IT Matters: UnumProvident CIO Devises Strategies to Integrate Disparate Systems from Four Insurance Companies

by nextslm.org staff

IT matters when it comes to the merger of four insurance companies. Colonial Life & Accident, Paul Revere, Providence, and Unum – came together to form UnumProvident, the world’s largest disability insurance company with $40 billion in assets and 13,000 employees. The company underwrites individual and group disability, long-term and short-term group life, and long-term care insurance. In fact, Fortune magazine has named UnumProvident one of the 10 top best insurance companies in the U.S.

Bob Best, UnumProvident's Chief Information Officer, says, “Each company had a different piece of the marketplace, different customers, and different product lines. Our strategy consisted on integrating and consolidating about 30 different product-based systems into two standard operating platforms, which could provide customers with multiple offerings efficiently from one company.”

Unlike a lot of CIO’s at major companies, Best has to make sure that 1,000 of their employers receive exceptional customer service from more than 3,500 call center employees. Best is also the senior vice president for customer service. Best’s IT organization consists of 800 applications developers, and 400 employees from a third-party services company who manage the network infrastructure.

Best recently took the time to answer questions about his IT organization’s continuous drive to keep integrating and building systems to scale to support growth and quality of service.

Q. How does your company differ from other types of insurance companies?

UnumProvident is the result of the merger of four insurance companies completed in 1999. Unlike many large companies, our IT initiatives focus on customizing and integrating hardware and software from third-party vendors, such as DB2 from IBM. Our human resources and benefits system runs on PeopleSoft. We also develop many of our own tools, which explain why we have so many developers. For example, we wrote all of the application systems that support all of our underwriting areas, and our entire customer interfacing. We built out data warehousing piece based on an NCR Terdata system.

We’re not a typical life insurance company or property or casualty company. Instead, by focusing successfully on one line of business, we’ve become the market leader in disability insurance. We built a lot of capabilities into our systems that have enhanced the quality of service that our customers receive. Off the shelf packages tend to fit well with how we want to interact with our customers.

However, we do use a lot of infrastructure packages to support our custom processes. For example, a workflow imaging product from StaffWare has enabled us electronically to capture claims that are faxed to us. Our CoreChange portal engine has enabled us to offer our customer immediate access to all of their administrative information, such as forms. This technology also enables our employees to have online access to any type of training materials.

Q. Tell me about some of the unique databases you have developed?

We have the world’s largest disability and return to work databases in the world. Our large employers have helped us to tailor their reporting, and in turn, we’ve developed specialized services to help our customers with absence management, disease management, and disability management.

Q. Can you go into specifics about the role IT played in the merger of the systems from the four companies?

Our tactical role consisted on bringing together all of the different systems into two standard operating platforms – one for traditional group business, and the other for individual and worksite business.

Our strategic objective was to create more robust product offerings and present them seamlessly to our customers. To accomplish this, we had to bring together all the lines of business and customers. We had to change our business model from being a product-oriented company to being more focused with services our customers could benefit most from. We had to make sure we had back-end services that worked efficiently.

Q. What has the payback been for the consolidation?

Reducing overlaps and duplication has enabled us to reduce our overhead significantly. I don’t want to give specific figures. It was an interesting time to do a merger. The dot.com’s had heated up the industry. Rather than get caught up in the dot.com boom, we concentrated on merging and consolidating systems from the three companies. We partnered with IBM Global Services to consolidate 14 data centers into one, and to find the best operational practices for managing this data center. IT is right up there with our key operating areas.

Q. What’s the company’s strategic vision?

It hinges on three areas -- to bring integrated solutions to our customers, to continue to develop and to expand our market leadership around return to work practices, and to bring more comprehensive solutions around existing products and services, such as absence management.

Q. How does the company measure the performance of IT?

Right after the merger, we developed IT governance board consisting of all the IT directors from the new operating areas. We meet for about four hours each month to discuss key issues ranging from pitfalls in service level agreements to new investments more than $100,000 we want to make. Because of going through the merger, we also discuss ways we can mitigate IT risks to the business areas. To this end, we’ve developed a lot of expertise in planning strategies which we deliver to senior management.

Q. Does your IT organization operate as a shared service?

We’ve a decentralized and a centralized model that operate concurrently. We like to leave discussions about investments and resource allocation at the IT governance board meetings. We also locate our IT developers with the business areas they support. Our frontline IT managers and directors also sit with their business area. Some of IT staff has a dotted reporting line to a business line.

We’ve just completed a two year reengineering effort in one of our largest operating areas. Members of the IT staff worked with the business line executives to develop processes. We’ve worked very hard to have a strong collaborative effort between our business owners and our IT owners.

Q. Are you using best practices such as Six Sigma?

We’ve done some work around process control. IBM uses a lot of those tools. We’ve a request for a proposal for a third party to consolidate some of our change management practices.

We use a lot of best practices that focus on application development. Our large project office handles all of the reporting, metrics, and management techniques for each project as it moves through its lifecycle.

Q. Is your development effort similar to what you might see in the open source community -- everything is looked at, no one owns any code?

We’re working towards that goal. We still have some pre-merger issues to work out. Right now, we spend more time managing our business rather than developing more common software.

My budget is about $200 million. Outsourcing the infrastructure to IBM for 10 years has helped us to cut operational expenses.

During the dot.com boom, some companies wall off their developers so they could concentrate on building an e-commerce infrastructure within record time. We didn’t do that. We started offering an online service called ibilling. We’re still building the front-end infrastructure to that service. By focusing on the merger, we wound up a year behind where the rest of the market was. To this end, we were able to understand our business, work on some problems, and than get back to building our e-commerce infrastructure.

One of our latest initiatives will enable about 100,000 small to medium businesses to use Web-based administrative services to access their employee benefit booklets, their plan administrator guide, their contracts and billing history, and to download forms, as well to make changes to employee information.

Q. Did you read The Harvard Business Review article, IT Doesn’t Matter?

I didn’t agree with it. First of all, I didn’t grow up in IT. Instead, I started with the company in the mid 1980’s as the chief operating officer. IT has to provide a value to the company by enabling the business. IT is too big and powerful weapon to standalone. If you collaborate with the different business areas to make sure everything runs efficiently, then IT can add tremendous value to the company.

Some innovative technology solutions didn’t work for us. We created a portal so customers could file claims electronically. Our larger customers didn’t find it efficient because of the signatures required from so many different healthcare providers. It has been easier for them to just fax all of the signed forms.

One of the value-added services we offered following the merger consisted of providing customers with access to clinical specialists rather than a general claims representative with some knowledge of specific medical conditions. Throughout the country, we have groups of medical professionals – doctors and nurses – who specialize in areas such as Cardiovascular or Orthopedics.

Q. What are your manpower requirements for the next two years?

We’ve added personnel since the merger. However, our manpower requirements for 2004 will remain flat. We don’t hire based on specific plans. The needs of our business drive our personnel needs in IT. Anyone we hire must have the capability to become stepped in business process and work closely with our business lines.

Q. What type of projects are you working on?

We have four reengineering projects to support our different business areas. We’re concentrating a lot on standardizing processing by putting all of our different lines of business on the same front-end interface.

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