How Katrina Made a Business BetterBy David F. Carr | Posted 2006-05-06 Email Print
New Orleans-based Pan-American Life used its disaster plan to improve daily performance.
All things considered, New Orleans-based Pan-American Life Insurance did a good job of recovering from Hurricane Katrina. Still, it wants to do better if, as is all too likely, it is tested this way again.
Pan-American, which had revenue of $320.5 million in 2005 from life, health and disability insurance services in the U.S. and Latin America, owns one of the city's landmark downtown office buildings. That area was untouched by the floodwaters that soaked properties just a few blocks away, and Pan-American was among the first companies to publicly commit to returning to New Orleans.
But its data center operations are not coming back. In January, the company announced a 7.5-year outsourcing agreement with Computer Sciences Corp. worth about $27 million that will spread the insurer's data center operations between sites in San Diego and Austin, Texas. Moving data operations out of New Orleans is one of several adjustments the company is making to be better prepared for future disasters.
"Given what happened last year, we're anticipating that even the threat of a tropical storm will be a hair-trigger for evacuation," says Patrick McGunagle, the executive vice president who oversees information technology.
But the discipline forced by disaster preparedness has proved to be good for the company in other ways, he says. For example, by seeking alternative ways of providing customer service over the Internet in the event that phone service is unavailable, the company has also improved service on a normal day. So, a company that performs well in a disaster may learn how to deliver superior performance, period.
I first spoke with McGunagle in October, about a month and a half after the storm. In November, I also visited with CIO Dom Cortellessa, who works for McGunagle, and Judy Norwalt, the vice president in charge of administration, as the company was getting reestablished in New Orleans.
On the day that the storm hit, Monday, Aug. 29, Norwalt was in charge of a group of 13 employees setting up shop in a temporary office space in Grand Prairie, Texas, provided by disaster recovery specialist SunGard. Acting on a freshly revised disaster recovery plan, Pan-American had followed a pre-established plan on what to do in the days leading up to the storm. Backup tapes for the core insurance systems had been shipped out of New Orleans on the Saturday before the storm, bound for a SunGard data center in Philadelphia. But restoring systems from tape takes time, and those systems weren't operational until Tuesday.
The SunGard office space included desks and computers for about 30 peoplefine for a skeleton-crew customer service operation lasting a few days, Norwalt says, but not for the more protracted crisis after the flooding of New Orleans. That's where CSC came into the story. Pan-American had an existing relationship with CSC, but as the vendor of an insurance software package rather than for disaster recovery.
Still, CSC was quick to respond, providing work space for more than 200 people, plus data center capacity, in Irving, Texas. "They were extremely fair with us," Cortellessa says. The arrangement allowed Pan-American to vacate the SunGard facilities and begin calling employees to regroup in Irving and help the company get back on its feet.
The Katrina experience exposed other gaps in the company's recovery strategy. For example, Pan-American hadn't given a high priority to restoring its Microsoft Exchange e-mail servers, but e-mail proved to be a critical tool for reestablishing connections with employees. Now the company encourages employees to provide an alternate personal e-mail address to be listed on an emergency contact sheet.
And given how easily phone networks were knocked offline, Pan-American set up self-service applications on its Web site where customers can get answers to their questions; it also improved the online functions available to independent insurance agents who produce policies through Pan-American.
These efforts have actually reduced the company's call-abandonment rate, which now stands at 2% to 3%, McGunagle says. You have to respect any organization that can wring performance improvements from disaster.