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Transformation Specialist

American Modern Insurance Group is transforming itself into a Web-enabled distributor of products.

No matter a company's size, changing the business strategy and associated technology is a large task. But when a company shifts from being a finance company to a writer of mobile home insurance and then expands its product line, the response required by IT is enormous.

American Modern Insurance Group's parent, The Midland Company, was founded in 1938 as a finance company, evolving over the years into a vertically integrated mobile home manufacturer, lender, dealer and insurer. Eventually narrowing its focus to a specialty P & C insurer in the 1970s and then expanding its product line in the early '90s, American Modern Insurance Group (AMIG)—Midland's specialty insurance subsidiary—realized that a significant technology change was needed if it was to maneuver through the changes in its business model.

"For many years technology was viewed as a back-office support function and there was insufficient investment in IT," says John Campbell, senior vice president and CIO, who joined AMIG (Amelia, OH) in 1999. "The company was not...moving forward with new technologies and found itself in a position where dramatic changes were needed."

For starters, AMIG's systems ran on a Unisys platform. "Let me first say that Unisys is a good system, but it is not found in the mainstream of insurance technology," Campbell contends. "Most insurance companies are IBM-based. So we had difficulty finding individuals with Unisys and insurance expertise. And we couldn't find any packaged software solutions on the market."

Combining Silos

"Also," Campbell adds, "the systems were designed to support one product and once the decision was made to offer other products"—including some commercial, motorcycle, recreational vehicle, and others—"the systems were very hard to adapt. That made it difficult for us to deliver our products on a timely basis."

To solve the challenge of system inflexibility, in '99 AMIG began to build aninfrastructure that would support an e-commerce initiative. "We had never done anything on client/server, and we couldn't easily expose business processes to the Internet," which AMIG considered a modern-day business imperative, Campbell adds. In fact, he says, AMIG's lack of IT investment in client/server gave the company an advantage when it came to developing its e-commerce infrastructure. "AMIG has skipped the client/server revolution, so we could move directly to the Web-enabled business-process model."

But "the challenges for IT are related more to our varied distribution channels," Campbell adds. "We sell our products through agencies general, independent and specialty independent agents, point-of-sale manufacturers, dealers and lenders, and strategic alliances with other insurers. Many of these partners require special interfaces with non-insurance-based systems. IT decisions must take into consideration the importance of ease of doing business, reliability, dependability and a willingness to compromise."

The need for a modern IT infrastructure became evident when AMIG decided to sell products outside of its traditional agency channels. "We expanded distribution into the point-of-sale channel," Campbell adds, "which means that the finance manager for someone purchasing a mobile home could also sell the buyer mobile home insurance."

Recognizing that supporting the distribution changes, as well as moving a company from a monolithic legacy system to a Web-enabled organization, is not an overnight job, Campbell's team set out to define the technical and application architecture for the enterprise on which all of the new Web technology would run. AMIG designed the architecture "in such a way as to allow maximum independence between presentation, applications, data and technology layers," according to Campbell.

"We want to be able to plug and play," continues Campbell. "Flexibility is very important and we need the ability to change components when we have to." For instance, systems evolve at varying rates due to marketplace demands, he explains. "Billing evolves differently than claims," he says. "If the systems are tightly integrated, you are faced with the all-or-nothing situation. Our infrastructure is loosely coupled so we will be able to make incremental changes in the future," he adds.

The project's roadmap, named modernLINK, is a business process and IT transformation plan, Campbell says. "ModernLINK is a multi-year initiative to transform the IT infrastructure, replace the legacy applications, Web-enable the business processes, and enhance the collection, storage and access to information," he says. Ultimately, modernLINK "will support the business drivers of ease of doing business, flexibility in product design and distribution, speed to market, predictability of results and greater internal efficiency." Although Campbell could not relay any specific results and gains of the modernLINK initiative, he did say that "we have developed a very strong and defensible business case that justifies the anticipated spend on the modernLINK initiative."

Culture Shift

But with modernLINK evolving so much over such a short period of time, Campbell admits that he is challenged every day. "All of the changes in IT have happened over the last three years," he says. "The cultural transformation is phenomenal." But more pressing than the cultural change is Campbell's biggest challenge: resource allocation. "It's not just about people, its about dollars," he says. "Resources are precious and many of our people, business and IT, are being asked to do so many things and play multiple roles. We have a finite budget that must be deployed in support of the legacy environments while we transform the applications and business processes"

To better manage resource prioritization and cultural changes, Campbell makes sure that all projects are driven by the business. "The initial challenge was getting the business to understand their role in leading and helping to change the IT culture," he says. The business leaders "really had to understand the difference between leading and directing." Requiring business leadership of projects has also helped with education, since the business is much more attuned to the complexities of IT, he adds.

In the end, he says, the relationship between the business and IT comes down to trust. "We only promise what we can deliver and we deliver what we promise," Campbell says.

To better manage projects, Campbell has worked to ingrain a project management culture that requires business leadership and ownership for delivery of benefits. "The benefits of our project management methodologies are that we IT and business deliver more of the right things for the right reasons and increase the odds of achieving the ROI stated in the business case," he says. "We don't have the people or the money to throw around at wasteful projects."

With the architecture in place and both the business and IT teams reading from the same playbook, Campbell says AMIG should begin to move away from its reliance on internally developed apps. "Right now, we develop and maintain about 90 percent of applications internally," he says. "In five years, it should be about 40 percent."

AMIG is developing all of its Web capabilities internally. But, with the architecture in place, it is beginning to buy components to plug and play. AMIG recently purchased the (HNC) Blaze Advisor rules engine from Fair, Isaac (San Rafael, CA) and bought DuckCreek's (Bolivar, MO) rating engine.


Web Bound

COMPANY: American Modern Insurance Group (Amelia, OH), subsidiary of The Midland Co. (more than $1 billion in assets).


KEY EXECUTIVE: John Campbell, senior vice president and chief information officer.

IT STAFF: 148, plus 10 to 15 consultants.

KEY INITIATIVES: modernLINK, a multi-year initiative to transform the technology infrastructure, replace legacy applications, Web-enable the business processes and enhance the access to information.

IT ARCHITECTURE: Unisys (Blue Bell, PA) mainframe; IBM (Armonk, NY) AIX, Lotus Notes, WebSphere, Crossworlds EAI, MQ Series; Microsoft (Redmond, WA) NT-based servers, desktop (NT, migrating to XP); FileNet (Costa Mesa, CA) Imaging; Mercury Interactive (Sunnyvale, CA) testing suite; DuckCreek (Bolivar, MO) rating engine; Fair, Isaac (San Rafael, CA) HNC Blaze Advisor rules engine.


JC: Effectively manage resources deploying the capital at the right time on the right projects with the right staff to maximize ROI for IT and the transformation initiative, while maintaining the legacy environment. Also, maximizing profit when IT spending needs to be above average to maintain progress on the transformation initiative.


AMIG's Technology Philosophy

-- Create a partnership between IT and business. Implement through a Project Management philosophy that calls for business-led, tech-enabled initiatives.

-- Begin with a technology and application architecture that enables the business model and responds to the business leaders. Let the architecture be the roadmap to technology transformation and the touchstone for technology decisions.

-- Create enough independence among the presentation, application, data, an technology layers of an architecture to provide maximum flexibility in choice of product and ease of entry and exit of the product or newly developed system.

-- Build an IT culture that is dependable, efficient, proactive, and influential.

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

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