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Best Practices for Rating and Policy Administration System Replacement

June 18th 2009

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Martin HigginsDirector, Edgewater Technology, Inc.

Todd MeyerSenior Sales Consultant, ISO

Susan DalySales Consultant, AQS

Today’s Speakers

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• About Edgewater

• The Nature of the Beast

• Best Practices Summary

• How AQS can help

• How ISO Rating Service can help

• Final Thoughts

• Q&A

Agenda

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• 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• 300 Employees, 240 Consultants• 600 Clients• Large North American footprint• +2,000 projects completed to date• Publicly traded (NASDAQ: EDGW)

• Insurance Practice• Over 50 clients• Expertise in policy administration, rating, system selection

About Edgewater

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The Nature of the Beast(Why best practices are important)

Best Practices

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53%18%

29%

Challenged

Failed

Successful

Source: Standish Group 2006

Project Resolution Statistics

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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.

Source: WSR Consulting Group, LLC

The Challenges and Failures

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Excerpt from Edgewater Whitepaper

Best Practices Summary

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Project

Inception

System

Selection

Requirement

Definition

Negotiation

Planning

System

Integration

Data

Conversion

Build or

Modify

Deploy

& Maintain

8 Steps to System Implementation

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Do you really need a new system?

• Common motivation for a new system• Speed time to market for new products• Improve efficiency of business processes• Reduce cost of change (ISO updates)• Enhance back-office integration• Rising cost of legacy technology• Improve agent communication and involvement• Expand reporting capabilities

• Commitment & Investment Requirements

• Significant Risk

• What about refacing or repurposing existing systems?

ProjectInception

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• Build support for the initiative internally

• Identify the team• Sponsor and stakeholders

• Define a solid business case • What do you hope to gain?• Expected ROI or cost/benefit• Your Criteria for Success

• Get to know the market• Consider talking to industry experts • Identify potential solutions (Is there a fit out there?)

• Custom Build?

Yes! Now what? ProjectInception

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Selecting a System

•Here be Dragons!• Most treacherous step• Mistake here can doom the initiative

from the onset

•Clearly define the selection criteria

•Define approach schedule and team

•Invest the time to do it right!

System Selection

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Vendor Market 101

•Over 50 rating and administration vendors

•Product Types• Code vs. tool based

• Support for out of the box product definitions

• Best of breed vs. 1-stop-shop

•Delivery Models

•Ongoing Updates

System Selection

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• Is the technology sustainable?

• Is the vendor sustainable?

• Can the system be customized and still get maintenance releases from the vendor?

• Can I customize the system in house?

• What do really get out of the box?• ISO content?• Big part of the TCO

• How will it integrate with my back-end systems?• Favor standard formats like XML

• What do your customers think of you?

Questions to Ask System Selection

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• Business requirements• Consider current and future• Level of detail is very important

• For example, “The system must support OOS endorsements”• Most vendors will meet this requirement• What does that really mean?

• Do you expect automatic rollback and roll-forward?

• How will your back-end systems respond?

• What will the DEC look like?

Selecting a System: Requirements System Selection

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•RFI and/or RFP? •Limited short list

• Based on well-defined requirements

•Scripted demonstrations• Script the demos!

•Proof of concept• Really needed? What risk is being addressed?• Make meaningful and reusable

•Perform the due diligence

Selecting a System: Evaluation System Selection

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Project Management and Planning

•Project Management• Critical as selecting the right vendor• Look for relevant prior experience

• Hire if necessary

•Building the Plan• What lines and states first?• Look for quick wins (low volume,

low customization)• Build on early success• “Don’t eat an elephant in one bite!”

• Conversion and roll-out

Negotiation &Planning

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• Requirements approach depends on product• High functionality OOB → Gap analysis• Low or no functionality OOB → Detailed requirements

• Gap analysis is lowest risk

• Involve the right combination of business users• High Business Knowledge • Progressive Thinkers

• Consider business process reengineering

• Consider cost of modifications• Varies depending on vendor• Code-based or limited content = $$$$• Configuration-based or high content = $

Requirements or Gap Analysis RequirementDefinition

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•Strongly consider a blended approach• If vendor allows it• Institutionalizes knowledge about system early

•Insist on frequent releases• Only reliable way to track progress

•Testing• Early and often• Clearly defined test plans• Plan for broken builds• Include smoke, system, and user

Development/Customization Build orModify

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• With integration, one size does not fit all• Pick the right product to start with

• Consider the following interfaces• Agency upload and download (use a tool)

• Real-time interfaces

• Batch interfaces

• Reporting and business intelligence

• For all but the simplest cases, use a product!• BizTalk, WebSphere Integrator, ESB

• Consider using experts to get you started

System Integration System Integration

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• Is automation required?• Number of policies• True cost of automation (specs, development, testing,

environments, cleanup, etc.)• How cl3an is y0ur d@ta? Exception cases• Consider manual entry if practical

• Use the vendor’s API if possible• Data integration (ETL) is last resort

• What about historical data?• Consider a historical repository

• Consider BI up front

Data Conversion Data Conversion

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• Externally facing or internal only• Internal is better to start with

• Most common strategies• Renewal (lower risk, higher cost)• Big Bang (higher risk, lower cost)

• Consider limited agency rollout

• Automate regulatory updates• Minimize interpretation• Maintenance of ISO content

•3,100 ISO filings in 2006 for commercial/lines•Over 2,200 affect the 9 primary lines

Deployment and Maintenance Deploy & Maintain

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• Select the right product• Out-of-the-box functionality

• Ability to customize without forking

• Integration Friendly

• Build the right Team• Project Management, Partners

• Don’t bite off more than you can chew

• Minimize Risk in all areas• Requirements, Development, Conversion and Rollout

• Consider life after implementation

Best Practices Summary

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How AQS Can Help

Best Practices

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• AQS has 40 customers• Average tenure 16 years

• Stability and experience• Founded in 1979• More than 200 dedicated employees• Average employee tenure – 7+ years• Average insurance experience – 12 years

• Why AQS?• Experts in both insurance and technology• Decision support tools• Streamlined maintenance of ISO updates• Experience delivering and implementing rating & policy system

implementations for small, medium & large Carriers• Multiple implementation options

• Vendor Support (full service)• Self Service• Hybrid (shared)

AQS Overview

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AQS Access

Quote & Policy

Access

ISO Rating

Service

Designer

AccessPolicy

Management

External

Integration

Browser-based UI that is client centric, insures valid policy data entry

Premium calculation engine

- ISO based algorithms

- Extensible architecture

Full policy life cycle management

Toolset used to

Create ISO & Client

Customized Ratebooks

ISO Rating Service

ISO Rating

Service

Generates policy xml for

each issued transaction.

Stages and publishes xml for downstream systems.

AQS Access and ISO Rating Service

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AQS Advantage

Enter Edit

Engine

Rating

Engine

Transaction

Gateway

Document

Generation

ISO Stat

Generation

Policy

ManagementIntegrator

Sophisticated browser-based

UI that ensures valid policy

data entry

Premium calculation engine

- Data-driven algorithms

- Extensible architecture

Document selection, data

capture, and pdf generation.

Support for document

delivery integration options.

ISO Statistical record

coding and generation

Full transactional support.

Maintains policy history.

Policy storage and retrieval.

Generates policy xml for

each issued transaction.

Stages and publishes xml for

downstream systems.

Unattended transaction

processing initiated by

external system.

Advantage Toolset

Rates / Document

Rate & Document

Management Toolset

AQS Advantage: Major Functions

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• XML based integration

• ‘Call-Out’ capability

• Modern .NET architecture for all application components

• Highly configurable

• Preloaded ISO content

• Integrates with ISO Passport data sources

• Performance and Scalability

• Reports – impact analysis, functional specification

• Automated testing tools

AQS Highlights

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AQS Approach

•Best of breed

•Partnerships with functional components for enterprise solutions• Claims

• Billing

• Etc.

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• No duplicate data entry• Support for all policy types/lines of business• Full policy life cycle transaction types• Real-time data validation/error checking• Real-time rate calculations• Easy to use/intuitive navigation• Automatic forms selection/assignment• Automated workflow and referrals• Rating worksheets• Workflow/diary/notes• Customer-centric view (vs. policy-centric)

Benefits for Primary End Users

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• Faster speed to market for new products• Reduced premium leakage• Reduced “adverse selection”• Improved retention of profitable customers• Easier to stay current with ISO• Less costly to maintain content• Web-based for ease of doing business• Automatic “Stat Code” assignment• Best-of-breed product component option

Benefits for Management

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• Single system supports all P/C lines of business

• Tools based• Decision-support tools

• Configurable page design (user interface)

• All changes are automatically documented

• Designer tools

• Ratebook inheritance leverages ISO base content

• Import/export capability (speed, accuracy)

• Ratebook modeling, comparison, and analysis tools

• Functional specification documents

Benefits for Product Specialists

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•Current technologies (.NET, SQL Server, XML)•Highly configurable security model•Proven performance/scalability•Content updates distributed via ISOnet•XML input/output•Integration with downstream systems•Version control (date-driven Ratebooks)•Self-documenting system

Benefits for IT/Systems Personnel

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The ISO Rating Service

Best Practices

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• Maintenance of ISO content • Over 4000 ISO filings last year alone

• Analysis and data entry can be costly

• Expert content from the source

Legacy system maintenance can cost carriers millions of dollars per year!

The Magnitude of the Challenge

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ISO Filings 2005-2008

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How does the ISO Rating Service address this challenge?

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ISO Rating Service

•A single rating solution for multiple ISO programs

•Incorporates ISO-interpreted content

•Content inheritance model allows company-customized rating deviations and state exceptions

•Streamlined delivery of ISO content updates via ISOnet

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Single Rating Solution

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ISO-Interpreted Content

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ISO Rating Service Base

Company-SpecificBase

ISO LOBCountrywide

Company-SpecificLOB Countrywide

ISO LOB State

Company-Specific LOB State

Spans lines of business for company

Spans states for company

Company, LOB-specific state exceptions

ISO Rating Service: Inheritance Methodology

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ISO Rating Service Tools and Information

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Key Benefits

• What does all of this mean for you?• Quick access to ISO-defined content, leveraged to enable faster speed to market for

bringing up new lines, states, and rate plans

• Ability to determine how close your company is with respect to following ISO for loss costs, rules, forms and stat code assignment, allowing your company to remain in compliance and thus reduce exposure to fines

• Use of development tools with a patented inheritance methodology that provide you the ISO-defined content to customize to your needs, resulting in greater accuracy, less redundancy, and reduced costs

• Use of analytical tools to assist with the analysis effort for maintenance going forward, resulting in less time spent preparing for the next release

Powerful Tools Designed with Growth, Quality and Efficiency in Mind!

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Final Thoughts

Best Practices

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• Manage expectations• There will be many bumps in the road

• Play to your strengths

• Be realistic about your weaknesses• Augment if necessary

• Treat vendors as partners• Invest in the relationship• Everybody wants a successful implementation

• White paper available: www.iso.com/edgewater

Final Thoughts

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Any Questions?

Martin HigginsEdgewater Technologymhiggins@edgewater.com(781) 224 9026

Todd MeyerISObmeyer@iso.com(781) 224 9026

Susan DalyAQSsusan.daly@aqssys.com(603) 546 2434