“What would it look like for an insurer to do everything right with today’s technology?” That question, posed by Celent Senior Analyst Karen Monks, was answered last week as Celent awarded Nationwide Insurance with its 2012 Model Insurer Award, held during the firm's 2012 Insurance Innovation and Insight Day in Boston. As part of Celent’s Model Insurer presentation, Monks explained the theory behind the recognition given to Nationwide.
“We looked for key best practices in the use of technology across a broad range of areas, as well as the components that make up a theoretical model of an insurer’s IT systems and practices,” she said. “Those model insurer components generally represent the way things should be done. No single practice makes an implementation successful.”
Honored for its best practices in IT management, Nationwide successfully managed the IT requirements of a large-scale consolidation with a fellow $1 billion commercial lines organization, Allied Insurance, on time and on budget.
Dan Greteman, SVP, CIO of Nationwide Insurance’s Allied Commercial and Specialty business, explained how his company navigated through pre- and post-merger business and IT challenges, expanding into new states and distribution channels in the process.
“The journey to a combined, simplified Commercial Lines operating model across both Nationwide and Allied was a long one and only began in earnest several years ago,” Greteman told attendees.
To give the audience a perspective of that long journey, Greteman explained that pre-merger, the two entities were run primarily as separate companies, so the task before them included forming a combined organization (PCIO), a review of operating models and core integration objectives, a multi-phased integration roadmap, and the shift from a maintenance to a delivery IT organization that could optimize the new company’s output.
Called the Catalyst program, the initiative was established in 2005 to deliver benefits to the combined Commercial Lines organization in four key areas: accelerated growth, reduced expenses, business agility and better experience.
Growth meant recruiting exclusive agents to sell new products, expanding geographically and, in so doing, sharing claims resources and systems, as well as filling key leadership roles across the organizations.
At the same time, the company looked at standardizing an operating model, its products, business processes and IT systems to drive down costs, which included a review of redundant work processes.
“Consolidation of our IT systems meant we could make rate and regulatory changes faster, and with fewer of those systems, we could meet compliance requirements efficiently,” said Greteman. “Finally, our goal was to provide consistency, better integration, usability and quality (as a result of fewer systems) in order to improve the customer experience.”
Along the way, Greteman says, the project was challenged by cultural differences between Nationwide and Allied and a lack of large-scale development competency. “And like most organizations going through something like this, we also faced some skill gaps and resource challenges,” he added.
Greteman told the audience that a key decision in any post-merger integration effort is selection of the target operating model. “We needed to decide how we were going to function,” he said.
Separate operating models were left in place for a long time following the merger, and after some evaluation, the organization decided on a conversion approach, ultimately choosing between a big bang and phased approach.
“There are so many factors to consider,” he says, “and a big bang system conversion involves significant execution risk and cost, so we decided on the phased approach.”
The Catalyst program was divided into four separate pillars for management and reporting purposes — conversion/expansion, consolidation, the creation of a virtual service center for consolidation of imaging/workflow and commercial business intelligence, which would enable analytics to fuel various business unit efforts.
Now that 6,500 agents are trained and all 26 states have completed implementation, Greteman says he and his group learned their lessons along the way.
“Among other things, we refreshed the business case along the way and made sure we marketed our success. But business sponsorship underpinned by strong governance principles was critical,” he told attendees.
“Among other things, Nationwide’s iterative, cooperative development approach between IT and business, along with its ability to follow a comprehensive implementation roadmap, lead this company to measurable business results,” said Monks.
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