Data Warehouse Helps Debunk Myths

As a writer of life, disability and credit insurance, Life of the South Insurance Co. is hardly a household name in the insurance industry. And as a small insurer ($300 million in premiums), it must make the most of its 15-person information technology team, says Bob Fullington, senior vice president and CIO of the Jacksonville, FL-based company. "We want to operate at a high level of competence," he says. "We always select software and hardware with those things in mind."

So when market pressures forced the company to look at its operations, Fullington couldn't lean heavily on his IT team and expect it to produce numerous proprietary applications. "There has been an aggressive stancefrom customers who want their revenues increased," he says. "In this business, margins are always tough. We asked, 'Is there a value or an additional service that we could provide to increase our service? 'Understanding that, we have taken our clients' data and used data warehouse technology so we can understand their products."

Approximately two years ago, Life of the South began developing technology to better serve its client base, mainly credit agencies and banks. Knowing its small IT staff could only do so much development, Fullington wanted all systems to be able to run on the company's existing IBM (Armonk, NY) AS/400 servers. "We have three AS/400s—a main processor, a firewall server and a Web server," he says. Currently, Fullington is considering moving operations to an IBM Netfinity server setup.

The AS/400s run Life of the South's new data warehouse, powered by a Coglin Mill (Rochester, MN) Rodin database software. "With the technology, we have done some analysis and we have found many things our clients thought were true about their customers were myths," says Fullington.

For instance, "People say insurers shouldn't insure motorcycles, but we found motorcycles actually have a low loss ratio," says Fullington. "People that buy motorcycles are middle- to upper-class professionals, generally conservative. We also found insurers don't want to insure RVs. RVs sell to people who are usually retired"—as a result there is a higher chance they won't complete loan payments. "When you get a chance to look at the data, you see the trends that impact the bottom line." Fullington says data analysis has also detected fraud. Life of the South debunked these myths by analyzing the data with Brio's (Santa Clara, CA) desktop data analysis software.

The data warehouse and analysis tools, tied in with the company's self-built administration system, data imaging product and Web functionality—which "pushes" reports and data to users—has allowed Life of the South to act as an outsourcer for other small insurers. "We provide total administration of life products for other companies," says Fullington. "We do all of the reports and accounting. As a small company, if you don't have $100 million in premium, it is hard to do your own processing."

Fullington says all of the services are available to clients over the Net, so remote software and hardware maintenance is not required. The only "software" that must be installed on a client's desktop, he says, is a "small plug-in that clients download on the Internet for the Brio application." As a result, 50 percent of Life of the South's business is now from outsourced contracts.

One challenge Life of the South ran into during the implementation was not so much a technical problem as a human one. "We ran ahead of some of our customers who weren't up to speed with technology yet," according to Fullington. "Some were still doing things on typewriters." Another problem was at Life of the South. "It is hard to tell people who have been with the company for years they are no smarter than the person that just walked through the door because the systems are so easy to use," says Fullington. "We are working to have people understand change so they aren't threatened by it."

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SOLUTION: DATA WAREHOUSE

COMPANY NAME: Life of the South, Jacksonville, FL, $300 million in premiums.

LINES OF BUSINESS: Life, disability and credit insurance for banks and lenders.

VENDOR/TECHNOLOGY: IBM (Armonk, NY) AS/400 servers, Brio (Santa Clara, CA) data analysis software, Coglin Mill (Rochester, MN) Rodin database.

CHALLENGE: Develop new customer-focused technology with IT staff of 15.

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