IT 2005: The Light of Day

Tech Decisions: What portion of the insurance process will your company be looking to improve in 2005 with an eye toward technology? Are there any specific projects you will be undertaking, and what do you hope to accomplish?

E Brune: Were making improvements in all parts of our insurance processes, with a heavy emphasis on transaction systems. Also, were focused on providing all areas with better data analytics. We have a number of significant projects that enhance the major technologies that touch our customers.

E Chu:As a company, were always looking at every area to improve our operational performance, and technology is a critical part of that performance. We literally are looking at every aspect of our businessfrom acquisition to underwriting to claimsand identifying ways technology can help us get the most out of everything we do. We scope out projects, do them, and then circle around to see where we can do more. So, there always are hundreds of projects going on. Among the larger projects, personal lines speed to market, which enables us to respond quickly to market changes, will continue beyond 2005. Likewise, expansion of our Claim Expediter [The Hartfords electronic claims processing system for physical damage automobile claims] also is prominent on next years agenda.

E Gay: We have spent quite a bit of time this year trying to look at some technologies we want to exploit in 2005. Virtualization technology is big on our radar screen. We believe virtualization technology can allow us to improve not only the management of the capacity of our system but also our provisioning time. Were talking about multiple server images on one physical server or even virtualization in the storage arena and in the network arena. The other technology were looking at is grid computing. We believe [grid] has some promise, particularly in the insurance industry where we are in the actuarial business. There are a lot of compute-intensive models we want to apply it to. Were looking at expanding it beyond the initial [actuarial] project into some other areas, but we have some more work to do to get that done.

E Vasudeva: If you look at our major insurance processes, were doing things that arent necessarily using groundbreaking technologies but rather basing things around doing better application development using J2EE, better application development in the area of data warehouses we are trying to build in our finance area. A lot of the process improvements are going to come from these rather mature technologies with better use of them.

E Kellington: Were looking to revamp our claims environment and some of our policy administration area in personal lines. In claims, were introducing portal technology and content management. In policy administration, weve had a lot of success in implementing something called PARIS [Policy Administration Rating and Issuance System]. We built it initially for commercial lines. Now, were bringing our personal lines products and specialty lines in.

Tech Decisions: Have the string of hurricanes in Florida this year caused you to take a closer look at tools that could help in risk management?

E Brune: Since Hurricane Andrew, weve been focused on having the right tools in place to manage hurricanes, not only in Florida but in all of the states with hurricane exposure. Were already good at it but certainly are using the most recent events to make improvements. There always are things to learn from and new ideas to take advantage of.

E Gay: The first thing to think about in any kind of these CAT situations is this is Nationwides time to be there for our customers. We spend a lot of time preparing for that. We have a response team weve used a number of times. With this many hurricanes back to back as we had this year, it certainly was a stress on everyone. However, we felt really good about the response we were able to provide. We did one thing new this time we hadnt done in the past. We deployed some wireless connectivitysatellite-based networking. We deployed it in several locations in Florida that gave our adjusters the capability to access our network and the applications they needed even in the event we had power outages in those locations. That allowed us to be more flexible in where we set up our response environment.

E Chu:Not really. We continue to refine catastrophe modeling, but thats not new. On the claim side, though, the Florida hurricanes really gave us a chance to demonstrate the value of technology in augmenting the work of our CAT response team from afar. Technology gave the team easy access to a full complement of support to move things along quickly and provide great service. And Claim Expediter was up and running in time to speed up claim settlement for auto physical damage in Florida.

E Kellington: We dont have personal lines in Florida, but we have some commercial [policies] in Florida. We werent hit extremely hard by the hurricanes. Our intent is to move toward a predictive modeling type of concept on how you factually price, so getting a lot of sophisticated pricing techniques into all our lines is important to us.

Tech Decisions: Where does your company stand on wireless technology in its operation? Have you adopted a wireless plan, or are you still waiting?

E Brune: The recent Florida hurricanes are a great example of where we use wireless to create the best possible claims experience for our customers. Since our mobile catastrophe vans are equipped with this technology, were able to be there minute one for our customers. In terms of the future, like others, were hoping for better wireless networks that will enable more revolutionary uses of the technology.

E Thurber: We view wireless as a technology to provide mobility for our workforce. We are aligning enterprise requirements with available technology and deploying wireless where it makes business and economic sense. We have developed strategic plans and corresponding tactical goals for deploying wireless products and services, and we are allowing business requirements to align with maturing technology. Our mobility vision is to allow our workforce to perform all of its tasks away from the office, including serving customers at their location. Advancing and maturing technology will be the key to this vision. We were early adopters of mobility-enhancing technology and have deployed wireless where business solutions require it.

E Gay: If you think about whatever particular adjusters or producers might have in their handswhether it is a PDA or a laptop computerwe want to provide the capability for connectivity that is commensurate with what the application needs. Were looking at the cellular devices and at 80211 LAN-based wireless connectivity. For an adjuster, [the 80211] is not as practical as the cellular connectivity. Were trying to follow whats going on in that space, looking for higher-speed connectivity than what currently exists today in the cellular arena and looking forward to the merger of the above technologies so we can get higher-speed wireless communications.

E Chu: Were hot on wireless, but were moving carefully. Weve begun testing a wireless platform and looking at all sorts of ways wireless can help us differentiate ourselves and advance our overall operating model. Wireless is an important part of our Claim Expediter project right now, and were planning to expand it to improve more functions in the claims area. Weve dipped our toe into the wireless water and found it warm; now, were planning to wade.

E Kellington: We have wireless technology out to most of claims [personnel]. Thats been a major initiative for us, and its been very successful. The wireless technology that has been rolled out primarily has been cellular technology. As broadband gets more pervasive with hot spots around the country, wed like to leverage that higher bandwidth. We have marketing reps, underwriting, and anyone who travels using it. Obviously, claims reps are on the road a lot as are loss control people and others like that.

Tech Decisions: What are your feelings toward open source software? Do you use any? Why or why not?

E Vasudeva: We are using open source, and we think it is quite important. We are cautious as to the extent we use it and what the licensing issues are that come with it. As part of our architecture review board, we have a statement of direction that explains what sorts of open source software we allow to be used. We also have engaged our legal counsel, so we cautiously are taking advantage, where it makes sense, of open source. [Open source] is not just for small companies. We definitely can benefit from it, but one of the things we have to keep in mind is we are inherently a financial services/insurance company. Sometimes these open source tools require you to get many of them and string them together to create an end-to-end solution, and that requires your staff spending time on things that are sometimes better provided by a vendor. So, were cautious about to what extent we want to leverage it and where it makes sense.

E Allison: We keep current on open source software, but because of recent legal issues regarding patent infringement, we have stayed away from open source in our operation.

E Chu: Open source software serves a valuable role at The Hartford, and we use a number of open source products, including the Apache Web server, the Linux operating system, JBoss application server, and Lifray enterprise portal. Because its developed in a community atmosphere, open source users openly share their experiences on what works and what doesnt work, saving time in the research phase of a project. Most of the time, our open source software comes from vendors that have modified it for specific purposes. Thus, open source helps protect our systems from changes in the marketplace by expanding the number of vendors we can use to supply particular software.

E Brune: I represent a technology organization, not a legal organization. While we do use some open source technologies, well become more engaged when some of the legal battles get settled. All of the current fighting makes it difficult for the potential of true open source to be realized.

E Kellington: The thing about open source software is, in many cases, you can get really high-quality software. There is software out there you can license that has enough mass behind it with developers around the world contributing to it. It isnt just that companies can use it at a lesser cost; in many cases, it is high-quality stuff everybody is used to. For example, change control software is a typical issue software development groups have. Or default environments developers might use. If you are using open source, the probability when we hire new programmers is they already may have experience with it. So, that just benefits us.

Tech Decisions: Is outsourcingeither business process or technologya part of your operation? If you do outsource, what are your biggest challenges? If you do not outsource, what has kept you from sampling this solution?

E Allison: We do some technology outsourcing on a limited basis. These in-stances include where old systems are being retired to allow our workers to be transferred to new technologies and, in very specialized instances, where we dont have in-house expertise. Some external help also is used as a buffer to increase or decrease capacity as our business needs change.

E Brune: Yes. Like most people, there are challenges in effectively managing the work and coordinating the additional resources involved.

E Gay: The IT services Nationwide outsources are limited but primarily consist of application development projects and maintenance of legacy systems and represent less than one percent of Nationwides total IT expenditure. This supplements Nationwides existing IT resources, freeing up associates to work on new and emerging technology. We do not outsource customer-facing jobs, and no jobs have been displaced due to outsourcing.

E Chu: Through the years the use of technology and business process vendors has given us greater flexibility to address our changing work volume and changing needs. Outstanding service is at the heart of our business, so our main challenge is to find outside vendors that can perform routine functions with the same high standards we expect from our own staff.

E Kellington: We have relationships with a few offshore firms, IT primarily, although we have done some BPO, as well. Its not really outsourcing [for Ohio Casualty], its more staff augmentation type of work. If you have relations with an external provider, the bubble can go to the provider, and you are not staffing up and then reducing. You are controlling the costs and acquisition of IT and business resources with more flexibility.

Tech Decisions: With so much focus on IT working with the business units, do you see a day when there will be no IT department and each business unit will have its own technology staff and budget?

E Chu: IT is a critical player in advancing our strategic agenda, and over time it will help drive the strategy even more. Its essential companies align their operations to keep business and IT working together but less important exactly where the IT functions reside. Certainly, were seeing a blurring of lines as we extend the technology to run a business right to that business. Today, our product managers can make rules changes, edits in underwriting guidelines, and rate changes themselves, right from their desks. Similarly our technology staff members are well versed in the businesses they support. Companies that are committed to progress and constant improvement value ITs role as partners in the businessno matter what the organization looks like.

E Allison:I dont see that happening at State Farm. It seems centralized operations are more the norm than decentralized ones. When systems are decentralized, there tends to be less integration and reduced economies of scale, which can add to the overall cost structure. Decentralized companies also may find themselves more at the mercy of vendors for point solutions. State Farm has found a good balance by having business areas set priorities through a portfolio sequencing process that is reviewed and agreed upon by the enterprise. The IT department is charged with coordinating an overall plan to deliver the technology needs to support the business portfolio of work.

E Vasudeva: The way we have structured it, you can classify IT broadly into application development and operations. The application development part already is within the lines of business within Nationwide. The majority of our insurance- or financial services-related processes are in their appropriate lines of business. They are getting direction and a close relationship with what the business requirements are. From an operations perspective, once you have built the application, it makes sense to have a central group for cost and efficiency reasonsand sometimes infrastructure and security reasonsto have that consolidated. We have it structured that way. That trend is not new for Nationwide, and other companies seem similarly structured. I see the improvement in business users being able to articulate business requirements in a better way so you actually can build applications to meet those needs, but that is probably a few years down the road.

E Gay:That model is working well for us. Its a combination of a centralized/ decentralized model. We clearly recognize we are in the insurance and financial services business here. What those businesses want us to do is really key, and we have to be responsive to that. We believe the organization we have gives us that responsiveness and provides an effective solution for Nationwide

E Brune:We use a federated model that works effectively and ensures our business units have close partnerships with technologists supporting those areas. But we always will need a strategic group that ensures we have the right infrastructure, governance, and processes for security and privacy of data across the enterprise.

E Kellington:We have an extremely good working relationship with the business side. We have enterprise priority lists we work off ofthe priorities the enterprise has set for us. By having a centralized IT environment, if you are organized appropriately, you can have a much more fluid environment [where] you can move more resources to an environment that is more important. By siloing [technology], you really restrict your ability to expand greatly in the areas of need. Its much better to have a centralized environment that can be deployed wherever the demands of the business are. Business sets the strategies and the priorities for projects. It literally numbers them, and thats what we work with. Our expertise is how you develop best practices around project management, software architectures, and things like that so the priorities are met in a most effective and efficient manner.