Last February, PwC Consulting unveiled an intriguing concept known as the Virtual Insurance Community (VIC), an end-to-end component-based e-business solution designed for property and casualty insurance carriers.One major distinction that set VIC apart was its vast array of services, including Web portal development, application hosting and front- and back-office components.
Another aspect that set VIC apart was its partners. PwC's VIC consisted of a consortium of no fewer than a dozen insurance industry technology providers-from Castek Software Factory to Siebel Systems, each bringing its own component-based IT competencies to the table.
Less than a year later, PwC's ambitious VIC concept has disappeared following IBM Corp.' s acquisition late last year of PwC. VIC might be gone, but it's certainly not forgotten. In fact, VIC leaves in its wake a powerful legacy-IBM's recently launched Insurance Transformation Solutions (ITS). Much like VIC, ITS consists of end-to-end, integrated and component-based solutions that encompass all the vital areas of an insurer's value chain. The concept is a major element of IBM's newly formed Business Consulting Services unit.
With White Plains, N.Y.-based IBM holding long-time competencies in the infrastructure side of the business, the consulting unit came to fruition once consulting giant PwC was folded into IBM's insurance operation.
ITS's main thrust is to work with insurers to adopt e-business "on-demand" capabilities. IBM defines on-demand as solutions that provide integrated end-to-end processes across an enterprise.
When PwC launched VIC, the concept was being piloted by Cincinnati-based American Modern Insurance Group (AMIG). As insurers become involved in ITS, they'll have access to many of the same resources as AMIG-key partners, suppliers and customers who will be able to respond with agility and speed to customer demands, market opportunities or competitive threats.
Three parts
One important characteristic of ITS is its ability to help insurers modernize their core capabilities of underwriting, policy administration and claims management. This will assist them to grow their businesses by adopting new procedures, productivity enhancements and cost saving measures.
"IBM is building these enterprise offerings for the insurance sector," says Susan Cornoyer, research analyst for Gartner DataQuest, Lowell, Mass.
"They have a clear vision for vertical markets, and insurance is a critical vertical market. On-demand is just the type of end-to-end solution that many insurance vendors have talked about offering for years but could not deliver."
The activities range from tactical to strategic, including implementing over time an entirely new infrastructure and total transformation of their IT systems and processes.
ITS is broken out into three central components. The first component consists of an industry vision, coupled with in-depth insight and expertise about issues facing insurers and how they can respond and benefit from on-demand e-businesses.
The second consists of a comprehensive solution portfolio of consulting, implementation and maintenance services, along with hardware, middleware, and interoperable, component-based applications that follow open standards. The applications leverage a "best fit" approach from a community of software vendors allied with IBM.
The third part is marked by industry accelerators, which are unique insurance assets, methodologies and practices used to jump-start and reduce the time for implementing solutions. These accelerators focus on the elements needed for successful change-process, technology, people and culture-while minimizing implementation risks.
"Our research shows e-business on-demand enables insurers to benefit from thoughtful business processes centralization with less risk, while simultaneously decreasing expenses as much as 22%," says William Pieroni, general manager, IBM Global Insurance Industry. "More expenses can be shifted to the variable and discretionary side and there is more freedom to develop new revenue sources."
Resolving a dilemma
PwC's VIC leveraged off the trend that as insurers' profit positions became increasingly tenuous, most would be unable to devote a great deal of capital toward full-fledged IT projects.
Insurers are facing difficulty from volatile financial markets, expanding risks and an over-reliance on an aging technology infrastructure. VIC's components-based architecture provided an answer to this dilemma, and so does ITS. On-demand solves this dilemma because businesses can achieve significant economies of scope and scale, reduce their cost of capital, cut expenses considerably and offer new products and services faster when they implement a module at a time.
"The On-demand concept is ideal because a carrier invests only in what it needs. With IT budgets constrained, most insurers are not going to invest in a full suite of IT solutions," says Cornoyer.
Several clients have asked for on-demand but IBM is moving slowly on test pilots. When it is fully operational, Cornoyer envisions that it will be internally driven with outsourced capability. Large insurance clients would probably build something internal and IBM would more than likely manage the program.
