Many outstanding CIOs have been able to reach senior levels at insurance companies by acquiring business understanding to complement their technological expertise. But ever since Billy McCarter began working for a small consulting firm in his native Louisville, KY, business acumen has been a part of his resume. "My whole career has been dedicated to understanding how to best apply technology to business problems," he says.
McCarter took on another consulting position, of a sort, when he was appointed CIO of Fireman's Fund Insurance Co. (FFIC, Novato, CA, $11.5 billion in assets) in January 2000, having come to FFIC to run technology for personal lines in 1997. After taking the reins, he took six months toassess the state of technology vis a vis the carrier's business needs and determined that there were major challenges that needed to be addressed, "both in our operations areas and in terms of delivering reliable service levels at the right price." In facing those challenges, McCarter is effecting a transformation of the carrier's IT organization "anchored to the theme of people, process and technology," he says.
Following the six-month diagnostic phase McCarter launched a bottom line-driven improvement program that conceptualized IT into two areas: infrastructure, including what McCarter calls "the context, the commodity-type services," and applications development. Having determined that the latter called for further investment and growth, he recalls pitching his analysis at the time: "We can run the best data center in the world without influencing our market capitalization, but if we deliver solutions that meet customers' needs better than our competitors, then we can influence the overall value of the company."
The goal of delivering stable infrastructure services of the right type-and at the right price-led to an outsourcing arrangement with Toronto-based CGI, finalized in October 2001. The 10-year, $380 million deal involves the transfer of 339 infrastructure-related employees to CGI, and the retention of 11 infrastructure management positions.
On the development side of the house, all FFIC project managers must now have PMI (Project Management Institute, Newtown Square, PA) certification, and governance measures have been instituted to stiffen fiscal discipline.
In the past, according to McCarter, FFIC had no formal approval process for IT investment. "It was a decision between the line of business head and the IT leader, without any formal, rigorous cost/benefit analysis," he says. McCarter introduced such a model and "changed the decision-making to allow a focus on projects that have double-digit returns on investment."
FFIC now measures retention of top IT employees as well as tracking management of lower performers. "The goal is to retain the best employees and continually improve the bottom performers or cause them to exit," McCarter says.
The approach seems to be working: Of the organization's top 20 projects, 94.5 percent have been on-time, on-budget and within scope this year, compared with a 20 to 30 percent rate in 2000, before the measures were instituted, according to McCarter. IT expenditures have been reduced by close to $30 million in three years on an annual run-rate basis, while improving service levels in many aspects of IT delivery.
McCarter's work hasn't been limited to tightening the IT ship. He has also launched distribution-related initiatives that exploit the Internet to enhance the agent/carrier channel.
Among these is the commercial lines iCustomer Series, which delivers online tools, information sources, and loss-reporting and claims support services through an extranet site and software sent to agents via CD ROM. "It's really a technology capability married with a business opportunity," McCarter says. "Agents have to earn the right to get iCustomer; because there's significant value for them, we expect value from it." Functionality within iCustomer is delivered by the carrier's new Underwriting Efficiency System, an enterprise-level project developed for commercial lines that will eventually be rolled out to other lines of business.
On the personal lines front, FFIC is set to introduce the Prestige Access platform, "which improves supply chain management between our agents and ourselves around rating, quoting and issuing policies," McCarter says.
Centers of Competence
Following his infrastructure and applications development clean-up, McCarter's next deliverable will be a restructured IT organization based on four "centers of competence." A Business Services center will "manage the relationship with the business from a service level perspective to make sure they're getting what they need at the right price," McCarter explains. Project Services will cover the building, buying and integrating of solutions; Application Services will include the pool of engineers, developers, etc., "who actually do the programming activity," and Infrastructure Services will "deal with the foundational tasks of operations."
This enterprise organizational model will foster FFIC's being "able to build technology in a reusable kind of way and allow uniqueness when you adapt it to the business," McCarter says.
WILLIAM S. McCARTER
CIO & Senior Vice President, Fireman's Fund Insurance Co; Regional CIO, Allianz of North America.
SIZE OF IT STAFF: 662
BACKGROUND: McCarter has held senior technology positions at BankOne and PNC Bank. He joined Fireman's Fund in 1997 to run technology for the firm's personal insurance division. He became CIO in January 2000.
HOBBIES/INTERESTS: Golf, tennis.
DREAM JOB: "If I weren't doing this, I'd love to teach and share some of the things I've learned."
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