Liberty Mutual Sets Sights on Product Development, Sees a More Nimble, Speedy and Robust Future

For property and casualty (P&C) insurers success is intimately tied to their ability to satisfy their customers’ needs by enhancing their product ranges on an ongoing basis. So when Safeco Corporation – which was acquired by Liberty Mutual last September – wanted to improve its product development capabilities it turned to Accenture, becoming the charter client for its newly created Insurance Configuration Components (ICC) software solution.

Safeco’s focus is on insuring small businesses in the United States, a market niche that lends itself well to the application of predictive modeling, explains Tom Troy, executive vice president and chief operating officer in Liberty Mutual’s regional companies group. As a result, the firm has predictive models for each of its core product categories. But in building such models the need for data, and tools to see and use the data, grows exponentially.

“When that happens you start to run into constraints in the speed with which you can make product changes, because the modeling environment becomes somewhat rule driven, and there’s a great need to edit the rules,” says Troy. However, legacy technology starts to breakdown when it comes to rules management since it lacks the requisite nimbleness. “So a major driver to go onboard with ICC was this growing need to more effectively manage the rules sets that are involved in our predictive models,” he notes.

In addition, Safeco has been keen to improve the speed with which it brings new products to market, says Troy: “When you are focusing on the small commercial insurance business and are using predictive models, which have a great reliance on these rule sets, your ability to bring products to market quickly is tied to your effectiveness in testing different permutations of rule changes. And one of the great strengths of ICC is that it has a robust testing environment within the product builder that allows you to envision a product, build a rule set that you think would be effective in making it work, and then back test it on your book of business.” 

Accenture, working with Microsoft and a joint venture established by the two firms called Avanade, began building out the ICC application vision and capability about two years ago. The solution leverages Microsoft .NET 3.0 for support of Web services and full service-oriented architecture, as well as several distinct Microsoft products, including BizTalk for orchestration and business process management, SQL Server, Host Integration Server and Visual Studio, notes Gail McGiffin, senior executive in Accenture’s insurance practice. 

At Safeco the solution is also integrated with SharePoint, which “is providing the overall collaboration and process management and foldering,” she explains. “Product development is very much about information gathering and analysis, and it’s quite extensive and cross-functional in the organization, so there is a need for rigorous project management and the ability to capture, store and share documents.”

Using these technologies then ICC enables business users to configure their product definition and business rules management for all transactions across the underwriting policy space in a centralized environment, says McGiffin. The solution also includes adapters, which means ICC can be integrated into heterogeneous hardware and software environments, allowing users to push those configurations into, for example, its best-of-breed rules and ratings engines and legacy policy systems or quote portal, McGiffin adds. A run-time environment then executes calls and query services back to ICC, for example to validate the products or when quoting a policy.

ICC features a project management component too that enables the business to track the progress of projects to create new products or modify existing ones. Meanwhile, the testing component “allows the business to aggregate sets of rules and rates and run them through a test environment against existing customer policy data, to see where they might be displacing current customers based on product features,” says McGiffin. “And we have a deployment component that allows us to package the components and move them from the working space into the test environment and then subsequently into the production environment. So it puts control in the hands of the business in terms of being able to deploy new products and product changes.”

The components are then supported by a cohesive workstation that provides business users with a single place from which they can handle their product configuration, testing, deployment and project management, she adds.

And according to McGiffin, these capabilities offer multiple benefits to insurers. In particular, it improves the speed and flexibility of development for both original and derivative product offerings, enabling insurance companies to put more compelling offerings out into the marketplace. “It’s taken a process that can be anywhere from 12 to 18 months on average down to just a few months to get a product out the door end-to-end, including integration. And product changes have gone from several weeks down to hours or days.”

In addition, previously any time a company created a new product they also created a new application silo, McGiffin notes. But because ICC features a centralized repository of data definitions and allows for the reuse of rules it “is eliminating the need to build additional self-sustaining application capabilities for new products, because you’re getting tremendous reuse of products and their components, and you get much better integrity,” she says. 

Greater cost efficiency is another factor. “We’re seeing dramatic expense improvements of at least a couple of points in the bottom line in terms of being able to reduce application maintenance cost and total cost of ownership, as well as giving greater IT throughput,” according to McGiffin. “And with most of the changes being in the hands of the business, because of the externalized workstation capabilities, IT is able to focus more on the renewing legacy priorities, and there is no longer a bottleneck for product changes and product introduction.”

And Accenture and its technology partners are already “advancing the solution vision,” says McGiffin, with the build out of a more robust integration between ICC and what they call the “next generation workplace,” which aims to improve communication and collaboration within enterprises by streamlining and simplifying how people work. 

“We’ve created an end-to-end product development demo to visualize how you can move beyond SharePoint capabilities and integrate with email and communication tools such as chat, instant messaging and live meetings,” says McGiffin. “So we’re trying to more holistically address the full set of integration needed for end-to-end product management.”

As for Safeco, the original timeline of year-end 2008 for implementation of ICC has been delayed as a result of the Liberty Mutual acquisition. The firm therefore is in the process of assessing how best to bring together the two different mainframe environments that exist at Safeco and Liberty Mutual Agency Markets, the P&C strategic business unit (SBU) within Liberty Mutual Group, says Troy. “ICC is a layer that interacts very intimately with the policy admin system, and so we have to make the right choices on the direction we’re going to take with our mainframe environment. And then in the coming months we’ll be back to looking at how ICC is going to plug into that.”

Microsoft on the ICC Platform

At the heart of Microsoft’s collaboration with Accenture is the software firm’s insurance value chain (IVC) strategy. According to Bill Hartnett, Microsoft’s general manager for the U.S. insurance business, the IVC concept was designed to help the insurance business meet two key challenges: how to get better business process management into organizations, and how to leverage service-oriented architectures and Web services. “So the insurance value chain brings those two trends together, and allows you to get more out of both,” he says.

The common obstacle to business process management has been the brittleness of the legacy systems used in the industry, with organizations hobbled by the need to build new capabilities into legacy code, Hartnett explains. This is where service-oriented architectures have helped, he says: “If you can map the business process directly to the technology that supports it in a more granular way then you can start to achieve some business process management and streamline your operations.”

And by using Web services and industry standards, Microsoft has been able to work with its independent software vendor (ISV) partners to build an ecosystem of pre-integrated applications around the IVC. As a result, insurers can take advantage of best-of-breed systems that incorporate newer technologies and use those to transform their business, rather than having to write new functionality into legacy systems or face a massive investment in a new IT framework, notes Hartnett.

Accenture, meanwhile, has been a close Microsoft partner “from the beginning of our vertical efforts in insurance,” says Hartnett, having worked together originally in building Accenture’s claims and then underwriting solutions. And now with its Insurance Configuration Components (ICC) Solution – which focuses on product design and development – Accenture is producing a good demonstration of the IVC concept, says Hartnett, since “it takes this best-of-breed approach with applications such as ILOG, and ties them in to legacy systems using SOA and using industry standards as the glue that ties the applications together.”

The ICC platform is based on Microsoft’s core enterprise technology. For instance, on the back end it leverages Windows Server, and SQL Server 2008 for the product configuration databases. And using the .NET 3.0 Framework, and the Web services architecture generally, notes Hartnett, “we’ve created through ICC essentially the enterprise services bus that allows you to tie the ISV [best-of-breed] applications together.” BizTalk Server then exposes the systems out to the front-end workflows.

“And then SharePoint Server 2007 on the front end is where you expose all of this information into a workstation, where people can design and develop new products, and new workflows that will handle the production of those products, and get them to market quickly,” says Hartnett.

The ICC platform, therefore, is a revolutionary approach to architecture, contends Hartnett, since instead of having to pay for traditional point-to-point systems integration services, which are a major part of organizations’ IT investment spend, Accenture is providing companies with a reusable framework. 

What is more, the ICC approach is not restricted to large insurance companies, nor is it only appropriate for a small organization with a more simple technology environment, says Hartnett: “We think it spans the waterfront here.”

As for the future, the natural extension of creating services through service-oriented architectures is to have those services available in a cloud, so that “you could assemble the support workflows kind of on the fly,” says Hartnett. “And we are starting to look at that. Cloud computing is in its infancy, but we’re a major initial player, the same way we were with service-oriented architectures and Web services. And our goal is to have services available for things like rating or underwriting, or even a policy administration service, that would be available in a cloud, if that’s where the insurance carrier chose to deploy it.”

And as with the utilization of Web services, cloud computing offers the potential to start tackling the biggest component of the IT spend faced by insurance companies, and indeed financial institutions generally, says Hartnett: “It’s the services part more than the software that costs a lot of money, it’s the custom work that gets done. And the more we can start to map these services that support business processes and put them in a hosted environment in a cloud, the more we can start to fundamentally attack the IT budgets in a lot of institutions. We want to be leaders in that field, and I know Accenture does as well.”