Financial Services Industry Case Study
/ Insurance Firm Speeds Time-to-Market
60 Percent with Better Policy Administration
Overview
Country or Region:United States
Industry:Insurance
Customer Profile
Founded in 1904, Sentry Insurance and its subsidiaries provide property and casualty insurance, life insurance, annuities, and retirement programs for businesses and individuals. Sentry employs 4,500 people.
Business Situation
Sentry wanted to replace three mainframe systems that supported its life insurance business with a single policy administration solution built on flexible, extensible, and cost-effective technologies.
Solution
Sentry modernized its policy administration with EXL LifePRO from EXL Service, an administration platform that runs Windows Server 2008 and Microsoft SQL Server 2008 and interoperates with Microsoft Office programs.
Benefits
- Improved business agility
- Reduced operating costs
- Improved access to data
- Better customer service
Fred Schroeckenthaler, IT Director, Life & Health, Sentry Insurance
Sentry Insurance, a mutual insurance company in Stevens Point, Wisconsin, wanted to consolidate three mainframe life insurance policy administration systems on a single solution running on up-to-date technologies. Sentry deployed EXL LifePRO from EXL Service, an administration platform that is built on the Microsoft .NET Framework software and runs on Windows Server 2008 and Microsoft SQL Server 2008. The solution enabled Sentry to retire the three mainframe systems and save approximately U.S.$450,000 in IT costs annually. Now that business users and actuaries use EXL LifePRO to build new offerings without IT involvement, Sentry improved speed-to-market by 60 percent and saved an average of $60,000 in development costs per product, helping the company meet market demands.
Situation
Sentry Insurance is a major insurance company in the United States. Founded in 1904, Sentry and its subsidiaries provide property and casualty insurance, life insurance, annuities, and retirement programs for businesses and individuals throughout the United States. With assets of U.S.$11 billion and a policyholder surplus of more than $3.3 billion, as of December 31, 2010, Sentry Insurance is rated A+ by A.M. Best, the industry's leading rating authority. More than 1.1 million policyholders put their trust in Sentry.
Outdated Mainframe Systems
Sentry has approximately 80,000 life insurance policies in place. Until recently, the company relied on three aging mainframe systems to administer all its life insurance lines of business: universal life, variable annuities, and traditional life insurance. These life insurance policy systems were written in a combination of COBOL, Assembler (BAL), and Telon programming languages. The policy level date was stored in a combination of DL/1 and DB2 databases and VSAM (virtual storage access method) files.
“We were running our mission-critical life insurance lines of business on technology that was more than 30 years old,” says Fred Schroeckenthaler, IT Director, Life & Health, at Sentry Insurance. “The staff members responsible for maintaining these systems were getting close to retirement, and it was becoming increasingly difficult to find new employees who wanted to work with these development languages.”
Slow Time-to-Market
The business ramifications of the outdated IT environment began to put pressure on the IT department to find an alternative. The most pressing issue centered on business agility: It took too long to bring new products to market—on average between nine months and a year—and this delay reduced the company’s ability to stay ahead in a competitive industry.
“To build a traditional life insurance product, with cash values and loans, our actuaries had to test and determine the policy rates using [Microsoft] Excel spreadsheets and then file the product with our domicile state of Wisconsin,” explains Schroeckenthaler. “Then the actuaries would provide the details to our programming staff. We hoped it matched closely to an existing product. We had to go through every line of code, copying the modules that referenced the existing product and updated the modules with new code where we needed new functionality. If a new product matched closely with an existing product, it took the IT staff about 1,000 hours to go through all of the modules, clone them, change the product ID, and perform testing.”
For a product that had significant, or even mildly significant, differences to one that Sentry had already rolled out, it could easily total 2,000 to 2,500 IT hours to provide the new functionality.
Difficulty Extracting Information
Extracting data from the three separate mainframe systems was another issue that impacted the business. Creating new management reports took a large amount of development time. Work had to be completed to extract data from each of the systems and consolidate it into one report.
“Every time management wanted a new report, we had to search for data across three different systems,” says Schroeckenthaler. “So it was very cumbersome and costly for us to provide the appropriate management information to the business. Reporting always involved IT staff.”
Inefficient data access added an additional challenge to complying with state audits, consequently, because Sentry IT staff audits were also time-consuming. “There are insurance industry exams or audits required annually,” says Schroeckenthaler. “Needless to say, it took too much time and effort to provide the requested information back to the state auditors.“
Impact on Customer Service
Poor access to information also affected customer service. To answer customer queries on the phone, Sentry staff had to search for information in all three systems. “If the customer asked for a change impacting the price of the policy, we needed to get back to them the next day because calculating the price for a change was done in an overnight batch process,” explains Schroeckenthaler. “We didn’t like having customers waiting that long for information about their policies.”
In an effort to solve these issues, Sentry decided to modernize its policy administration platform. This meant looking for a new solution to replace the three mainframe systems. Sentry IT staff wanted a server-based solution built using either the Microsoft .NET Framework or the Java platform.
“We had been talking about reducing the maintenance and support costs for these systems for quite a few years,” says Schroeckenthaler. “However, the project was daunting: It’s a huge challenge for insurance companies to migrate their lines of business off mainframe systems that they have been using for decades. We needed to find the right solution built on the right technology. We also needed a vendor with experience administering a variety of different product lines to help us make this transition.”
Solution
Sentry Insurance chose a solution by EXL Service called EXL LifePRO for its superior functionality and because the policy administration platform runs on the Windows Server operating system and Microsoft SQL Server data management software and is built on the Microsoft .NET Framework. EXL LifePRO uses Windows Presentation Foundation, which is included in the Microsoft .NET Framework and is a unified programming model for building Windows client applications with engaging user interfaces. On the client, EXL LifePRO interoperates with the Windows 7 operating system and Microsoft Office programs.
“A Microsoft-based solution is so easy to use,” says Schroeckenthaler. “Everybody at Sentry is familiar with Microsoft Word and Microsoft Excel. And in the IT shop, we have experience in developing Microsoft .NET applications. And with SQL Server, it’s just so incredibly easy to get at the data and to put it into people’s hands for manipulation and analysis.”
Sentry was also impressed with the features and functionality of EXL LifePRO, which offers ease of integration throughout the enterprise. Access to EXL LifePRO business logic is enabled through a suite of .NET application programming interfaces (APIs). Sentry IT staff have used the APIs to build additional applications that extend the functionality of EXL LifePRO—another reason why the company chose a solution based on Microsoft technologies.
“We write a lot of applications for SQL Server based on the .NET Framework, so LifePRO was a good fit in our environment,” says Schroeckenthaler. “We liked the idea of building applications on top of LifePRO to extract data out of the SQL Server database and present it on web pages or in reports.
“We needed a vendor that had experience administering a variety of product lines and who could provide us with a solution that could handle the complex regulations around our universal life and security-based products,” continues Schroeckenthaler. “EXL brought all those strengths to the table.”
A Phased Deployment
Beginning in 2006, EXL began working with Sentry to migrate its life insurance policy administration systems from the mainframes to EXL LifePRO, at that time running on the Windows Server 2003 operating system and Microsoft SQL Server 2005 data management software. EXL performed a gap analysis and discussed modifications to the system to ensure that Sentry gained a solution that would fully meet its needs for all products. Sentry planned a phased deployment, starting with migrating its traditional life products to EXL LifePRO. In June 2008, it went live with its variable annuities line of business on EXL LifePRO. Sentry successfully completed an additional five policy conversions with the last one being completed in September 2010. Each conversion consisted of a group of similar products that made business sense to convert as a block of policies.
“For each phase of the conversion project, we mapped the mainframe data to EXL LifePRO, and Sentry used EXL LifePRO tools to interact with SQL Server to import the data,” explains Ed Brown, Vice President at EXL. “The financial information, the policy information, and the claims associated with those policies needed to be converted. Also, the agents who sell Sentry products in the marketplace have to have information in their systems that tie into EXL LifePRO, so Sentry can pay them their commissions.”
Building Additional Applications
Sentry is taking advantage of the APIs that come with EXL LifePRO to build Windows applications that extend the value of EXL LifePRO for the company. To date, the IT staff has developed approximately 50 Microsoft Visual Basic .NET 2010 programs that run in conjunction with EXL LifePRO. Many of these programs were developed to interface data to downstream systems and give access to information on life policies to people who do not have access to the EXL LifePRO system.
“We interface premiums, losses, and commissions to the corporate general ledger system,” says Schroeckenthaler. “We also created web pages to provide real-time information to agents on the status of their life applications and sales statistics. Before implementing LifePRO, this information was printed on reports and mailed to the agents on a monthly basis.”
Another application written in Visual Basic is a new underwriting workflow system. “We’re pulling a lot of information out of LifePRO and using it to track the underwriting process and make sure it gets completed,” explains Schroeckenthaler. “The new application stores all of the information associated with underwriting a life policy electronically, so we no longer require paper file folders.”
Today, approximately 90 Sentry employees use EXL LifePRO daily. “Over the years, EXL’s highly knowledgeable technical and business consultants were essential members of Sentry’s dedicated project team,” says Schroeckenthaler. “They provided us a tremendous amount of help to implement the LifePRO system. We are looking forward to working with them again to help us upgrade to the latest version of LifePRO, version 16, in 2012.”
Benefits
After deploying EXL LifePRO, a flexible policy administrative solution built on Microsoft technologies, Sentry Insurance consolidated its three life insurance policy administration systems onto a single client/server solution. Today, Sentry is a more agile business, bringing new products to market more quickly than ever before. Its modern policy administration IT infrastructure has significantly reduced operating costs and enabled staff to provide better customer service. Today, Sentry employees can work more productively and make better decisions with easy access to business data.
“With LifePRO, we consolidate all our life insurance products on a single solution built on Microsoft technologies and save approximately $450,000 a year in IT expenses,” says Schroeckenthaler. “Along with reducing operating expenses, we can implement new products faster and provide better customer services to both internal business people and external policyholders.”
Improved Business Agility
Instead of taking up to a year to write code and build new products on the mainframe systems, Sentry actuaries and product groups are using EXL LifePRO’s flexible product rules engine to build new offerings with virtually no IT involvement. And because Sentry developers are already familiar with SQL Server, they have built a separate database for the actuaries to test the new product and fine-tune rates and product pricing directly in EXL LifePRO. Compared to the previous method, this saves the actuaries the trouble of explaining to IT what they want and then working through months of testing to verify that IT built the product correctly.
“Today, product development is back in the hands of the actuaries and product managers,” says Schroeckenthaler. “IT may update some of the points of integration with other systems or add a new product code to a set of SQL Server tables that control reporting interfaces, but that’s about it. What would have taken us 15 months in the past to deploy and get ready to sell, we can now bring to market in six.”
Also, Sentry is a more nimble company with regard to developing internal applications that build on the benefits of the EXL LifePRO solution to address a number of business needs. This is a direct result of the extensible Microsoft technologies upon which EXL LifePRO is built.
“It would have been cost prohibitive to build some of these new .NET Framework–based applications on the mainframes,” says Schroeckenthaler. “One of the biggest driving forces for the migration was to eliminate inflexible, outdated technologies. The LifePRO product offers a Microsoft development environment that we are familiar with. It did not take us long to train new staff on this product.”
Reduced Operating Costs
Since retiring its mainframes, Sentry is saving money on a number of fronts, including IT costs, labor costs, and product development costs. “We need fewer people to maintain LifePRO compared to the three mainframe systems, saving us $300,000 annually,” says Schroeckenthaler. “We are saving an additional $150,000 annually through the reduction in CPU utilization costs allocated to the life insurance systems.”
Improved Access to Data, Business Insight
Because Sentry has consolidated three life insurance policy administration systems into one, the number of integration points between other Sentry enterprise systems/reports and EXL LifePRO is reduced by a third.
“It’s extremely easy to get data out of the LifePRO system. The best thing is we only have to build one connection point to LifePRO instead of the three that we had to build in the past, one for each mainframe system,” says Schroeckenthaler.
Because of the interoperability between EXL LifePRO and Excel spreadsheet software, business users and executives have self-service access to data for better visibility into different lines of business. They never had this opportunity before because mainframe data extraction utilities were inflexible; if a business employee wanted a change in the report criteria, IT had to make the change.
“Today business users can use LifePRO’s extensive predefined queries to extract data into Excel for trending analysis. The actuaries can extract data related to a specific product, a specific line of business, or a specific status such as all the terminated policies within the last five years,” explains Schroeckenthaler.
Better Customer Service
Sentry customer service representatives no longer have to tell the customers to wait until the next day to get an accurate quote for a policy change. The EXL LifePRO system provides an accurate quote in real-time, so the customer service representative can respond back to the customer on the phone.
“In LifePRO, when you process something, it will reflect that policy change immediately,” says Schroeckenthaler. “There are other capabilities within LifePRO that we haven’t had the chance to deploy, but we are looking at the APIs that would enable customers to provide us with contact information updates directly, or to build a customer service website.”
“Looking back, it seems incredible that Sentry took this step,” concludes Schroeckenthaler. “There were many people who thought we would never get rid of the mainframe systems used to administer the life policies. But with EXL and Microsoft, we made this major transition successfully, and there’s no looking back.”
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