Consumer Insurance CIO Karl Uphoff Improves Efficiency, Supports Growth at Chartis

When Karl Uphoff, CIO of global consumer lines at New York-based Chartis Insurance ($31.6 billion in 2010 net written premium) arrived at the company's Private Client Group (PCG) in 2003, the business unit enjoyed a rare degree of independence within parent company AIG because of its profitability. "It was sort of an island paradise," he recalls. "We were having fun, and we were somewhat isolated from the general culture of AIG."

PCG's technology environment, however, was a collection of siloed legacy systems that operated largely on manual, paper-driven processes and were ill-suited to supporting the growth of its high-net-worth personal lines business, Uphoff admits. "At that point PCG was doing a little more than $200 million in written premium and hadn't established a technology platform or strategy," he recalls. "It had various systems, each with intricacies that the client services reps had to learn."

Uphoff embarked on a technology transformation effort designed to optimize the unique value proposition of the high-net-worth business, with its specialized rating, cross-selling and service capabilities. Rather than pursue a piecemeal approach to modernization, he says, he identified a few viable components within PCG's Wheatley (now Dayton, Ohio-based LexisNexis) WINS-based legacy environment, retired the rest and replaced them with a new, SOA-based core platform called ePCG.

Designed to streamline policy administration, underwriting and digital correspondence, ePCG is built with Exigen Insurance Solutions' (San Francisco) technology. The new platform integrates with all of PCG's core applications through use of an ACORD-based business object model and web interface to all customer, account, policy, claims and billing information, according to analyst firm Celent (Boston), which recognized PCG with a Celent Model Carrier Award for new business automation.

The system "provides a role-based view of customers and account portfolios," Celent reports. "EPCG monitors every click of the user to provide a complete audit trail of system activity… [and] eliminates the printing and storage of documents."

Since ePCG went live in 2006, it has scaled to support PCG's double-digit growth over the past five years -- enabling the company to grow from $300 million to $1.2 billion in gross written premium during that period, Uphoff notes. Uphoff reports that he and his team were able to achieve these results while maintaining an IT expense ratio of 2.8 -- about half the industry average. With the new platform, he adds, "32 percent of all new business quotes are completed by Chartis' brokers, reducing the internal cost of completing the data entry."

Serving Two Masters

According to Uphoff, ePCG's automated underwriting and account portfolio capabilities served both revenue growth and expense reduction. "We were able to stimulate growth by increasing ease of doing business and to plateau expenses by reducing the amount of data entry done by our internal team," he says. "If brokers can get us an ACORD transaction, we can take it straight into our platform."

Uphoff's transformation plan also included the 2009 launch of what he calls the Insight-Driven Transaction Strategy. The initiative, he says, advanced PCG's ability to leverage business intelligence assets during quote transaction processing in ePCG to reduce PCG's loss ratio. "The decision-management service utilizes IBM ILOG rule sets to leverage our business intelligence assets like predictive models, data warehouse and third-party data to apply these in real time to an auto or homeowners risk," Uphoff explains. "It is designed to make our transactions and employees smarter while processing transactions in ePCG."

From its inception, Uphoff relates, his plan anticipated the need to change out the remaining legacy components of the technology environment. "Challenges related to COBOL resources and older legacy artifacts were starting to hold us back around the five-year point," he explains. "So by 2010, we were recommending the next step, which is what we're executing on now: to eliminate the back end of our systems altogether, using the Exigen suite. When that goes live in 2013, it will take away the billing, claims and policy support that is currently supported by the COBOL-based WINS system that is still running on the back end."

It's Alive!

To improve customer-facing capabilities, PCG will launch in fall 2011 its LivePolicy e-presentment capability based on Adobe's (San Jose, Calif.) LiveCycle suite. "It essentially takes a PDF document and brings it to life, if you will," Uphoff says. "We're initially rolling it out to provide e-presentment of our policy documents during policy issuance. The LivePolicy document provides the customer a personalized portal that offers basic self-service capabilities and, using embedded rules, the ability to present cross-sell and up-sell opportunities."

Uphoff notes that Adobe's LiveCycle capabilities are designed to add value to existing back-end systems, but he sees the technology itself as the basis of a global document delivery program. "To the customer or prospect the document would look and act like a processing system, able to capture information and connect to Chartis services to fulfill requests for more information, or to provide transaction support," he says.

Noting Adobe's versatility with regard to language and other factors of presentation, Uphoff regards the technology as a quick route to a global presence. "We have this notion of a live proposal that converts to a live quote, which in turn converts to a live policy," he says.

To address discomfort brokers may have with the direct-to-customer aspect of LivePolicy, the ePCG platform notifies the broker of any activity and sends the transaction request and all captured information for approval. New line quotes are forwarded to brokers participating in the program.

"We created this as a value-add that fits in with the high-net-worth customer value proposition, but we understand the brokers' potential concerns about disintermediation," Uphoff explains. "Our intention is not to go direct, but rather to foster a better relationship with our customers that benefits all parties."

Uphoff takes a similar approach as a manager, running what he says is a very flat, non-hierarchical organization. "Some companies like to create natural tension. I think it breaks down esprit de corps," he shares. "None of my folks feel they will get the next job by stepping on somebody else, and I haven't lost any senior staff in seven years."

Dealing diplomatically within a global context has become more important as Chartis moves away from the old AIG approach of allowing many country managers to own their technology implementations, according to Uphoff. "As a result we have 30-plus data centers throughout the world," he elaborates. "It becomes a challenge for a global CIO to insist on a five-year plan and put forward an end state where all our unit costs to process our business are predictable and uniform across the globe because we're sharing the same infrastructure."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio