Following the $28 billion merger deal the two companies announced this morning, the IT departments at ACE Group and Chubb will spend the next few months identifying and elevating the most valuable technology assets each carrier has to offer while the departments consolidate.
“There will be a number of challenges around the integration of a number of systems and they are going to have to make number of strategic decisions about their long term platforms if they really are going to take out the cost of operations,” says Mike Boyle, former AFLAC CIO who is now CEO of Perseus Technical Strategies. “They are going to need to establish a strategic roadmap based on some hard decisions to maximize the investment.”
While there’s always a concern that M&A could lead to staff reductions through redundancies, IT likely has little to fear especially in the short term, says Adrian Brown, another former insurance CIO from Canal Insurance -- who is now a P&C industry technology consultant with Stratus Technology Services.
“I don’t think that anyone in IT at either company needs to be worried about immediate consolidation and downsizing,” he says. “The new organization will have a need for all of the existing information and processes as well as the added task of understanding how to share these processes and data. Business architects, analysts and scrum masters will all be in hot demand.”
It’s rare that you see two large insurance companies Chubb and ACE are 13th and 14th respectively in U.S. market share, according to the NAIC -- consolidate their massive data resources, adds Robert Hartwig, president of the Insurance Information Institute. Applying robust analytics tools to the high-quality insurance data ACE and Chubb have collected over the years should yield a company that has a clear view of the current state of risk across their several commercial and personal lines.
“The kind of advanced analytics that can be run on the combined data of the two companies after the merger goes through will likely help the combined entity to more accurately assess risk and provide products and services,” Hartwig explains.
Economies of scale are cited as a major driver of insurance M&A, and consolidation is a means of gaining access quickly to robust technology resources -- which was pointed out in Swiss Re’s March 2015 Sigma report on M&A activity in insurance.
“Although still nascent, a number of recent M&A transactions in insurance highlight the growing influence of technology as a motivating factor. Insurers have been active as either acquirers of technology companies or as targets, especially where digital applications offer enhanced insights about customer needs, wants and behaviours,” Swiss Re writes.
Once the tough work of consolidation is completed, ACE and Chubb will be able to leverage the streamlined technology organization to get to a new level of customer insight.
“[The deal] reflects some of the investments that will be required in emerging capabilities that will allow carriers to continue to profitably grow operations in a future state", says Robert McIsaac, SVP research and consulting for Novarica. “The cost of analytics and truly big-data-oriented capabilities can be spread over a broader set of products and markets, helping to reduce unit costs and gain better insights concurrently.”
But time is of the essence. Brown notes that it took “several years” for Nationwide to consolidate the IT infrastructure around their Allied acquisition and select a platform going forward.
“ACE and Chubb have the opportunity to shorten the process to design where they want to be in ten years or sooner -- as far as IT is concerned,” he says. “The platforms available today enable radical changes from the older models and it should be an exciting time to be part of the changes that will be made.”
One thing is for sure: Customers of the combined entity will lean on the firm to be up and running at full speed as soon as possible, says Monique Hesseling, partner at Strategy Meets Action and a former ACE employee herself.
“Customer experience expectations will require a relatively quick integration of customer data between both companies, to support a single view of the customers. Recent experiences with merging airlines, for example, have taught us that a single view of the customer is not an easy feat to achieve,” she says. “If they take the time to objectively assess their combined assets around IT and data, and can agree on a target environment that capitalizes on best practices, regardless of where those originated from, this can be a great opportunity for the new company to leap forward, with IT truly enabling the new organization.”
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