If you're a subscriber to the print edition of Insurance & Technology, you have likely received the September 2008 issue that mailed recently. Contained within the September issue was a Carrier Confidential feature on Liberty Mutual Agency Markets, the Liberty Mutual Group business unit responsible for the Ohio Casualty and Safeco integration efforts.
Not contained within that article though, were comments from Joe Gilles, an Agency Markets executive vice president. As manager of finance, actuarial and administration, Gilles was in a unique position to discuss Liberty Mutual Agency Market's IT environment and philosophy from a business perspective. Excerpts from my conversation with him are below.Insurance & Technology: What is your role in the integration efforts at Liberty Mutual Agency Markets?
Joe Gilles: My general role, finance and actuarial, sort of gives me the keys to all doors in the company because those two areas in the insurance world get to worry about all issues. The administrative part [of my role] means that I'm pretty much involved with, are very active in, or run most of our due diligence exercises and integration work.
Last year with Ohio Casualty, for instance, I headed up the integration piece for all the specialty lines. Right now, for Safeco, I'm managing all the integration pieces for all shared services. Finance, actuarial, human resources, IT, claims, investments, corporate shared services, legal -- all those teams report to me. Not every minute of ever day of course. They have their own jobs, but for the transition I'm supposed to keep up on what they are doing.
I&T: I would imagine then that you work fairly closely in that role with people like Agency Markets CIO James McGlennon and application portfolio and software development director Bob Lewandowski.
Gilles: Even when I'm not in that role. James sits about 37 yards from [my office] and I probably spend hours with him -- at least it feels that way -- every day, all the time. I would be James' number one contact in the group. He sees me more than he probably sees his boss.
I&T: What is the nature of that working relationship? What do you and James work on together?
Gilles: Basically, we decide each year what to spend on technology and for us it's roughly $200 million. James and I work together to say, of $200 million, how much is spent on maintenance, how much is spent on infrastructure, how much is spent on development projects. And then of that money spent on development, we determine how much is spent on integration activities and how much is spent on a new claims system or a new commercial lines systems or billing system, etc.
James and I know the entire portfolio and we coordinate those decisions for everybody. There are [other] people making individual decisions, but if you're working on a commercial lines systems, it is going to have an impact on the claims and billing systems. James and I are the two people who get to see the big picture. We call it portfolio management.
I&T: When you make these decisions, do you employ an overriding philosophy to technology investment?
Gilles: Well, yes. I'd tend to say our overriding philosophy is spend money first and foremost on things that affect agents and customers and second on internal needs. Obviously, you spend a lot on both those areas. When projects come to us we're looking at the cost and the benefit. We're looking at what the return on investment is, but we're also looking at who gets the return.
I&T: What are the key investments in that space right now?
Gilles: The biggest one is a commercial lines policy administration system. We bought Ohio Casualty and numerous other companies and they all had different policy management systems. We're down to two, maybe three with Ohio Casualty, and we're aiming for one. That's our biggest project by far.
The second biggest project we have going on now is probably the personal lines system. The Ohio Casualty integration is large, but not as big as those two in terms of dollars. Although, it probably touches more people, both on the business and IT side, but has less total cost.
I&T: As someone that sits on the business side, but obviously has heavy involvement in technology decisions, what kind of technological expertise do you have to have?
Gilles: It's impossible to keep up. I'm an actuary by training, which means I've used computers, programmed and run major technology projects as a project manager. I'm on IBM customer council and I go to those twice-a-year meetings. James and I talk about all issues. So, I keep up by reading and staying close to James. He is, by far, smarter than me when it comes to technology.
I&T: When buying or building new systems, how do the issues of longevity and adaptability come into play. How long are you expecting a system to last?
Gilles: To a degree, I would say 30 years ago that people wanted a system that would last 30 years. I don't think that is true anymore. You look at systems today and you want a reasonably short return. Also, you want a modular system so that you don't have to have the system "last forever." You want [aspects of the system] to go out of existence in five years to be replaced with a better part, so to speak. The interface changes more often to the backroom. So, you look at the lifecycle of the components and you want an architecture that allows you to change components at their own lifecycle.
30 years ago when we were building system in a COBOL world, there wasn't that luxury. There tended to be monolithic systems that had one preordained life expectancy.
I&T: When it comes to technology details, you naturally rely on James. In what areas might James rely upon you?
Gilles: I would say we work very well together and we help each other think. My role is frequently related to what the impact [of a given technology investment] is on a $6 billion business (which will be an even bigger business next year). How do I think it will impact 6,000 agents across the country, or [our] employees? It's a functional thing but also what I think will best help us do our job from an emotional, cultural and psychological perspective.
I&T: Has James been required to be more in-tune and aligned with the business than perhaps past CIOs have had to be, if for no other reason than that technology has become an increasingly important aspect of the insurance industry?
Gilles: I would say that the answer to that is yes, except I think that at Liberty Mutual that might have started ten or fifteen years ago. We expected our IT people to be conversant in business, and vice versa for a long time now.
I&T: How has that helped things?
Gilles: I'll say it bluntly. It wouldn't work otherwise. It would fall apart. You can use technology to automate exactly the wrong thing and you can, as a businessperson, ask questions that will get you the wrong [technology]. If the businessperson doesn't know enough about technology, he or she will never ask the right questions or manage projects in the right direction. You'll never get what you really need, even if you might get what you asked for. And, on the technology side, you might program something that is really, really neat -- but useless.