CNA’s Golden Boy

It's probably safe to assume that when Continental Assurance Company of North America was formed in a modest two-room office more than 100 years ago, a technology strategy for interconnectivity was not one of its founders' top priorities. But the carrier that charged Michigan's railroad workers $1 in monthly premium for health and accident coverages in 1897 has come a long way from its humble beginnings.

Today Chicago-based CNA insurance companies ($62 billion in assets) is a global company with the fourth-largest commercial presence in the US. Although it counts The Hartford, Kemper, Travelers and AIG among its biggest competitors, John Golden, chief information officer, CNA insurance companies, contends the company offers the broadest array of products. According to the IT executive, 70 percent of the carrier's business is composed of P&C lines, with life and group coverages making up approximately 20 percent. The remainder of CNA's business is composed of reinsurance lines.

Although such a diversity of products may keep the carrier's IT organization striving to stay several steps ahead of the competition, Golden—who has been with the insurer since mid-2001—seems well-poised to address CNA's business challenges. Working with a $520 million budget and a 1,600-person IT team, the CIO has recently overseen a major transformation of CNA's IT. With a reemphasis on delivering business value by reducing unnecessary expense, the carrier has consolidated its applications and centralized its 20 disparate IT groups into one.

Ridding Redundancy

"CNA had so much redundancy," says Golden. "IT needed to achieve cheaper maintenance so that we could apply new applications." As a result of its goal, CNA has eliminated 17 percent of its applications. Prior to the metamorphosis, "our development team spent 62 percent of its time handling maintenance and 38 percent working on new projects. One year later, we've flipped these numbers and 63 percent of time is spent on new projects." Because a major chunk of its financial resources are no longer being drained, $200 million of the budget is now allocated for new initiatives each year. But the transformation has not rid the CIO of all his difficulties. Golden concedes that the consolidation has resulted in his greatest business challenge—that is, "meeting the individual needs of the business segments while taking advantage of the synergies across the businesses," he explains. "That involves getting the priorities of the disparate businesses aligned to develop the right single set of solutions."

CNA's End-Game Solution was created to help deal with that challenge. The three-year project was designed to take advantage of commonalities that exist among business processes as new solutions are implemented. Specific objectives of the plan—which will reach completion in mid-2005—include the launch of more profitable products and the implementation of tools enabling better understanding of claims leakage and risk. Additionally, Golden hopes to develop enterprise-wide security and acommon customer database in order to deliver sustainable value. "CNA insurance companies will spend $1.5 billion on technology in the next three years," says Golden. "If IT doesn't develop a much better business environment over those three years, IT will have failed because it will have just kept things running."

Keeping the Fat Off

Because Golden recognizes that he and his team must work to keep off the fat that has been trimmed from systems maintenance, while building the muscle of its deliverables to the business, he has established a strategy focusing on five key steps: making the right choice in business partners; proper program management; the use of more comprehensive solutions; greater technology and application portfolio management; and a comprehensive delivery framework. Golden recognizes the importance of weighing the total cost of ownership in each of these steps.

"The expectation of the company is that IT costs will be driven downward, but as we move forward the business will have more dependency on technology," says Golden. "Keeping the focus on the total cost of ownership has caused CNA to make a lot of decisions that are different from those that would have been made in the past." Prior to CNA's cost-of-ownership focus, business managers would get caught up in the immediacy of the need for a solution, relates Golden. IT would focus on getting the solution up and running and worry later about its cost of maintenance, but the topic would never be revisited "because IT would move on to putting out the next fire." CNA's new commitment to getting things done right the first time is successful because it's not just an IT priority but a business priority, as well. "If you don't have the right business environment you aren't going to pull this off."

A recent initiative that CNA was able to "pull off" through collaboration with the business was the delivery of the carrier's home-grown Merlin tool. The tool, described by Golden as an executive dashboard being used by P&C business staffers to measure and manage results, not only enables the application of analytics to business management, but the product's implementation also has reduced the number of CNA databases.

According to Golden, CNA's chairman, Steven Lilienthal, played a pivotal role in attaining the consistency of data required for the project's success. Lilienthal identified his "landing lights"—the numbers that he needs to manage the business. The carrier's senior financial officer, Maggie Westdale, then took these requirements out to the business and drove the standardization of how those numbers are attained. "It was one of those classic projects where you wouldn't know who was a member of the business and who was a member of IT," relates Golden.

Today, "any field office can log-on to Merlin to see how much premium is being spent by a certain segment, how much business is being done by a specific branch agent or how a certain product is selling," he continues. Merlin is also making Lilienthal's job easier. Prior to its implementation, says Golden, P&C business managers would meet with the chairman to report changes in the business, but, because information was gained from disparate sources, it lacked consistency and the numbers just weren't adding up. "Lilienthal could never figure out why the business was always losing," says Golden. Now that managers are all receiving their information from the same source, the inconsistencies have been eliminated and a more accurate analysis can be made.

Gaining an Edge

In another effort to sew the thread of commonality throughout the enterprise, CNA began its Edge initiative last year. The enterprise-wide project's objective is the creation of a common desktop infrastructure. Prior to the initiative, most of CNA's desktops were operating on Microsoft (Redmond, WA) Windows 95 or 98, while others ran on IBM's (Armonk, NY) OS/2. Because the carrier had consolidated its 20 disparate IT groups, the support of applications that had code built into their corresponding operating systems was "out of control." In such an environment "I couldn't guarantee stability."

In an undertaking that Golden likens to "Y2K all over again," the carrier decided to upgrade its desktop operating system to Windows XP and examine all of its applications. "We physically went in to every application in order to explore how it would work on XP," says Golden. "CNA had to decide whether it would be cheaper to shut down an application or convert it." Twenty percent of the time, relates Golden, it made sense to shut the application down.

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Consolidating Maintenance

"At CNA, IT is building a team and processes that can consistently deliver results. We know we need to build consistent capability," says John Golden, CNA insurance companies.

COMPANY: CNA insurance companies (Chicago, $62 billion in assets).

LINES OF BUSINESS: P&C, life and group, reinsurance.

KEY EXECUTIVES: John Golden, chief information officer; Stephen W. Lilienthal, chairman and chief executive officer; Robert V. Deutsch, executive vice president and chief financial officer; Maggie Westdale, senior financial officer; James R. Lewis, president and chief executive officer, CNA P&C Operations; Robert W. Patin, chief executive officer, CNA Life and Group Operations; Debra L. McClenahan, chief executive officer, CNA Re.

IT STAFF: 1,600

IT BUDGET: $520 million

KEY INITIATIVES: Merlin, a tool used to measure and manage results; Edge, the creation of an common desktop infrastructure.

I&T: WHAT IS YOUR GREATEST BUSINESS CHALLENGE?

JOHN GOLDEN: "Meeting the individual needs of the business segments while taking advantage of synergies across the businesses."