Insurance Companies Get Smarter About Project Management

Insurers striving to become smarter project managers should adopt conventional best practices, but they should be flexible in their adaptation of those practices, recommends Rao Tadepalli, CIO of Republic Indemnity, an independent subsidiary of Cincinnati-based Great American Insurance. They also should be open to ideas from other industries, he advises.

Owing to the Encino, Calif.-based PC carrier’s proximity to Hollywood, Tadepalli has been able to take inspiration from television production procedures in the form of a “runner” role. “A runner is someone who does most of the odd jobs,” he explains. “We realized that in large projects, teams tend to act as silos and neglect things that don’t belong neatly within their responsibilities. In order to close the gaps, we applied the runner concept to keep projects on track.”

According to Tadepalli, he first employed an independent consultant to act as a runner during Republic Indemnity’s legacy claims system replacement initiative. In mid- 2009 the carrier finished implementing Guidewire’s ClaimCenter within 18 months and 10 percent under budget. During that initiative, Tadepalli explains, the runner was available for tasks — such as database administration, coding and documentation — for no more than 50 percent of his time; Tadepalli stresses that the runner was as much diplomat as gofer.

“The rest of his time was spent to offer help and mediate,” Tadepalli continues. “He was in a position to hear both sides of a story between teams that might blame a problem on each other. Sometimes these issues are just a matter of constrained resources, and a runner is able to pick up slack. Otherwise the issues get escalated to the project manager level or to me, and there are disputes that divert energy away from project work.”

During the past decade, insurers’ project and program management has matured significantly, and many carriers now have adopted advanced project management offices (PMOs), required at least some of their project managers to be PMI (Project Management Institute) certified and built education programs to groom managers, according to Karen Furtado, a partner with Boston-based research and advisory firm Strategy Meets Action (SMA). While these measures have reduced the incidences of project failure, however, there still is plenty of room for improvement, she says. “We still hear about too many project failures in the insurance industry,” Furtado comments.

The Right Talent for the Job

To improve that record, Furtado recommends that insurers hire experienced project managers, rather than delegating that work to business analysts or technical architects. Combining roles will end up costing insurers in the end, she warns. “Companies need to have a formalized structure and processes for all to follow,” Furtado advises. “The appropriate level of process for each project is key.”

Company growth drove Scottsdale, Ariz.-based Nautilus Insurance ($250 million in 2011 premium) to a higher level of formality in its IT management, including hiring its first CIO, Brad Lontz. The company has an appetite for modern technology, such as its Java-based Fiserv (now StoneRiver) PolicyStar core insurance system, Lontz tells IT. However, as Nautilus has continued to invest in IT, he says, its leadership wanted to answer the question: “Are we getting maximum value for that investment?”

To drive both greater efficiency and transparency into IT resource use, Lontz licensed San Mateo, Calif.-based Clarizen‘s project management software on a software-as-a- service basis. “That allowed us to start small, with minimal investment, and walk away with little trouble if it didn’t work,” he says.

According to Lontz, Nautilus took a focused approach to what he describes as the rich functionality of Clarizen. “Early on we instituted an intake and prioritization process, which addresses how you get the projects from the business team, prioritize and execute them,” he relates.

The software has given Nautilus a precise grasp on the status of projects and availability of resources, Lontz says. “You never say ‘IT is busy'; you can determine which resources are needed and track when they will become available,” he explains. “You mature away from working purely on a queue and saying, ‘We can’t get to that now — let’s put it off.’ ”

Tracking the IT Portfolio

When Jeff Frazee became SVP and CIO of Aviva USA (Des Moines; more than $47 billion in assets) at the beginning of 2010, he says, he faced the challenge of refocusing the technology investment of a large enterprise. Investment dollars were allocated to functional areas, making projects more tactical than strategic, he explains.

Frazee created a centralized fund for a business transformation portfolio of projects, as well as an Executive Prioritization Committee (EPC) staffed by the CIO, CFO, general counsel and the heads of insurance operations, sales and marketing. The EPC, which meets every three weeks, monitors strategic projects only, which are defined as those that meet a threshold of 2,500 work hours or $200,000 invested, he relates.

“The portfolio obviously doesn’t change that often, but this gives us the ability to reevaluate projects at all different stages,” Frazee says. “The EPC also helps us keep people accountable for things such as cost reduction — for example, our IT costs had been rising due to failure to sunset legacy applications after new packages were implemented.”

Frazee says he has endeavored to minimize project management bureaucracy in order to keep the focus on delivery rather than process, and he has driven more diligent use of the HP Project Portfolio Management (HP PMM) tool set at Aviva. “The tool was in place, but we weren’t maintaining good information about the commitment of resources,” Frazee explains. “We’ve worked hard to get a three-month command view to anticipate where certain subject matter experts and skill sets are needed.”

Staff changes also have played a role in renovating Aviva’s project acumen, according to Frazee. The insurer’s PMO staff has been scaled back to about 20 percent contractors, down from about 55 percent in 2009. Over the same period, the percent of projects completed on time and within scope and budget has gone from 40 percent to 70 percent, Frazee reports. He attributes that success in part to having the proper incentives in place, ranging from business rather than IT responsibility for strategic IT projects to bonus incentives for IT professionals.

Rethinking IT’s Project Management Role

Thrivent Financial (Minneapolis; $73.1 billion in assets under management as of Dec. 31, 2010 ) recognized the value in realigning incentives in the wake of unsuccessful projects aimed at consolidating and upgrading the insurer’s statements, including the implementation of Oracle’s (Redwood Shores, Calif.) Documaker as Thrivent’s go-forward statement composition engine, as well as new Xerox (Norwalk, Conn.) printers and Bell & Howell (Durham, N.C.) inserters. The insurer broke from protocol by putting Peter Koel, the IT owner of the Statements and Correspondence functional area, in charge of the project rather than a PM from the enterprise project management office (EPMO). “I was put in because I have accountability when the solution goes live — it’s like eating your own cooking,” Koel quips.

Koel’s appointment — driven by his boss, Rich Mordhorst, VP, IT, and authorized by CIO Holly Morris — created some tension with the EPMO, Koel acknowledges. But upon the project’s completion in December 2011, he says, the effort received the highest scores of any project during the last two years and was achieved with spending of $7.7 million, even though it had been budgeted for a range of $7.9 to $9.2 million. The estimated savings resulting from the consolidation project, Koel reports, have been $1.36 million to date.

Koel says he believes the project’s success shows that companies should not underestimate the power of having the project leadership team include the IT and business owners of the resulting functionality and ongoing vendor relationships. “These are key people [with whom] to have an existing high-trust relationship, and they are well placed to build and direct a high-trust project team,” Koel comments.

Koel recommends leveraging traditional PMs for the administrative tasks, such as project plans, finance and status updates, to the extent that those tasks add value. But, he cautions, “Traditional PMs rarely have accountability for their decisions or for vendor/business partner relationships once the project goes live.”

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