policy administration systems
* Accommodations for new product launches and conversion of existing product lines within your PAS framework
* Guidelines for implementation strategies and goal definition

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  • Mike - Over 20 years progressive professional experience; over 17 years in the  information technology field in the areas of data warehousing, business intelligence, strategy development, large, high-performance/high availability data systems. Ms. L.G. is a Principal Consultant with over ten years of experience performing strategic technology consulting and business process reengineering initiatives with specific expertise in the financial services and insurance.   In addition, Ms. L.G. provides risk analysis expertise (in identifying and mitigating potential threats to business continuity and safeguarding critical business and customer data). 
  • Questions at any time; tendency to go quickly through content;
  • Agnostic systems integrator; full service partner; trade show / speaking;
  • European competition; remain front runner; multi-year projects
  • As you’ll see, strategy definition through implementation never forgetting conversion
  • New product versus conversion; “bite off” challenge; what defines success?
  • Both sides believe in their position Message: Truth is inevitably somewhere in the middle Relationship is key
  • Six steps; early identification of data issues – positive (mapping / possible ETL tool) Need to note that these steps are not necessarily serial
  • Thinking through all the pieces – holistically; a critical often short-cut step leading to failure;
  • Define success; don’t jump out of the fishbowl unless you know where the other fish bowl is…
  • Need to meet market forces in a timely manner, coupled with IT cost reduction; whilst engaged, consider critical differentiating additional projects (bottom 4 items)
  • What makes “you” unique (don’t focus on the norm)? Don’t make the common mistakes (conversion, management, single focus)…;
  • Second step is the selection process - CRITICAL
  • Vendor makeup / support May be able to eliminate need for RFI with vendor knowledge (straight to RFP) Criticality of experienced project management throughout all of these steps
  • Step 1: quickest (industry expertise, vendor knowledge) Step 2: where majority of time / effort should be spent
  • Common pitfall – carriers believe they don’t need external assistance in developing an implementation plan Have worked large, multi-year projects but expertise / complexity – it’s not the size of the project, it’s the complexity of the project that will be the downfall
  • Due Diligence - Not just references, use network Criticality of relevant Project Management expertise Talk to the systems integrator that you’re currently working with on the selection – can be a great source of information and should be agnostic Negotiation Define Change process Define Acceptance Criteria Delivery Milestones HAND OVER TO MIKE
  • During the planning and evaluation process, key is identifying the critical business needs / functionality that must be met What capabilities are unique / differentiating capabilities for your organization?
  • When thinking through the system requirements, be sure to consider “desired” process vs. system constraints Might be the case that selected system will drive business reengineering
  • Be sure to capture how the system should support key differentiating capabilities / offerings Always a trade-off for the level of customization you can deploy Find that many vendors try to push the gap analysis (to showcase their strengths) but you will still need full requirements to document the system (fully) - shouldn’t need gap analysis until final 2 (or so) vendors being compared
  • Overarching value of documenting high level business requirements – aligned reference point, overarching context, agreed upon objective of system Specifically allows for measurable testing efforts
  • During the vendor selection / discussions, continued detailed requirements can be gathered Begin with the likely POC area for vendor demo Business reengineering / functional specification capture – to clearly define the specifics of how the system will drive specific processes (to determine if there are any unexpected roadblocks – e.g., inability / significant modifications needed to support key differentiating capabilities
  • During selection process, considerations towards “out of the box” vs. customization – cost / business value
  • If need something specific, consider building it outside the system to prevent complexities in ongoing maintenance Testing - Not an afterthought Use issue tracking, shared if possible Work to ensure ease of upgrades / ongoing vendor support Handoff to Mike F
  • Move to post “Enhance vs. build” section Iceberg analogy – “what you don’t know is what will sink you” 7 – 10 minutes for this section
  • What’s under the water; Without proper planning, data issues can sink your project Direct General – source system analysis (claims) DDNJ – uncovered issue in transaction system Highlight master lists
  • Reiterating Stacey’s message re: early planning on conversion Things you could do to identify issues early: Master List Data Quality Review Planning your conversion approach
  • Bringing it all back together
  • Highlight governance Introduces the importance of management of the conversion process – cleaning the data; enterprise view
  • Unique opportunity Chance to realize more value out of your conversion Significantly improve analytic and reporting capabilities within your organization
  • Importance of a data clearinghouse, role in the conversion and how to leverage HANDOFF TO STACEY
  • Don’t slay the hydra to create the chimera
  • Define an integration architecture and communication protocol up front Reduce maintenance; enterprise wide strategy; product vs. build;
  • Refer to initial strategy and objectives; robust system vs. “quick win”; possible separate reporting project; BI is a secondary benefit
  • Covered many high level topics; each could be their own webinar;
  • Consider life after implementation Can you support it? Blended team Can you keep it current?

L&A PAS Replacement: Slaying the Hydra L&A PAS Replacement: Slaying the Hydra Presentation Transcript

  • Best Practices for Life & Annuities Policy Administration System Replacement “Slaying the Hydra” October 21, 2009
  • Stacey Cheese Director of Insurance Practice, Edgewater Technology, Inc. Laura Gleason Principal Consultant, Edgewater Technology, Inc. Today’s Speakers
  • Agenda
    • About Edgewater
    • Policy Administration System Selections
      • Insurance business environment, challenges, & root causes
      • The nature of the beast
    • Key Steps to Success
    • Final Thoughts
    • Q&A
  • About Edgewater
    • Technology Management Consulting Firm
      • Provide a unique blend of specialty IT services
      • Leverage proven industry expertise in strategy, technology and enterprise performance management
      • Focus on middle and Global 2000 market
    • Stable and Proven
      • Founded in 1992
      • Headquartered in Wakefield, MA
      • 250 Employees, 200 Consultants
      • 700 Clients
      • Large North American Footprint
      • +2,200 Projects Completed to Date
      • Publicly Traded (NASDAQ: EDGW)
    • Insurance Practice
      • Over 50 clients
      • Expertise in policy administration, system selection, implementations
  • Edgewater’s Policy System Selection and Replacement Expertise
    • System Replacement Experience
      • Familiarity with vendors in the space
      • Vendor selections
      • System integration
      • Custom build / customization
    • Related Projects
      • Policy system implementation, forms generation, data conversion, Business Intelligence and data warehousing
    • Supporting Services
      • Project / Program management
      • Requirements and gap analysis
      • Testing: manual and automated
      • Project triage / rescue
  • 2009 Insurance Industry Trends
    • Insurance Internet Commerce
      • Insurance and Web 2.0
      • Portals – external and internal
      • Analytics
    • PAS – Replacement / Integration / Implementation
      • Best practices
      • Keys for success
    • Legacy Modernization and Integration
    • Document Services
      • Straight through processing
      • Automation and increased customer service
    • Enterprise Information Management (EIM)
      • Data warehousing / Business intelligence
      • Data readiness assessment – the path to data empowerment
  • Insurance Business Environment & Challenge
    • Many insurance companies run multiple admin systems
    • Frequent limitations on user reporting capabilities
      • Limited out-of-the-box system reporting capabilities
      • No direct access to data
      • Inaccurate data
    • To remain competitive, carriers must:
      • Increase automation to improve discipline and efficiency, reduce error rates and minimize leakage
      • Provide flexible, secure, easy access for agents, employers and consumers
      • Offer key reporting and BI capabilities both internally and externally
      • Achieve seamless integration with existing systems
      • Speed the time to market for new insurance products and riders
  • Project Statistics – The Numbers Game
    • As of 2007, 64% of North American insurance firms were planning or implementing PAS consolidations
    • Key Drivers:
      • Compliance requirements
      • Speed time to market
      • Business unit productivity
      • IT cost reduction
      • Web Enablement
    • Key Issues:
      • Platform functionality
      • Discrete product lines
      • Group vs. individual
      • Integrated application upgrades
        • (Claims, Commissions, Billing etc)
      • Conversion Jail
    Source: Accenture
  • The Nature of the Beast (Why best practices are important) Policy Administration System Selection and Replacement
  • Common Policy Replacement Roadblocks / Pitfalls
    • New policy administration system typically deployed for a new product offering, without strategic focus
      • Drives new system addition vs. consolidation
    • Conversion of multiple lines of business onto one strategic platform is rarely considered as a leading priority during the system implementation
      • Difficulty of integrating disparate LOBs supported by disparate technologies should not be minimized
    • Short term wins vs. long term gains
      • Launch of a simple, new product may not uncover the underlying system frailties
    • Successful Project Resolution – Statistics
    Source: Standish Group 2006
  • Project Statistics – The Challenges and Failures Source: WSR Consulting Group, LLC He Said… She Said… System doesn’t work; not what we needed. You changed your minds; You don’t know what you want or need. You delivered limited functionality. You continually changed project scope. The system failed in the field and in production. You didn’t perform the required “business process reengineering” to make it work. Your software, services, and expertise were oversold. You conducted your reference checks and due diligence. What didn’t you know? No one can use system! Poor training. “ Required staff” never came to primary training or refresher training. The system is “fundamentally flawed.” We only need 2 more months to test/fix issues. You never told us that! You gave poor advice! You didn’t follow our recommendations; you changed/delayed making key decisions. The system is full of bugs! Bad data conversion/poor interfaces caused the problems. Systems always have bugs! You baited, then switched! You provided unqualified, unstable, uncommitted staff, project manager(s), steering committee. No, you baited, then switched! You provided unqualified, unstable, uncommitted staff, project manager(s), steering committee.
    • Key Steps to Successful System Implementation
    Driving a Successful Policy Replacement Solution Strategic Definition System Selection & Negotiation Planning Enhance vs. Build Requirement Definition Data Conversion System Integration, Deployment, Maintenance
  • Strategic Definition Planning picture
  • Strategic Definition – Planning
    • What are the End Goals?
      • Administrative consolidation
      • Strategic platform for new products
      • Administration replacement
      • Consolidate interfaces into one robust solution
  • Strategic Definition – Business Objectives
    • Common motivation for a new system:
      • Reduce time to market for new products
      • Improve efficiency of business processes
      • Reduce cost of change (regulatory updates, new riders, rates)
      • Consolidate to reduce operational overhead and complexity
      • Enhance back-office integration
      • Manage rising cost of legacy technology
      • Improve agent communication and involvement
      • Expand reporting capabilities
    • Consider other initiatives
      • Centralized data environment
      • BI Strategy
      • Agency integration
      • Re-facing or re-purposing existing systems
  • Strategic Definition – Planning the Approach
    • Where is your competitive advantage?
      • Focus on strengths and weaknesses
    • Start with a new product release or the conversion of an existing product?
      • Complex product initiative vs. Quick win release
    • Respect conversion
      • Poor data quality and lack of forethought are common reasons for failure
      • Plan on early, iterative execution
    • Obtain executive support
      • Identify clear, concise, defendable, & executable business case
      • Validate business vision with key senior management
      • Articulate expected ROI or cost / benefit
  • Start broad, reduce rapidly – focused search System Selection & Negotiation Planning
  • System Selection – Package Selection Vision & Approach
    • Gather & document business & technical requirements
      • Including key functional areas and technical considerations
    • Identify viable vendor options
      • System Types
        • Code vs. tool based
        • Technology platform
        • Support for out of the box product definitions
        • Best of breed vs. 1-stop-shop
      • Various delivery and support / maintenance models
      • Identify vendor “Long List,” reduce to vendor “Short List”
    • Issue requirements (RFI / RFP) to vendor short list and score results
      • Develop scripted demonstrations for apples to apples comparison
      • Qualify Vendor Options and Scoring Criteria
    • Select enterprise / best of breed system
  • System Selection – Exclusion Methodology STEP 1: Vendor selection process begins with a “long list” of over twenty vendors. Based on the first high-level analysis, a long list is reduced to the short list using specific requirements as a filter. STEP 2: Edgewater and the client project team review the vendor “short list” and identifies vendors that could provide the best fit. These vendors are invited to the RFI process. LONG LIST Qualified Vendor SHORT LIST FINALISTS Qualified Vendor Qualified Vendor Qualified Vendor Qualified Vendor Final Final STEP 3: Based on v endor demonstrations, vendor analysis and RFI responses, the best solution is selected. Selection VENDOR VENDOR VENDOR VENDOR VENDOR VENDOR VENDOR VENDOR VENDOR VENDOR VENDOR VENDOR
  • System Selection – Implementation Planning Steps
    • Develop timelines & milestones for vendor implementation
      • Supporting project plan outlining phasing for POC, detailed requirements, customization, and implementation
    • Determine product migration strategy
      • Existing product migration
      • New product launch
    • Identify approach for external system integration, including recommended phasing strategy
    • Identify potential area for proof of concept (POC) focus
      • Make meaningful and reusable
    • Outline key data conversion considerations, decision points, and milestones
  • Negotiation Planning – Key Vendor Due Diligence Questions
    • Is the vendor financially viable?
    • Is the technology sustainable?
    • What do we really get “out of the box”?
      • e.g., Billing, Commission, Claims, workflow integration, document imaging integration
      • Large part of the TCO
    • Can the system be customized and still get maintenance releases from the vendor?
      • Can the customizations be performed in house?
    • How will it integrate with my back-end systems?
  • Capturing the Critical Business Requirements Requirements Definition
  • Requirements Definition – Selecting a System
    • Capture business requirements for system functionality
      • Consider current and future requirements to draw a distinct line in the sand
      • Level of detail is very important
      • Don’t bound requirements by current system constraints
    • Include reporting requirements
    • Involve the right combination of business users
      • High Business Knowledge
      • Progressive Thinkers
    • Consider potential business process reengineering candidates
  • Requirements Definition – Requirements Analysis
    • Identify unique / differentiating business capabilities that must be supported
      • E.g. “Can the system handle commission splits and commission hierarchies?”
      • These capabilities should be areas of focus in evaluating PAS vendor products
    • Consider cost of modifications
      • Varies depending on vendor
      • Code-based or limited content changes = $$$$
      • Configuration-based or high content changes = $
      • Configuration to be weighed against cost of implementations
    • Evaluate whether gap analysis vs. full requirements is sufficient
      • Gap analysis  shorter duration, not reusable
      • Requirements analysis  longer duration, detailed, specific to organization, reusable
  • Requirements Definition – Business Requirements Value
    • Provides a reference and record of agreement on business process and top-level system functionality that the project delivery must satisfy
    • Provides context of environment (systems, processes and issues) and captures the proposed statements of capabilities needed
    • Allows for testing of discrete business capabilities and clear picture of system capabilities that are not yet working as agreed upon
      • Drives consensus on definition of “complete” requirements
      • Ensures clarity in test planning and design
      • Facilitates focused test execution to ensure requirements are met
  • Requirements Definition – Detailed Requirements Capture
    • During ongoing system selection process, detailed requirements capture should be started
      • Detailed business requirements need to be captured to ensure all critical business capabilities are not overlooked
    • Begin with identify business process / area that is challenging / unique as potential POC candidate
      • Unique business area / business process that system needs to support
    • Once package has been selected and POC is in process, detailed requirements for remainder of system will be run concurrently
    • Detailed requirements provide foundation for supporting system enhancements or build efforts
  • Customize the system? Or build external module? Enhance vs. Build
  • Enhance vs. Build – Customization / Development
    • Strongly consider an approach to enhancing out of the box capabilities and building external modules to obtain key functionality
      • Consideration: whether vendor allows customization
      • Benefit of enhancements: lower cost, institutionalizes knowledge about system early
      • Benefit of builds: specific functionality, eases maintenance updates to core components
    • Benefit of frequent system releases from vendor
      • Reliable method to remain “current” on system features / capabilities
    • System testing
      • “ Early and often”
      • Develop clearly defined test plans
      • Include smoke, system, and user testing
    • Level of customization directly relates to ease of maintenance and system upgrades
  • Ignorance is not bliss Data Conversion
  • Data Conversion – Don’t Ignore the Data
    • Data Conversions can uncover multiple issues that have grown over the years
    INCORRECT MASTER LISTS POOR DATA QUALITY MISCODED FIELDS IN LEGACY SYSTEM SOURCE FIELDS USED FOR MULTIPLE PURPOSES CONFLICTING DATA DEFINITIONS Not addressing these early can severely impact your conversion effort
  • Data Conversion – Data Quality
    • “ Data quality management is one of the greatest challenges of information technology. According to the experts, the cost of poor data quality can reach as high as 15- to 25-percent of operating profit.”
      • - “http://www.tdwi.eu/fortbildung-zertifizierung/onsite/courses/data-quality-fundamentals.html
    Not making data quality an early focal point of your conversion effort significantly increases your potential cost and duration of the conversion
  • Data Conversion – Typical Challenges Typical Data Conversion Challenges Remediation Approach
      • Data duplication
      • Data cleanliness
      • Incomplete data
      • Master data issues (e.g., fields used for multiple meanings)
      • Data collision
      • Conversion Strategy
      • Data Governance
      • Data Quality Focus & Early Identification of DQ Issues
      • Clear Definition of Master Data
      • Flexible Conversion Architecture
    Lessons Learned
      • A comprehensive conversion strategy & centralized governance function is critical for successful conversions
      • Never underestimate the importance of early & continued focus on data quality, especially in the area of master data/lists (ex. Customer, Policy, etc.)
      • Conversions of major operational systems offer unique opportunities to leverage the "clean" data for other purposes (ex. Reporting & Analytics)
  • Data Conversion – Taking Charge of the Data
    • Precision
    • Granularity
    • Accuracy
    • Consistency
    • Completeness
    • Member/Group
    • Product
    • Eligibility
    • Policy
    • Claim
    • Etc
    • Enterprise Definitions
    • Consistent Usage
    • Common KPI’s/Metrics
  • Conversion Approach – Its all about being Prepared Time Spent on Analysis & Planning Your Conversion Will Provide a Return on Investment Many Times Over GOVERNANCE
  • Leveraging Your Replatform Initiative to Provide Improved Reporting & Analytical Capabilities Provides Significant Business Value Data Conversion – Leveraging the Conversion “ Data Clearinghouse” Error Analysis & Reprocessing Data Staging Area Data Distribution Area Extract Grouping #1 Extract Grouping #2 Extract Grouping X Subject Area A Subject Area B Subject Area X Business Data Quality Referential Integrity De - Dup Processing Data Formatting Technical Data Quality Data Cleansing Derived Metrics Processing Data Collision Resolution Business Rule Application Subject Area Processing Standardization Data Cleansing & Transformation Area Error/Reject Staging Error/Reject Remediation Error/Reject Reprocessing Centralized Reporting & Analytics Platform Subject Areas Claims Policies Members Groups Centralized Master & Metadata Standardized Reporting/Analysis Tools New Platform Extract – Transform – Load Processing Old Legacy Platform
  • Leveraging the Conversion
    • The conversion from a legacy platforms offers an unique opportunity as the foundation for improved reporting & analytics through the establishment of a “Data Clearinghouse”:
      • One of the most costly & challenging aspects of establishing a centralized reporting & analytics environment is often the sourcing & cleansing of operational transaction systems
      • The cleansed/transformed data that is required for the new operational processing system can be leveraged for the foundation of a centralized reporting & analytics environment
      • The technology used in the operational system conversion (ex. Informatica) can be leveraged in the creation of the centralized reporting & analytics environment
    • The establishment of a centralized reporting & analytics environment in parallel with an operational system conversion requires an overall data strategy and governance structure encompassing both initiatives. “Retro-fitting” these constructs later increases risk of required remediation.
  • Connecting disparate systems & keeping current System Integration, Deployment, Maintenance
  • System Integration – Technologies
    • With integration, one size does not fit all
      • Pick the right product to start with
    • Understanding disparate architecture
      • Existing legacy platforms
      • Distributed systems
    • Consider the following interfaces
      • Consider using XML / standards such as ACORD for external communications
      • Select technology for interfacing with all of these external or supporting systems
      • Real-time vs. batch interfaces
      • Reporting and business intelligence tools
    • For all but the simplest cases, use a product!
      • BizTalk, WebSphere Integrator, ESB
  • Deployment and Maintenance – Best Practices
    • Deployment Best Practices
      • Is objective to deploy with existing book of business (e..g, existing policies), or release new product to market?
        • Combination of both is ideal
        • Test system on two levels
      • For converted block of business, run new admin system in parallel for period prior to cutover
      • Release with all core interfaces complete (claims, commissions, etc.)
      • Reporting is key – current out of the box PAS reporting, vs. new separate reporting structure
    • Maintenance Best Practices
      • Stay with the vendor – i.e., as the PAS vendor makes changes, make sure you follow on par with releases
      • Key consideration is ability to customize without branching code
  • Final Thoughts Best Practices
  • Final Thoughts
    • Select the right product
      • Out-of-the-box functionality, integration friendly
    • Manage expectations
      • There will be many bumps in the road
    • Build the right Team
      • Project Management, Partners / Vendors
      • Everybody wants a successful implementation
    • Play to your strengths & be realistic about your weaknesses
      • Augment if necessary
    • Minimize risk in all areas
      • Requirements, Development, Conversion and Rollout
  • Thank You for Joining Us
    • Stacey Cheese
      • Director of Insurance Practice
      • [email_address]
      • 813-464-4601
    • Laura Gleason
      • Principal Consultant
      • [email_address]
      • 781-224-9043
    Visit edgewater.com to learn more about our Insurance and EIM practices