Loma Emerging Technology Conference

focused on your success

The Value of an Asset Intensive Solutions Approach

Luke D. Kelleher, IBM Senior Managing Consultant
LOMA Emerging Technology Conference
February 20, 2009 - San Diego, California

IBM CONFIDENTIAL
© Copyright IBM Corporation

Global Business Service focused on your success

Agenda
Planned Session Outcomes
Trends - 2020
Assets and Solutions
– Insurance Self Service, Operations of the Future and Customer Insight.

Deep Dive into Insurance Self Service
– Business Drivers
– Approach
– People
– Process
– Technology
– Lesson Learned

Cases

2 Luke D. Kelleher: luke.kelleher@us.ibm.com | David S. Lipien: lipien@us.ibm.com © 2009 IBM Corporation


The outcome for today is to a look at assets holistically, understand how
leveraging your current systems can work and what is available.
Look at assets holistically
– Treat technology, processes, and people as assets.
Understand how leveraging your current systems can work
– Establish links between applications and services using an Enterprise Service Bus.
– Enable effective integration & re-use of legacy functionality across channels.
– Your existing systems are too important and would be very costly to rebuild.
Understand what accelerators, models, and assets are available
– Component Business Modeling (CBM), Service Oriented Architecture (SOA) and Model Driven
Architecture (MDA) play an important role in this transformation and the transformation of our
largest clients.
– Standards like XML 1 (Open Data), HTML, XHTML (Open Publishing), Web Services (Open
Interchange) and J2EE (Open Programming).
Understand the demand and management of the necessary skills
– Employees have become an increasingly important issue due to the aging of the workforce and
the shrinking of incoming labor pools.
– LIMRA estimates 38% decline in full-time affiliated agents.

1. WBI Insurance Adapter for ACORD XML V1.0. Enables business applications to send and receive business data and events asynchronously. A broker or server can exchange business
objects with applications that send or receive data in the form of ACORD XML messages.



Agenda
Trends - 2020

– Approach
– People
– Process
– Technology
– Lesson Learned

Cases



Consumer expectations, operations, business performance and regulation are
the four mega trends shaping the industry now and years to come.

2020 Megatrend Current Implications

Consumer Active and informed consumers Customer centric marketing is
Expectations across demographic groups key – 360 Degree view of the
reward non-traditional operators client.

Insurance Technology virtualizes the value Componentize business services
Operations chain and lowers barriers to entry to create an "assembly line“.

Business Insurance products are dynamic Pure standarization only creates
Performance and provide more consistent cost differentiation, not quality.
performance Think out of the box.

Regulation Regulatory coordination and Promote data quality and clarity.
affirmed industry standards What would you do in a world
broaden to international scales 1 without regulation?

Rob Henrikson CEO, MetLife 08‘ Investor Conference: “Substantially reducing costs, while
investing more in application development to further drive customer value.”
Source: 2020 Mega Trends: IBM Institute for Business Value | 1. http://www.cmcrossroads.com/content/view/7908/120/



Agenda
Trends - 2020

– Approach
– People
– Process
– Technology
– Lesson Learned

Cases



Assets delivered as well defined solutions meeting today’s challenges are
insurance self service, operations of the future and customer insight.

Product Policyholder Policy Claims
Marketing Underwriting
Operations Acquisition Administration Management

Channel Management

Customer Relationship Management

Enterprise Resource Management

Solutions Across the Insurance Value Chain

1. Insurance Self Service (B2C or B2E):
• provides carriers with the ability to rapidly deploy a website (portal) that will provide both Agents and
Consumers with an easy to use, real-time, highly personalized access point to the carrier’s new business and
support functions.
2. Operations of the Future:
• enables a carrier to automate the processing of inbound documents and service requests. The approach is
to automate business processes – from receipt of paper to production of output. The solution recognizes
inbound mail documents, converts them automatically to XML transactions, where they are processed
through Websphere Process Server by using exposed business services.
3. Customer Insight:
The foundation for facilitating and optimizing the information driven, customer oriented processes related to
marketing, sales, service and compliance across the financial services enterprise.



Agenda
Trends - 2020

– Approach
– People
– Process
– Technology
– Lesson Learned

Cases



We will take the Insurance Self Service Solution and discuss the assets across
technology, process, and people.

Conducts Complete
Business Participant interview with Links application Conducts manual
agent priorities to underwriting
product Asses Renders
Creates risk
via internet
Presents Conduct decision
campaigns and Prioritizes
Services illustrations interview
notifies agents needs

Marketing Customer Agent Underwriting

Carrier

Tom Wilson, CEO Allstate 07’: “We will grow Allstate by focusing on the consumer in an
industry that is not known for innovating to meet consumers' changing needs. Our vision is
to reinvent protection and retirement for the consumer“



Computing has become increasingly pervasive across all aspects of a
consumer’s life, significantly changing relationships with financial firms.

Today’s customers are more savvy and have
heightened expectations for how they interact
with financial services companies through a
variety of touchpoints.
Widespread broadband connectivity and
pervasive computing are resetting Broadband & Web 2.0 & Social
Pervasive Networking /
expectations and introducing new Touchpoints Collaboration
opportunities to financial services firms.
Old notion of “channel” is being replaced by
more fluid customer “touchpoint” relationship Enabling
Technologies
model, supported by the growth in the number
and use of mobile digital devices.

79% of consumers will commit to a deeper product or service relationship with a brand after a
satisfying experience1.

1. LaValle, Steve and Brian Scheld. “CRM Done Right: Executive handbook for realizing the value of CRM.” IBM Global Business Services



Behavioral changes of insurance customers suggest that insurers need
innovative and non-traditional ways to understand and court different customers.
Insurance Customers in 2020: Behavioral Changes
Gen Zers Gen Yers Gen Xers Boomers Seniors
Ages in 2020 b. 1988 - b. 1978 - 87 b. 1965 - 77 b. 1946 - 64 b. 1900 - 45
(12-32) (33-42) (43-55) (56-74) (75+)
20% of population 20% of population 15% of population 30% of population 15% of population
Value in 2020
5% of assets 10% of assets 15% of assets 35% of assets 35% of assets
Demand that loyalty be Expect personal Taking longer-term Demand multi- Seek products that
earned early control and high level approach channel service match their
of service options conservative, cost-
Fit products into hard Demand support for
How will conscious
working, high Want products that wealth-building via Seek support for
they seek approach
consumption, minimal support major life investments, transition to wealth
protection? savings lifestyle events (moving, educational savings, preservation, such Want high-touch
marriage) that trigger retirement assets as transfer and service and advice
Technology savvy
financial decisions retirement
Radical Behavioral Change to 2020 Gradual

Offer on-line services, Offer consultative, Offer non-traditional Provide Enhance
basic products collaborative products to satisfy preservation-based transparency in
How will approach to sales, life stage needs products, services customer service
Grow with customers
insurers court who are willing to
service
Provide greater
to largest, richest
Offer consultative
future segment
share info Meet convenience access to onsite and approach to sales
policyholders? Provide individual
expectations remote specialists Enhance multi-
Enhance branding
channel delivery
attention with service Settle on 1-2 channels Provide high multi- for security,
experience,
and product channel use as they advocacy
Avoid marketing that customized care
customization transition to later life
relies on behavioural
stages
assumptions
Note: Percent of population and percent of total assets controlled are represented only for people 18 and older. Source: Forrester Research; IBM Institute for Business Value



Customers expect consistency across channels, reward an innovative service
experience - they are ready to interact meaningfully online.

Firms can no longer afford to have poor Web sites (or web strategy) as
consumers visit, evaluate, and decide on insurance based on information on-
line.
Firms should begin by thinking about a commerce value chain focused on
their interactions with customers. Insurers must build a Web presence that
attracts customers, and guides them easily and swiftly through interaction,
action and reaction.
Forrester: 92% of customers value multi-channel integration and would like
all interactions fully harmonized.

Source: “The Online Insurance Imperative: Driving Growth by Expanding Your Online Presence" - ftp://ftp.software.ibm.com/common/ssi/sa/wh/n/gbw03067usen/GBW03067USEN.PDF



Asset intensive solutions are constructed by significantly leveraging re-usable
assets. The solution & assets used in its construction conform in a standard way.

Composite Business Ex: Fraud & Abuse
Services Management System (FAMS)

Ex: Comparative Quotes
Service (From SEEC)
Common Enablers (SCM,
Infrastructure)

Industry Framework
- Industry Content Packs
Industry Specific or - Process Models
Cross-Industry Content: - Information Models
(IAA) - Service Models
- Reference Architecture
- Adapters / Connectors
Suite of Products - Integration Toolkit, etc.



With all solutions people are a key assets to the success of the effort, that is
especially true of the Insurance Self Service Solution.
Skills – new skills needed and skills shortage:
– In a successful Insurance Self Service Solution resources that have both industry and
technology skills are needed.
– Computerworld 09’: “Demand for Web 2.0 skills is also driven by the continuing expansion of
business-to-business connections.”
Workforce Demographics
– Maturing baby boomers are followed by a much smaller group of generation Xers, making
potential replacements increasingly difficult to find and hire.
– According to IBM studies, depending on an insurer’s business strategy and model,
underwriters, claims adjusters, sales professionals, actuaries and others can make a
difference of between 10%-20% annual growth as well as have an impact on underwriting
profit and loss.
Global Delivery
– Cost pressures, increased speed to market, hot skills, skills shortages and demographics is all
causing this to be even more important.
Vendor Management
– Typically in asset based solutions you are dealing with integration, conversion, packaged
software and teams located globally.
The keys to success in managing a global delivery model are: PM Fundamentals, focus on people,
use of standards, defined reporting metrics, leveraging technology, leveraging global
competencies, taking ownership and accountability and remembering the value of iterations.


Process will also play an important part in minimizing spend, increasing speed
to delivery and providing a level repeatability and quality.



The important aspect of the Insurance Self Service Solution is the process
assets are built and refined with every engagement.
CBM creates an integrated and flexible framework using a common language for
multiple purposes and ensures consistency with strategic direction.
Use Cases and Use Case Diagrams.
Process Models.
Factory Approach to Delivery.
Release Management Standards 2 and Approach.
IBM Unified Method Framework ™ (the Method) – a technical method that supports a
wide range of projects how an emphasis on Work Products that define a standard set
of outcomes for services delivery will help lead you to success.

Life Insurance CBM B2C Use Case Diagram B2C Use Case Inventory Process Models
UC3.6 View
UC1.4 UC1.3
UC1.8 View UC1 Capture UC3.3 Save UC3.4 Coverage
Capture Capture
Person Retrieve Summary
Category
License Household Person Quote UC3.5 View
Summary Quote
Business & Manufacturing/ Business Policy
History
UC1.5
History Quote
Summary
UC3.7 View
Financial Product Relationship Acquisition Risk Management Administration Benefit Payments Group Capture
UC1.2
Capture
UC3
Generate
Quote
Compare
Management/ Development Management & Retention & Services Administration UC1.6
Accident
History
Additional
UC1.1
Capture Quote
Infrastructure Capture
Person Primary

B Violation
History
UC1.7
Capture
Insurance
Person UC3.1
Anonymous
Quote

u Business Strategy Product Portfolio
Strategy
Customer
Relationship
Market and
Promotion
Reinsurance
Strategy Claims
History UC3.2
Known User

Strategy Planning Management UC2.1 UC2 Capture UC4.1 Quote

s Treasury Concept Selling Risk, Compliance,
Strategy UC2.2 Asset
Pre-Filled
Capture
Asset
Asset UC4.5 Adtl
Interested
Capture
Person Adtl UC6.2 Capture
ACH Payment
Strategy Dist. Partners Distribution/ Legal Management Operations Information Parties Information
UC6.1 Capture
i Direct Investment Strategy Relationship Compensation Management
And
Group
Strategy
Information
UC4.4
Capture
Debit/Credit
Payment
UC6.3
Schedule
Proposition Strategy Strategy Reserve UC2.3 UC2.4 View
n Facilities Strategy Management Planning Miscellaneous
Miscellaneous
Payments
Asset-
Person
Asset
Summary
Financial
Parites
UC4 Purchase
Quote
Installment
Payment
Management Payment Assignment UC4.6 View UC6 Capture
e Product Brand
Strategy
Client Asset
Retention Strategy Catastrophe Strategy
Planning Purchase
Confirmatio
UC4.3
Capture
Payment

Asset Management Planning Planning
s Business Process Contact Risk Compliance,
n
UC4.2
Lessor
UC6.6
Promotion UC4.8 Print UC4.7 View UC4.9 Credit Capture Request

s Management Product Management Management Legal Monitoring
Claims Account
Temp Proof
of Insurance
Policy
Summary
Warning Asset Adtl
Information UC6.5 View
Refund
Insurance
Investment/Capital Management Correspondence Installation
UC6.7 View
Company
Management Internal/External Management Establish Reserves Litigation Payment Refund
Market Research/ Status Status
Segment Analysis Monitor Loss Operations
Customer
A Control Audit Procedures Brand Management
Campaign
Reserves Management
Controls
UC6.6 View
Payment
UC6.4 Print
Payment
History Receipt

c External Reporting Actuarial Pricing
Channel
Management
Management Underwriting
Management Fraud Account UC7.21
UC7.22
Analysis Management Management UC7 Reinstate
t Procurement/ Customer Producer Portfolio Customer Profitability
Analysis
Endorsemen
t
Cancel

Vendor Management Management Analysis (Review)
i Customer Surrenders/
UC7.20
Renew UC7.16 View UC7.17 View
Asset
UC5 Process
External
Cash Management Information Profile Processing Processing
Person
Summary
v Product
Development Prospect
Illustrations
Risk Rat ing
Policy Maturities Policy
Summary Reports

Changes Changes UC7.13 Modify UC7.2 Person UC7.1
Information Profile
i AR/AP Internal/External
3rd Party Information
Loans and
Dividends
UC7.12 Modify
Discount(s)
Lessor Update Person
Inquiry
UC7.19 View
Policy
UC5.1 Process
CLUE Reports
UC5.3 Process
Misc Reports
Summary
Financial Advisory
t Financial Reporting Profile
Tools Cancellations
Payment Processing
Cancellations UC7.10 Modify
and Controls (GL) Dist/Hierarchical And And Person UC7.9 Modify UC7.6 Modify

y Product Setup Profile
Underwriting
Lapsing (Disbursements) Lapses Assignment Asset(s) UC7.5 Modify
Accidents(s)
Household UC7.18 View
Coverage UC5.4 Order UC5.6 Order
Audit and Financial/Specialist Decisioning UC7.3 Modify Summary CLUE Reports Misc Reports
Maintenance Sales Support Evaluate Claim Person(s)
Advisor (Loss)
UC7.11 Modify
Coverage(s) UC7.14 Modify
UC7.8 Modify

L Execute Human Resources Campaign
Execution
Billing Billing
UC7.15 Modify
Financial
Parties
UC7.7 Modify
Insurance UC5.2 Process
MVR Reports

New Business Process Claim License
e Technology Reinsurance/ Correspondence Processing
Reinsurance
Interested
Parties UC7.4 Modify
Violation(s)
Management Coinsurance Handling (Application) UC5.5 Order

v Program
Communications
Treaties Investigate Claim MVR Reports

Learning/Knowledge Collections (Loss) Collections
e Services
Cont act Servicing/
Renewals
Processing
UC8.1 Person UC8.2 Claim UC8.5 View
Service Centers
l Facility Operations Regulatory and
Settle Claim UC8 Post
Purchase
Inquiry Inquiry Claim Status

Product Education Public Relations Compliance 3rd Party 3rd Party
Producer/Hierarchy Reporting Customer
Compensation Collections Collections UC8.3 Capture
UC8.4 View
Security Services Channel/Client Fraud Investigation First Notice of
Claim History
Loss
Education Delivery

UC9.5 Modify UC9 Account
Billing Management
UC8.6 View
Insurance Policy UC8.8 View
Company Summary Asset Summary
UC9 4 Retrieve
UC9 1 L i

1. "How a factory development model can help insurers gear up for success" - GBW03001-USEN-00.pdf , D.Lipien and J.Kelly IBM POV
2. http://www.ibm.com/developerworks/rational/library/06/0925_lipien-haines-gan/index.html



Somewhere in the middle of the world of process and technology we have the
Industry Reference Architecture Framework and a System Context…

Industry Reference Architecture Framework
Industry Reference Architecture Framework

Strategic Statement and Goals

Strategy
Channel Market Product
Strategy Segmentation Strategy

Business
Business Business Business Business
Roles Channels Info
Process Services Comp Rules
Requirements

Application
User Domain Software App
Actors Workflow Data
Interface Services Comp Rules

Infrastructure
Client Interact Process Integrate Container Rules Info
Services Services Services Services Services Services Services

Security and Systems Management
Development



The system context asset helps to demonstrates the breath, complexity and
integration needed for the solution to both fresher and legacy components.
Policy Admin System Billing System

Rating System
Billing
Purchase Claims System
Purchased
Policies
Products
Chosen
Quote
Product Mgmt
Purchased Policies Claims

Policy
Modifications Purchased Policies
Products Being
Considered

Policy Admin
Shopping Customer System
Information
Consumer Info File Service Policy

Pipeline
Updates

Sales Management
Agent Mgmt
Op’s of the Future
Book of Business

Commission System
Self Service Solution is CRM System
in Blue Ring. Other
systems are out of
scope for the solution,
but are pre-req’s



People and the process help to enable the technology assets by which the
Insurance Self Service Solution can be built.
IBM WebSphere Portal:
– A key “people part” of any service orientation is to allow people to interact with the on demand
world in a personalized way – to automatically get the dynamic information they need. With
IBM WebSphere Portal, people can quickly execute business processes using composite
applications built on SOA principles. They can collaborate with portal users to make faster
decisions.
IBM Tivoli Identity Manager:
– With the openness of an SOA environment — integrating formerly separate domains of
authorization and control — specific technology solutions are required for the secure
management and protection of information. Tivoli implements a security-rich SOA
environment, delivering comprehensive identity management, improved compliance support,
reduced administration costs, and an enhanced user experience based on single sign-on and
convenient access to multiple services.
IBM Rational ClearQuest:
– A workflow automation tool. Have a single view of the releases scheduled for a given time
frame (day, week, month, year). Run complex relational queries based on management
requirements and produce Metrics. Have access to the most current Release information.
Have a more granular view of issues, risks, defects, deployment requests and change
requests to a given release. Move towards a more mature software configuration management
process. Support and enable regulatory requirements like the Sarbanes-Oxley (SOX), through
tracking, history collection, sign-off mechanisms and other programmatic and custom
capabilities of the tool.



As Gary Wendlandt New York Life recently said …“As with most things in life,
when things seem too good to be true, there’s usually a problem lurking”.
Key questions will need to answer across the value chain from high-level strategy to detail:

1. Are there existing services and/or functions built across other channels that can be leveraged in the online
channel (such as a quoting service/process or a payment processing service/process currently supporting the
agency or call center channels)?
2. How will rate comparisons and product integrity be ensured across all channels?
3. If saving and retrieving a quote is part of the feature function set – what are the rules related to external data
orders (e.g. Values Transmittal – ACORD TX1212) and product changes?
4. Maintaining accurate data and site currency is a large part of that standard. Jacob Neilson’s ten things to
consider for commerce websites provide excellent guidelines in this area 1.
5. What is the cross-browser and cross device (mobile, kiosk, etc.) development and testing strategy? 4
6. How will integration to back-end systems and services be handled (e.g. change management, up-time and
enterprise release management)?
7. Will the site be developed by geographic state, or by a standard “vanilla” state? What are the by-state and/or
base state requirements? How will deltas or complexities of each state be categorized and managed?
8. How will dates be handled (leap year, timestamps across systems and servers, geographic time zone
conflicts, etc)?
9. What will be the security protocols to handle sensitive personal information (SPI), encryption decryption, SSL,
payment collection, and terms and conditions?
10. Do not forget about post deployment tasks like web search optimization and analytical metrics.

1. Nielsen, Jakob. Heuristic evaluation. In Nielsen, J., and Mack, R.L. (Eds.), Usability Inspection Methods, John Wiley & Sons, New York, NY.
2. For example when Google Chrome was released it captured 1% of the browser market share in less that 24 hours. www.computerworld.com.au/index.php/d;678159717;fp;4;fpid;535331



Agenda
Trends - 2020

– Approach
– People
– Process
– Technology
– Lesson Learned

Cases



Standard Life Assurance is an example of how thoughtful planning and reusable
business service helped save the company $3.6M in development costs.
Business and IT Challenges
– Enhance business channels, while developing new ones.
– Anticipate and adapt to the rapid changes in the environment.
– Identify common code patterns and maintain design simplicity.

Impact of the Project
– 51% of services are reused and showing a development savings of $3.6M.
– 40% of the company’s backend transaction come through its SOA (1.6M transaction per day).
– 73 service-consuming application running in production.

Business-to-Consumer (B2C) Business-to-Business (B2B)

Reusable Business Services

Provide Annuity Details Search and Validate Address Send Email

Verify Identity Maintain Self Invested Asset Provide Life Cover Information

Produce Statement Maintain Address Provide Scheme Information

Provide Bank Details Provide Pension Valuation Etc.

Source: IBM SOA Compass: Business Value, Planning, and Enterprise Roadmap by Norbert Bieberstein, Sanjay Bose, Marc Fiammante, Keith Jones (Author), Rawn Shah



P&C Insurer that is looking to be innovate and capture a multi-channel strategy
by following standards, using rapid development techniques and global delivery.
Business and IT Challenges
– Looking for new opportunities to grow profitably.
– Reuse technical assets and recent web transformation efforts.
– Speed to market critical.

Impact of the Project
– Exceeded year one sales target by 3%.
– Currently on target to exceed year two targets by 36%.
– 14 service-consuming application running in production (Quote, Bind, Territory, Auto Info., etc.).

Web 2.0 (AJAX and Web Services) J2EE Exposed as Web Service Legacy (via Web Service, PCML, MQ)

Reusable Business Services
Household
Quote

Rate

Underwriting Rating
Confidential: Not Actual Site Bind and Finalize



IBM understands the challenges facing our insurance clients on-line, and we
have the processes, people and technologies to make it a success.

A traditional IBM strength
and representative of the
broader custom
development capabilities

Capabilities that provide
industry specific
analyses and drive
application solution
development

A unique capability within
IBM with talents typically
found in an Agency model

IBM Interactive is one of the world’s leading digital agencies with strengths in visioning, designing,
implementing and deploying creative solutions. Advertising Age has released its agency report for
2008, and IBM Interactive is recognized as the 5th highest rated interactive agency globally.


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