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By Ara Trembly

Like many insurance carriers and the property/casualty industry generally, Boston-based Lexington Insurance Co., is always looking for ways to cut costs and boost productivity through the use of technology.

Lexington didn't have to look far for the model, because Chartis had launched a similar pilot program in February 2009 with its primary property/casualty and workers' comp personnel.

As far as Chartis was concerned, using technology to replace paper-intensive systems was a slam dunk. The real surprise, in fact, was when Chartis learned that establishing a work-from-home protocol for some of its claims personnel is being projected to save $20 million across the Chartis organization over the next five years.

For Lexington, the success that Chartis was having with its new technology experiment was a good omen. If a new technology program could be used at Chartis, which paid an average of $75 million in claims worldwide every business day related to its more than 70 million clients worldwide, then the technology initiative would likely work for Lexington.

Lexington, as the leading U.S.-based surplus lines carrier with more than $5.4 billion in nonadmitted direct premium written in 2009, began considering the work-at-home model for its numerous claims employees.

Many of those employees live in various New England states, and many of Lexington's employees had to travel up to one and a half hours each way to get to their offices, said Jeff Stracher, senior vice president of claims for Lexington.

If the company could find a way to keep their claims workers at home, for at least part of the week, the company could save on real estate expenses and workers could save on commuting costs.

Three years previously, Lexington had already taken the step of creating a virtually paperless claims environment, so having workers do their jobs at home "made sense," Stracher said.

And, of course, Chartis was already under way with its technology program, as were other carriers looking to use the Internet to cut their costs of managing and processing claims.

"We approached it from two fronts -- real estate costs (office space) and disaster recovery," said Charith J. Perera, senior vice president/global head of claims operations for Chartis Global Commercial Insurance.

With office space costs continuing to grow, Chartis had plans about where it wanted to expand or contract.

"From a claims organization perspective, once you write business, claims will sit around for a while," said Perera. "We want to make sure our claims folks are in the right places at the right time."

In terms of disaster recovery, Chartis also considered how a major catastrophe like Hurricane Katrina in 2005 might actually prevent claims personnel from reaching their offices.

In fact, Chartis had two offices in New Orleans when Katrina hit, but because the claims operation was largely paperless, adjusters in other areas of the country were able to pick up the ball and work on the claims.

The needs and challenges gave birth in 2010 to what the company calls "eWork," a project designed to deliver savings, while making the lives of claims adjusters a little less stressful.

Perera said to make the initiative work, Lexington and Chartis information technology personnel looked at a number of software and hardware vendors in a comprehensive vetting process that included in-house trials.

Based on price, reliability and available support, the companies chose Citrix XenApp and XenDesktop, both virtualization applications. They also purchased additional "dumb" terminal systems -- monitors, keyboard and mice -- from Wyse that would be installed in some Lexington claims workers' homes to allow them to access the mainframe systems. Phone software from Avaya completed the picture.

The "dumb" terminals are connected in workers' homes via their own broadband connection, said Perera. "They just turn it on and they get connected to our network," he said. "It's more reliable and money-saving than a desktop personal computer." Perera said the company doesn't have to worry about their remote workers being up to date on software as the network updates the software.

The company also utilizes voice over Internet protocol, or VoIP, to allow calls to the office number to ring at the remote worker's home. "It's all seamless to our customers," he said.

Change does not always come easily, however, and there was some resistance to the idea of working at home, Perera said. "This happened at all levels and across different functions. Even human resources was very hesitant at first until we could prove to them that it helps with talent retention and quality of life."

One objection was that managers were not familiar with how to manage personnel remotely, so eWork included training in this area. Determining who was eligible to work at home was also a challenge, Perera said. But in order to become eligible, workers had to meet certain performance standards within their areas of responsibility.

"When someone begins working at home they are working three days at home and two days at the office," Stracher said. "After 90 days, if they are adjusting well, they work at home four days and at the office one day."

This helps develop a rotation for use of the "hotel cubicles," the dumb terminals located at the office, he said.

Some workers were also concerned about whether they would be required to work at home, but the company did not press the issue for those who would rather not be "cooped up" in their own homes, Perera said.

In addition, some claims workers could not provide a home work space that was acceptable, because other family members would be home. "We require that they have a private, quiet space (no dogs barking).

"Most senior managers were convinced by the financials and they let us try it," he also said. "They weren't used to managing remotely, but once we got through the pilot and they received feedback, they got more comfortable. Even today, though, some are still getting used to it."

While eWork implementation is still in progress, Perera says that by the end of 2012, 45 percent of the claims work force will be working remotely. "AIG, our parent, is now looking at this option for the rest of the organization," he said.

One of the keys to the initial success was a good support team that provided training where needed, he also said. "We have had a very positive response to eWork by the end of it all."

Work-at-home personnel are provided with all the necessary training before they receive their home systems. "We also give them instruction on how to assemble the equipment at home, since they have no tech support there," said Perera. "We give them all the tools they need to set themselves up and be fully functional." Training and experience on the Wyse terminals in the office were provided before equipment was sent to workers' homes.

"The transition was pretty seamless," Stracher said.

Reaping Benefits

As a result of the Lexington eWork rollout, Perera said, "From a company perspective, we anticipate a $20 million cost reduction over the next five years." The savings will come from reduced costs for office space, hardware and software. Remote workers, he also said, can claim a tax deduction for using part of their homes as an office.

In addition, as a near-paperless environment, the company is saving money on the purchase of printers, as well as paper, ink and toner, he said. Lower costs are also anticipated from the ability to reduce the amount of physical space needed for workers and equipment, as well as not having to renew some office leases.

"With eWork, we haven't expanded in any locations, but we haven't had to leave [any cities] because it became cost prohibitive," he said.

"Morale was boosted for those who had a long commute," Stracher said. Productivity has also benefitted, as workers at home on the East Coast were more accessible to do West Coast business after East Coast hours. "It's a testament to the employees that they're taking more initiative with the available time," he said.

"This is also about the claims adjuster as a person; the quality of their life improves significantly, and that comes with being allowed to work from home," Perera said. "It helps them, and it helps us to retain top talent."

"After a bit more than a year, it has been very beneficial," Stracher said. "We may find some individuals who are not suited to the work at home environment. Techs working at home are happy."

Lexington is also extending the eWork program to include managers, and that initiative "seems to be working well," Stracher said.

"Chartis is exploring doing the same thing for our underwriters, finance and accounting and other functions," Perera said. "The only absolute requirement is that you must have a paperless or near paperless environment."

ARA C. TREMBLY is founder of The Tech Consultant and The Rogue Guru Blog. He can be reached at riskletters@lrp.com.

June 1, 2012

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