When it comes to competition within the insurance industry, "it's an all-out arms race," says Stuart McGuigan, SVP and CIO of Boston-based Liberty Mutual Insurance Group ($21.2 billion in annual consolidated assets). And he would know, having worked early in his career on the IT side of aerospace and defense projects as an associate research scientist at Honeywell's Systems and Research Center in Morristown, N.J. "At the time, we were developing applications using rules-based expert systems, lightweight object-oriented development and peer-networked workstations to solve hard business problems," says McGuigan. "When I left for mainstream business, I thought I would never see those technologies again."
Although it surely wasn't the typical path for an insurance CIO, McGuigan says that having had the opportunity to work with such innovative technologies gives him an advantage in his insurance career. "I see the industry in the next 10 years as being in a technology arms race as we provide the level of information and automation that enables us to develop new products faster and faster," he explains. "Everything we do [in IT] today has a direct impact on our customers and, therefore, on our growth and profitability."
With dramatic growth in the use of process automation and online tools, for example, technology in the insurance industry has been driven from the back office to the front lines to help customer-facing representatives process policies and find information quickly, and to help provide customers with information through customer-facing applications, McGuigan points out. Consequently, since arriving at Liberty Mutual in 2004, he says he has worked to align the information systems (IS) organization with the carrier's three U.S. business units to enhance profitability and ensure that IT supports business initiatives.
To gain a comprehensive view of IT across the enterprise, McGuigan established three IS units to manage projects and the budgets related to the carrier's distribution channels -- one serves the independent agent channel that handles small business clients and individuals; one serves Liberty Mutual's captive sales force, direct response centers and the Internet, which handle individual business; and the third group serves the carrier's captive sales force and brokers that handle commercial business. These groups now have divisional CIO positions that report to McGuigan so he can get an enterprisewide perspective of IS. "While the divisional CIOs report to me, they view themselves as part of the business group's management team," says McGuigan.
Through these management teams, McGuigan has learned that the biggest challenge for the enterprise is increasing speed to market and understanding customer segments to price products appropriately. "The biggest challenge is how to increase our speed," he says. "The winners are the ones that can bring new technology and new products to market faster."
One way to get products to market more quickly is to maximize uptime. With an IS staff of 2,200, McGuigan is the driving force behind major quality and compliance initiatives that have reduced the carrier's unplanned downtime by more than 90 percent in the past two years. "We have been employing IT Infrastructure Library (ITIL) almost in stealth mode rather than attempt a big-bang implementation," he relates. "ITIL provides an excellent framework for figuring out how to improve, but we use business and IT metrics to determine where and when we should direct our efforts. By focusing on responsiveness in incident management, prevention in problem management and good controls in change management, we have made dramatic improvements in every area of quality and reliability."
In the past two years, Liberty Mutual's IS department also has deployed technology that has dramatically improved the efficiency of business operations. One of those projects was the implementation of a document management system to reduce the time and effort required to handle workers' compensation claims. "By moving to electronic documents, we give our business partners not only the ability to increase productivity, but also the ability to better utilize the expertise in the workforce," says McGuigan. "We move from a paper-based physical claims office to being able to support a nationwide virtual office." Liberty Mutual began rolling out the document management system to its workers' compensation business in June 2005.
In order to better manage costs, Liberty Mutual also implemented an enterprise procurement system that will increase visibility into procurement and standardize processes. "Because the business strategy was exceptionally well conceived, the objectives clearly laid out, and the partnership between the business and IS team was rock solid, we completed enterprise deployment in seven months," says McGuigan.
Automation and process standardization also resulted in an increase in business capacity. "Two years ago we struggled to manage a workload of 30 to 40 contracts at a time," says McGuigan. "With no increase in Liberty staff, we now handle well over 100 deals on an ongoing basis."
The carrier also has made it easier for agents to work with Liberty Mutual by building a new technology interface for independent agents to quote and write business. The portal, which was developed in-house using ACORD standards, allows agents to quote a wide range of commercial and personal lines of business, and automates many kinds of endorsement processing, according to McGuigan. "It's a very competitive business, and if your interface and workflow don't line up with what the agent wants to do, he or she won't use you as a carrier," he asserts. "Today, businesses of all sizes are looking to streamline their processes and manage their costs. The partners that best support them in this, and provide the products their customers need, will be the overwhelming winners."
Since the user experience has become such a key driver of business success, Liberty Mutual also has established an IT infrastructure unit to monitor the carrier's top 50 applications in the data center. These applications manage critical customer and business continuity services, according to McGuigan. "Our customer service applications are closely monitored," he explains. "The availability of the right information or the ability to solve customers' problems the first time around helps drive customer satisfaction."
"Monitoring also creates the raw data needed to drive continuous quality improvement," McGuigan continues. "The key to our quality improvements has been having the right data to begin with. After that, the rest is easy."
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Senior Vice President and CIO, Liberty Mutual Insurance Group (Boston; $21.2 billion in annual consolidated assets).
Size of IS Staff: 2,200
Career: McGuigan holds a bachelor's degree in psychology from Fairfield University and master's degrees in science and philosophy from Yale University. He started his career as an associate research scientist at Honeywell's Systems and Research Center (Morristown, N.J.) in 1986. In 1988, McGuigan joined Merck (Whitehouse Station, N.J.) as director of information planning. He then moved to Medco Health Solutions (Franklin Lakes, N.J.) in 1993 to establish an information services group. McGuigan joined Liberty Mutual Insurance Group in 2004 as SVP and CIO.
Pastimes/Hobbies: McGuigan enjoys playing the trumpet. "At one point, I thought I was going to be a musician," he relates. "But fortune saved me from that fate."
Last Book Read: "1776," by David McCullough.