Predictable Precision
Allmerica Financial's leadership knew that technology could play a critical role in achieving growth. But it felt that for that strategy to work, its technology organization-Allmerica Technology services (ATS)-needed to be run more like a business. Deciding that the best way to do that was to appoint a senior executive to the top technology job, Allmerica named Greg Tranter-chief operating officer of the company's mainstay property and casualty division-to be CIO. Since early 2000, Tranter has led ATS to fulfill what he calls the organization's vision: "fueling Allmerica's competitive advantage through technology."
In addition to insurance markets, financial planning and investment management products and services, Worcester, MA-based Allmerica Financial ($18 billion in assets) sells personal and commercial P&C insurance through two regional storefronts: Citizen Insurance Co. of America (which covers a large portion of the Midwest), and Hanover Insurance Co., which sells in the Northeast and South. While a hard market has raised revenues-per-customer through Allmerica's P&C channels, the real challenge is to increase the number of policyholders, according to Tranter. "We try to drive profitable growth by being a low-cost provider and ensuring we price risk appropriately for the exposure we're taking," he relates.
In support of that goal, Tranter has moved ATS to a centralized model, beginning with combining the legacy systems of Citizens and Hanover. "Over the last three years we've been converting to a single set of back-end systems in order to gain efficiencies, drive out costs and make it easier for our independent agents," he says.
Centralized IT
Choosing a "legacy surround" strategy, rather than replacement, Allmerica's applications run on a "20-year-old PMSC (now CSC, Austin, TX) platform," Tranter adds, above which ATS has layered technology necessary to provide competitive online services to its agents.
One of Allmerica's most significant recent investments in ease-of-business has been an in-house built, Web-based point-of-sale (POS) system, according to Tranter. Started at the end of 1999, the POS system went online for business owners policies in 2000, followed by personal auto and homeowners in 2001, and commercial auto and workers' comp, each in the succeeding years. "The agent can go from their desktop, over the Internet into our back-office systems in real-time, and quote, issue and endorse both personal and commercial lines," Tranter asserts.
Over the next couple of years ATS will be delivering an underwriting workstation to help ensure the risk-quality of new business. "We're trying to provide a lot of relevant data to the fingertips of our underwriters so that they can make the best decisions possible," Tranter says. The idea is to improve both quality and efficiency, he adds, "getting data to their fingertips so they're spending the vast majority of their time analyzing and making decisions and very little time performing administrative-type tasks."
In addition to becoming centralized, ATS's capacity to deliver competitive solutions has been influenced by a reorganization of internal functions. "While centralized organizations typically lose touch with the business over time, we've been able to maintain the focus on the business through breaking the organization into multiple components," Tranter argues.
A Service Delivery component delivers service or maintenance to the business, and is further partitioned by line of business. Project Delivery concentrates all project planning and execution into one place. "We found it difficult to deliver technology on-time and on-budget because we had people working on both maintenance and project-related activities, and when that happens, you always get pulled to the maintenance work," he explains. An Enterprise IT focus area "is where we have all the centralized architecture, data management and vendor management, so that we can leverage off technology investments that we make from an architectural and data standpoint," Tranter adds. Finally, an Enterprise Excellence group is tasked with creating and fostering best practices for all services delivered to the business. "They are responsible for driving CMM capability maturity model throughout our organization, as well as a myriad of other practices that we use," Tranter says.
The effectiveness of this structure is reinforced by thinking of ATS an "assignment-based organization," according to Tranter. A specific workforce management function takes charge in distributing the organization's skills as need demands. "When work comes in from the business, we look around and see who is capable of doing the work and establish their availability," Tranter explains. "We're very flexible about moving people across the organization instead of having staffing stovepipes."
The assignment-based approach has influenced the outsourcing of about half of ATS's application work, and has helped mitigate the pain of necessary technology lay-offs, which ATS has suffered in recent years. "We decided we could gain strategic advantage by focusing our internal employees on new development, while sourcing our baseline maintenance work to a third party," Tranter relates. A drive for best practices was part of the motivation for a decision to pursue outsourcing options with Keane, Inc. (Boston), but so was an attempt to build a variable cost structure. (Editor's Note: For more on Allmerica's outsourcing to Keane, Inc., see related article on pg. 28.) The idea, Tranter explains, is to be able to "ebb and flow with the business as its technology spending ebbs and flows."
Thought Leadership
The overall design of ATS's reorganization is to go beyond merely responding to the fluctuating demands of the business. What Tranter is working to craft is what he calls a thought leadership role for the technology organization. "The ideal scenario, looking out a couple of years, is one where we're bringing solutions to the business before they ask for them," he says. ATS will fulfill this thought leadership role by asking, "'Where are the competitors, what are they doing, where is the technology?' so that we're out in front and bringing solutions back." Also key is proactive assessment of disruptive change, Tranter continues. "In other words, asking what are the things that are potentially going to happen in the insurance marketplace that are going to be a source of disruptive change, and are we positioned to respond?"
Delivery Capability
Two factors are critical to achieving thought leadership, in Tranter's view. First is business/IT partnership. That phrase may have long since decayed into meaningless cliche, Tranter acknowledges, but he insists nevertheless that Allmerica's working ideal is "joint ownership of technology delivery."
But more importantly still is ATS's capacity to deliver. "You really have to have your ducks in a row from an operational standpoint so that the business has confidence in your ability to deliver the day-to-day stuff before they're going to pay attention" to forward-looking recommendations, Tranter notes. "That's why we focus so much energy on CMM and other practices, and why we have dedicated people"-in the organization's Enterprise Excellence group-"to make sure our practices are best of breed."
Allmerica began working to implement CMM practices in 2000. ATS was subsequently assessed at CMM Level 1 in 2001, and Level 2 in 2002. "We expect to be at Level 3 by the end of this year," Tranter states. "The industry average is about four to four-and-a-half years to get from Level 1 to Level 3; we will have done it in two."
As ATS's process maturity is established, Tranter asserts, "it shows the business that when they want us to deliver something, we can deliver it on-time, on-budget-that we can deliver with predictable precision."
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THOUGHT LEADER
"ATS's vision is fueling Allmerica's competitive advantage through technology," says Greg Tranter, CIO.
COMPANY: Allmerica Financial, Worcester, MA; $18 billion in assets.
LINES OF BUSINESS: Property and casualty, financial planning and investment management services.
KEY EXECUTIVES: Greg Tranter, CIO; Carol Borowski, VP, Project Delivery; Paul Trombley, VP, Service Delivery Application; Dave Carlson, VP, Service Delivery, Utility; Lorna Stearns, VP, Enterprise Excellence; Jim McClafferty, VP, Enterprise IT.
IT BUDGET: Approximately $115 million.
STAFF: About 440 internal, and 220 external staff.
KEY INITIATIVES: Internet-based point-of-sale solution; underwriting workstation; management information strategy initiative.
IT ARCHITECTURE: Sun Microsystems (Santa Clara, CA) I-Planet, Solaris; IBM (Armonk, NY) CICS, WebSphere, MQ Series, MQ Series Integrator, UDB, AS/400, AIX.
WHAT IS YOUR GREATEST BUSINESS CHALLENGE?
TRANTER: Continuing to be a low-cost provider for our P&C companies, enhancing our underwriting risk selection processes and driving revenue growth through pricing and underwriting.
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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
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