CNA
Peter F. Lazzari

Its a big job at a big company: Consolidate an overabundance of systems and software, upgrade all the users, and install an agent extranet. No problem.

In a time of bigger and bigger catastrophes, the ability to absorb loss is critical for an insurance carrier. Size matters more than ever, and CNA is one of the biggest.

Even after selling off its personal lines division to Allstatewhich renamed it EncompassCNA remains one of the largest U.S. carriers. It ended 2001 with close to $6 billion in P&C premiums, another $4 billion in life/group, and more from CNA Re and some other operations. It has about 12,500 employees worldwide, with the bulk of them in the U.S.

As chief technology officer, Pete Lazzari is responsible for all of the companys infrastructurethats all the hardware, systems (voice and data), data centers, networks, etc. Hes also responsible for all the software that runs on those systems for the property/casualty operations, although he only supports the hardware infrastructure for the life/health side.

Lazzari comes from the consulting side of the industry. With the exception of a five-year stint at apartments.com (one of the few dot-coms to achieve critical mass and survive), his entire career has been as a consultant with firms such as Andersen Consulting (now Accenture) and DiamondCluster. He got to know Bob James, CNAs executive vice president, while working as the interim CTO of e-business at CNA, while the company was conducting a search for a full-time candidate. Six months later, in April 2001, when CNA decided to centralize its IT operations, Lazzari officially took over his current role.

Theres a lot of infrastructure at CNA, and simplifying it is one of Lazzaris primary goals. CNA bought The Continental Group (another large carrier) in 1995, inheriting all of Continentals systems. In addition, CNA had been pursuing a policy of having autonomous business units, each of which purchased its own systems. Add to that the sheer size and complexity of the company and you see why Lazzari says, It seems like we have at least one of every system out there. And maybe we do.

For example, Lazzari says CNA currently owns 22 policy processing systems. It certainly doesnt need that many, so over time he expects to consolidate to as few as one or two.

Another example of size and complexity is the companys project to refresh and shrink its base of 20,000 desktops (more than its number of employees, if youve been keeping track). Its last standard had been Windows 95. Over a two-year period, Lazzari and his staff will be moving all of them to Windows XP. If that isnt enough, CNA currently has 1,700 software packages. Some of them are certainly redundant; some may not even be in use. Even as it consolidates that software (and saves on licensing fees), every one it keeps has to be tested and approved for the XP environment, and some will surely either not work at all or will need modification.

Lazzaris team uses a wrap, shrink, and roll approach with all these systems: They wrap the legacy systems with a common, browser-based front-end. They shrink the number of systems to one or a selected few. Then they roll them out, in a thoughtful, measured way.

Specifically, Lazzari has seven major, multi-year projects under way. CNA Central, the companys corporate extranet for agents, is a big one. A 500,000 man-hour project, it went live in 2001, giving agents the ability to rate, order, and issue small commercial policies for BAP (its version of BOP), auto, and workers comp. The company expects to add package policies as well as endorsement and renewal processing in 2002, and thats just one of its projects.

Other major projects include a legacy system consolidation, a desktop refresh program, a new underwriters desktop (workstation), a new system architecture for back office systems, a consolidated and re-designed management information system dashboard for management, and a knowledge management system to provide employees with easy access to knowledge from internal and external references as well as tapping the expertise of employees.

As Lazzari explained all this, it became obvious that there was a lot of thought behind it. CNA used CNA Central as a pilot of a comprehensive delivery process it calls Business Frameworkit defines how you go from a thought to a qualified idea, then it is defined in detail, a solution is crafted (example: make or buy), then on to construction, introduction, and full deployment. The project was successful, and CNA will be adopting Business Framework company-wide.

Despite its size, or perhaps because of it, Pete Lazzari seems to have a well-defined plan of where CNA is going with its technology infrastructure.

Indiana Farm Bureau
Victor A. Johnson, Sr.

All he had to do was upgrade a giant farm bureau from technology that was a quarter-century old.

There are fifty Farm Bureaus, one for each state. With $500 million in premiums, the Indiana Farm Bureau (IFB) ranks in the top quarter of those that also have companion insurance companies. In Indiana, its the number-two writer of personal auto (behind State Farm), number two in homeowners (ditto), and numero uno in farm insurance.

Victor A. Johnson, Sr. is CIO, but, in slightly smaller letters, his card also reads Senior Vice President, Information Services/Innovation & Quality.

Its the Innovation & Quality part that brought Johnson, a 22-year insurance veteran with an actuarial background in pricing and product development, to the Indiana Farm Bureau and ultimately to the CIO position.

IFBs CEO, Harry Frenchak, came to the company from Madison, Wis.-based CUNA Mutual, where he was responsible for a major reengineering initiative. Johnson had been his right-hand man as they implemented an Innovation & Quality process improvement program. When Frenchak came to Indiana Farm Bureau, the company was saddled with 25-year old green-screen technology, and decided to upgrade to PMSCs Series 3 system, which was popular with other Farm Bureaus.

But the project would involve much more than just technology, so Frenchak brought in Vic Johnson to streamline workflowthey wanted the company to realize lasting benefits with the new system. When Johnsons predecessor left, Frenchak asked Johnson to take that position. He did, hiring a strong CTO to handle the actual technology and infrastructure.

Farm Bureaus are inherently local organizations. With at least one office in each county of the state, Indiana Farm Bureau has 130 offices. It writes insurance through a network of 455 captive agents in these offices80 percent P&C (mostly personal lines), and the rest in life and annuities. Johnson and his staff of 140 IT people, along with about 20 outside contractors, support the companys 1,700 employees.

Indiana Farm Bureau was moving away from its ancient, homegrown systems and culture of unique rate and form filings. (One example: Every insured automobile was on a separate policy with its own billings.) Its now moving more towards standards, including ISO (with select coverage enhancements). That extends all the way down to the adoption of standard Microsoft Office products, including Outlook and Word. And agents and CSRs are now able to serve policyholders over the Internet.

Johnson inherited over 90 systems, and he plans to cut that in half, moving as much as he can onto my three big horses, as he calls them: Cyberlife (from Cybertek, now a CSC company) for the life company; Series 3+ (from PMSC, also now CSC) for its personal lines; and the Point System (once again, PMSC/CSC) for its commercial lines.

Why both the Series 3 and Point systems? Johnson says IFB wanted the more robust capabilities of Series 3 for its heavy personal lines, and the nimbleness of the Point system for the smaller commercial lines division and to pilot new products.

The project didnt start off well. In fact, it got rough enough in the early stages that IFB even considered pulling the plug. Johnson credits PMSCs decision to bring in Ray August in a senior management position as a major factor leading to a turnaround.

Ray totally changed PMSCs relationship with us, from a vendor-focused company pushing product to a customer-focused partner, Johnson said. For example, PMSC used to prioritize IFBs requests, and IFB would have to debate if it disagreed. Ray came to us and said that we were the customer, we should prioritize the requests, and [PMSC] would come back to us if they felt it should be different. That one change, alone, eliminated a major bone of contention.

Today, the project is well under way. IFB deployed its first vertical slicehomeownerson time and within seven percent of budget. Johnson credits this to two factors. First, IFB kept the modifications, commonly in the hundreds, to around a dozen. Secondly, it got the active and personal involvement of the corporate sponsors, as well as strong backing from the CEO. While its too early to claim victory, Johnson and crew are confident that the other lines will go just as well. The number of software applications is dropping, too; when auto goes live in 2002, that alone will eliminate at least a dozen current systems.

With all three core products coming from CSC, Johnson says, were in a unique position to help them integrate these products, which are currently individual silos. For example, all three systems need image and data storage, printing capabilities, reporting, browsers, and other functions that arent yet integrated. Johnson now sits on CSCs customer advisory board for its Series 3 product, so he can help push this development.

Johnson keeps in mind Frenchaks mantra of change through a focus on people, process, and technology. It looks like Indiana Farm Bureau is getting it right.

CSCs Series 3+, for which Indiana Farm Bureau was a beta site, is a modified version of the traditional version. With a mainframe back end (Amdahl, an IBM clone, in IFBs case), the front end is deployed on PCs and an NT network. It still retains the three-tiered architecture of Series 3.

Safeco
Yomtov Senegor

The companys profitability problems presented some challenges for its new CIO.

Safeco CIO Yomtov Senegor had only been with the company 90 days when we spoke with him, but in that time hed gotten a good handle on the company and the industry, and had begun implementing changes (in the company, that is). Its because he came in with a running start.

Senegors background is as an industry consultant; for the past five years, he was the central region managing partner for Accentures insurance practice, based in Chicago. During his 20 years with Accenture, Senegor helped some of the largest insurance companies in the U.S. automate their underwriting departments and integrate their systems. A graduate of the Illinois Institute of Technology, Senegor holds a BS degree in computer science.

Accenture deals mostly with the larger insurance companiesprimarily the top 50. Mike McGavick, Safecos new CEO, came from CNA, and he knew Senegor from work hed done with Accenture (formerly Anderson Consulting). So when McGavick took over as CEO at Safeco early last year, he brought in Accenture (and Senegor) to do a study on what it would take to implement the kind of changes he wanted to make at Safeco. When Senegor later came on board as senior vice president and CIO, he had actually been walking the halls at Safeco, working on the plans that hes now charged with implementing, since May of 2001.

For most of its corporate history, Safeco was a successful niche player. It focused on the Westparticularly the northwestand concentrated on personal lines and small commercial products.

Credited as the company that invented direct-billing technology, Safeco had a virtually unblemished history of steady growth and continued profitability. In 1997, it made the leap into the top tier of carriers with its acquisition of American States Insurance Group from Lincoln National. This enabled Safeco to become a leading writer of business policies for small- to medium-sized businesses. Whether it was the switch to becoming instantly national, the culture clash, the different product mix, or the market conditions (or more likely some combination of all of these), Safeco has had some hard times since. McGavick came on board in early 2001 with a clear mandate to restore Safeco to stability and profitability. Senegors job, more than anything else, is to help him do that.

After the addition of American States, and most recently a 10 percent reduction in force last year, Safeco is at about $7 billion in premium, primarily P&C (mostly personal lines) with the balance in its life insurance company. It has about 11,000 employees, and writes exclusively through its 6,500-member agency force. Most of them, Senegor says, are in the Pacific, Mountain, and Central time zones, although they are technically a national company.

Senegors first objectivealready accomplishedwas to install a new IT governance system. (This seems fairly obvious, but the company didnt have one.) In addition to the cost/benefit analyses, and sign-off by senior members of the projects owners, hes also looking for accountability from everyone involved. I expect everybody in my organization to have a clear line of sight on their projects, and how it will make a difference, to Safeco, in returning to excellence, he said.

In addition to the duties and responsibilities of any CIO, Senegor also wears another hat: He has the responsibility for corporate strategy for all of Safeco. The primary focus of that strategy is to return Safeco to its roots, refocusing on personal auto and small commercial policies, which are its primary strengths. Its steadily shrinking its book of large commercial business, and its holding steady on its large-homeowners book, which is traditionally a big but unprofitable area. (Senegor says that if you look at Safecos current numbers and eliminate the areas theyre shedding, the company would already be profitable again.)

Although Senegor talked a lot about metrics and measurements, and the plans already being put in place to implement them, there was another comment that was telling: In his initial work as a consultant with the company, Senegor said he was struck by the fact that peopleespecially the senior peoplewere actually looking for change. Here was a company, he said, that had had significant success in its history, and was not having that success now, and it was looking for change and leadership to get back to that earlier success.

He said that a company with a mandate for change was much more likely to be successful when the employees were embracing and not fighting it. Now its up to Mike McGavick, Yom Senegor, and the other members of the senior team to lead them there.

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