Living the Digital Life

Chuck Cornelio, EVP of Technology and Insurance Services, Jefferson Pilot Financial Chuck Cornelio's vision of a "digital life company" is nearing fruition. At the helm of Jefferson Pilot Financial's (Greensboro, N.C.; 2003 revenues of $3.57 billion) technology organization, Cornelio is close to completing what he says is the individual life insurance industry's first fully functional straight-through processing application. Though STP relies on a strong technology component, Cornelio believes that people contribute as much to IT's ability to deliver bottom-line benefits to the enterprise as does technology.

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I&T: Why did Jefferson Pilot Financial institute a business-aligned technology strategy? What are some of the benefits?

Cornelio: We determined some years ago that we could get real benefits by embedding technology within our business model. IT is aligned with the business in both our group and individual businesses. Although IT doesn't report to the business leaders, IT folks sit with the business leaders during strategy-setting in management meetings. They provide information on how IT can support the business, not only from a cost-savings and efficiency standpoint, but from a top-line perspective. As a result, we have a very integrated, forward-thinking technology strategy that is different than other strategies in the business.

I&T: What's an example of a technology decision that resulted from business alignment?

Cornelio: At Jefferson Pilot, technology is viewed as a real enabler of top-line business growth. For example, we removed all the legacy systems in our group business and replaced them with state-of-the-art applications with a common platform. That same platform is used from the time a broker completes a quote, through underwriting, administration and, ultimately, to the payment of claims. Information that comes over the Web does not need to be manually handled.

We have a similar effort under way in the individual business, where we are about to turn on straight-through processing. Applications come in over the Web - or are imaged if they come in on paper - and are electronically sent to an underwriting rules engine. Depending on the policy size, the system makes an underwriting decision, orders requirements and issues the policy and sends it off to the agent. It significantly reduces the need for human intervention.

I&T: Both your individual and group businesses have some of the lowest expense ratios in the industry. How does technology help you maintain that efficiency?

Cornelio: Those low ratios are due to a combination of technology and lean manufacturing principles. We got it right in that we didn't just apply technology to our processes but concentrated our efforts on first changing those processes - to straighten out the curves in the paths - for example, to reduce handoffs and eliminate multiple points of contact. Only then did we apply technology to the process.

I&T: Is "lean manufacturing" similar to Six Sigma and other total quality management methodologies?

Cornelio: Lean manufacturing is similar to those. It was created by Toyota and is more team-driven than Six Sigma. We have product champions, but lean manufacturing is mostly a cultural change in how the managers think about their processes.

I&T: Was it difficult to disseminate this cultural change throughout the organization?

Cornelio: In some areas it was very difficult. Rather than employ a whole job concept to a process, lean manufacturing breaks the process down into its parts, like an assembly line. There was some initial dislocation, but when employees and management saw the actual results of improved quality and speed and reduced expense, they all became believers. It's not hard to sell a lean manufacturing project at Jefferson Pilot any more.

I&T: Jefferson Pilot has been on a mission to create a "digital life company." What does that mean, and where are you in that process?

Cornelio: Being a "digital life company" means removing all the friction out of how the company does business. We do that by eliminating paper and handoffs and by reusing data and applications.

We still need to continue to improve reusability. In every large organization there are places where people are better at this stuff than others. We continue to root out those areas where people print things to paper or still do manual transactions that we've automated with technology.

I&T: Where do your legacy systems fit into the digital strategy? Are you retrofitting those systems or replacing them altogether?

Cornelio: We got rid of our legacy systems in our group business. We could do it - although it did take a lot of work - because that's an annually renewable business where we're not tracking policy values or paying commissions over 30 years. We also no longer use legacy systems for new business. But the main guts of the organization, our administrative legacy systems - one of which is more than 30 years old - continue to operate.

Mainframe-based legacy applications have a very important function: They process millions of transactions for hundredths of a cent each. They are robust and stable and reliable. What you want to do is maximize the investment you've made in that legacy environment while minimizing the impact of those systems on your business partners.

I&T: Will legacy systems always be a part of the industry's infrastructure?

Cornelio: While I believe that the insurance industry will continue to try to minimize the inherent inflexibility of these systems, they won't be eliminated. Converting a system with a couple of million policies costs about $40 to $60 per policy.

In our company, you would have to justify that through a cost-benefit analysis, and I don't know how we would do it. You're much more likely to stop putting product on that system and put it into a mode where you are just running it every day. Using technologies such as n-tier architecture with a presentation layer allows you to extract what you need while making it less painful to your business partners.

I&T: How does outsourcing fit into your technology strategy?

Cornelio: We have not engaged in the broad sort of outsourcing that other companies have, primarily because we are already such a low-cost provider. My total cost of ownership of data is less than $10 per gigabyte. My guess is that an outsourcer is not going to be able to run the operation for any less than I can.

We will outsource as part of a broader strategic effort, however. For example, we are outsourcing the programming of a large application. But we made that decision because we agreed with the application provider that outsourcing was the best way to get the project done. We didn't do it simply to save money. We have the luxury of not having to be overly concerned with expense.

I&T: Looking out three to five years, do you see any technologies that will have a great impact on the insurance industry?

Cornelio: Technology that enables you to communicate with your field partners, such as feeding data into consolidated agency systems, will have a significant impact on insurance. For example, the marketing organization will be able to look at all of its pending business with multiple carriers from within one system rather than having to access multiple systems. Field partners are increasingly demanding that we send them data in a format that makes it easy to pull into their own agency management systems.

I&T: What is the most challenging aspect of your job as CIO?

Cornelio: At the end of the day, technology is only made up of people. I think that the most challenging aspect for anyone who sits at the top of the IT organization is the care and feeding of your people. CIOs tend to talk a lot about the capital in their machines and their software, but human capital is the guts of technology. You have to make sure you have the correct inventory of skill sets, that you keep those skill sets current, fill in any gaps by giving people the opportunity to efficiently learn new things, and continually match your best people with the projects and initiatives that are most critical to the company.