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By JOEL BERG who is a freelance journalist and college professor.

As 20-plus years of records flowed onto a new global-claims system being installed at the Bermuda office of XL Insurance in February 2010, Paul I. Tuhy watched closely.

He was nervous because the system was going live for the first time, and accurately transferring data was a big factor in making sure it was compatible with existing financial and underwriting systems.

"That conversion is a huge, huge thing, and it's got to be flawless," Tuhy said.

When the conversion was done, however, the numbers were off by four cents, Tuhy said. It turned out to be a minor rounding error, he said. XL, over the next 20 months, phased in the new system at its offices around the world, becoming one of the first international carriers to create a single web-based platform for managing claims globally.

The platform replaces a paper-intensive process that hampered XL's ability to move data across borders and time zones. Developed in cooperation with consulting firm Accenture and called XLGlobalClaim, the system also responds to customers, especially multinational firms, seeking improved access to claims data.

"The demand for real-time information, the demand for better analytics, the demand at renewal time--'Am I getting the value out of the claims operation or the claims service that you sold me'--that puts a lot of pressure on the claims administrator," said Michael A. Costonis, managing director of global claims business services in Accenture's Philadelphia office.

XL is the first carrier to adapt Accenture's claims software for global use, Costonis said. Historically, companies have patched their systems where needed rather than overhauling them entirely.

Today, however, many large global insurers and brokers are adopting global claims-management tools, whether a single platform or some variation.

"They're trying to do that by developing consistent processes around the world to use and then trying to create a platform for technology so that the risk manager can go into a website and pull up the information they need as opposed to trying to dial into 50 different platforms," said Elise M. Farnham, president of Atlanta-based Illumine Consulting and a former independent adjuster.

XL didn't operate 50 platforms. But like other global insurers that have grown through mergers and acquisitions, the carrier had more than one. By 2008, XL was operating five major legacy claims systems, Tuhy said. Some were designed to handle claims; others had been programmed on top of underwriting systems. Gathering data to track key performance indicators was largely manual, boosting costs and opening up room for error.

"They weren't paperless; they weren't nearly as robust as the system we bought; and we couldn't adapt any of those to be global," Tuhy said.

Planning for XL's new claims system began in July 2008, with a budget of $86.4 million, a figure that includes the cost of building a connector to future information technology strategic initiatives. Actual costs are conservatively expected to be $76 million.

The challenge was not just technological. It was also cultural. XL fields a claims staff of 375 people in 25 countries, each with its own language, laws and customs. In some cases, staff members were being asked to alter work practices in addition to learning new technologies, Tuhy said.

To manage the challenge, XL opened the design process to its staff, ensuring representation both by nationality and by product line, Tuhy said. "Everybody had a say."

Staff members pointed out nuances ranging from government-required reporting in Italy to product-specific data fields that needed to be incorporated, Tuhy said. "There was some heated debate in the design phase, but at the end of the day you have to take people and put them on these types of projects."

One of the main concerns for XL employees was a decision to make English the system's chief language, Tuhy said. To assuage the concerns, XL allowed staff to create notes in their native languages and then have them electronically translated into English.

Employees also were worried about their customers and the potential for disruption in service, Tuhy said.

The decision to bring employees into the design phase can boost the cost of implementing new technology, said Bob Petrie, president of Origami Risk LLC, a Chicago-based provider of risk management information systems. If the technology investment is significant, cost-conscious companies might be tempted to take a top-down approach.

Giving orders from above also can be faster as well as cheaper, but doing so risks undermining the long-term benefits of whatever new system is being put in place, Petrie said.

"The critical piece for change management is listening to the end-users in each and every country or place that you're going to be making the change," he said. "If you start off by telling people what they're going to do and how great this is, it's considerably more difficult at the end of the day than if you start off by listening."

For XL, another step that eased introduction of the new claims system was the decision to roll it out in phases. The first test was in its Bermuda office, chosen because it was relatively small, already paperless, and handling relatively fewer claims, albeit more severe ones, Tuhy said.

Even with the temporary loss of four cents, the test was a success, Tuhy said. "I was pretty confident going forward. The rest of my concerns were not related to the system. They were related to getting the work flows right and the cultural change."

Business practices, for instance, had to be tweaked to account for a real-world office environment, he said.

Through the remainder of 2010 and into 2011, XL rolled out the system by geography and product line, Tuhy said, with implementation expected to wrap up by Oct. 31. Third-party administrators contracted by XL to handle claims, as well as customers, also will have access to the system.

Benefits for XL include an ability to move work seamlessly around the world based on demand and availability of resources, said Graham Lambourne, head of claims operations for international property and casualty in XL's London office.

"At the press of a button, we can change the claims handler on the system and we can allocate those cases very quickly, so it really does give us flexibility," Lambourne said.

He also expected customers and brokers to benefit from being able to tap into the system and, for example, produce timely and comprehensive loss runs.

"That I see as a real competitive edge in the market," Lambourne said. "There's a huge difference between having one claims system and many types of claims systems cobbled together."

Tuhy expects the system to pay for itself in five to eight years, largely through greater staff efficiency and faster closings. Additional savings will come from lower costs associated with paper files, such as storage.

Not that paper has been totally eliminated. In Spain, for example, regulations require paper files be kept for a specified period of time, said Accenture's Costonis. But the chief objective is not to wring out paper, he said. It's to use data for making better decisions.

Language, meanwhile, proved less of a barrier than expected, Tuhy said. Claims staff around the world has been comfortable operating in English. And the carrier took steps to minimize customer disruption.

Enhanced security is an added benefit of a global-claims platform, said Bob Morrell, CEO of Riskonnect, a risk management technology vendor in Marietta, Ga. A web-based system can replace the need to email spreadsheets all over the world. And information technology staff won't have to worry about data stored on laptops that could be stolen.

The advantages of a single system or consolidated approach for claims is not lost on other carriers with business worldwide.

"Today, that is like the point of entry; that is like the baseline of what is required if you are a global buyer of insurance," said Kathleen Ellis, a senior vice president and global manager with Chubb Multinational Solutions, a unit of Chubb Group of Insurance Companies in Warren, N.J. Chubb has a single worldwide claims system.

Brokers also see the benefits. Marsh, for example, is in the midst of unifying its claims systems, said David Pigot, the brokerage firm's global head of claims.

"We have huge amounts of information that flows through our systems," said Pigot, who is based in London. "And pulling all that together is a powerful tool."

October 1, 2011

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