Transformative Approach to Solving Insurance Challenges 2015...Configurable business rules, calculations, and validations that are available on-line •Automate for handling business

IASA 87TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW

Business Architecture Decisioning: A Transformative Approach to Solving Insurance Challenges

476


Today’s Objectives

Session Learning Objectives:

Identify new ways of approaching the business architecture

and implementing IT infrastructure solutions

Evaluate whether proposed architecture solutions can

address both current and future insurance business

challenges

Reference real world case studies or our clients addressing

real world challenges


Conventional Wisdom on Projects

Typical “MO”

Get everyone involved who may know

anything about topic

Everyone needs to “get comfortable”

Create tons of follow-ups

Review findings to get that illusive

comfort level up

Create huge backlog

Spend rest of project explaining to the

business why they can’t have the things

they thought they were going to get

We all grew up thinking that you need to think of everything

up front because it is too costly to find things later


Einstein’s Definition of Insanity

Life Legacy Core System Replacement Statistics

Less than 21% of projects ever convert all of the business planned

Less than 18% of replacement projects come within a year of the original schedule

Less than 15% of projects come within 25% of the approved budget

Less than 7% meet the original ROI objective

Source: Sample of major policy administration projects since 2000 where a new vendor relationship was

established

“The definition of insanity is doing the same thing over

and over again and expecting different results.”

http://ambassadors.net/archives/issue6/

http://ambassadors.net/archives/issue6/


A Problem-Driven vs. Solution-Driven Approach

• Consider underlying problems that are to be solved before determining the solution

Problem-Driven

Approach

• Assume that the problems and solution are known and just need to be delivered on.

Solution-Driven

Approach

“If I had asked people what they wanted, they would have said faster horses.”

-Henry Ford”


Use a Problem-Driven Approach by Starting with Why

Transparency

Decisions and

judgment should be

based on “your why”

Frames up

everything


FAST Aligns with our Why

WHAT

HOW

WHY

Why?Technology should open up new possibilities for the

business rather than creating constraints

How?Provide a platform that will meet the current business

needs, but be able to effectively adapt to future needs

What?A brand new way of addressing core systems challenges


Overall Business &Technical Objectives


Technology for the Business

Technical Feature This is how we can…

Role-driven, intuitive user interface and configurable business processes

• Get new people (both business and IT) can be up and running very quickly, allowing you to manage through spikes of demand

• Answer customer’s basic questions without jumping from screen to screen

• Reduce number of people involved to solve an issue or perform a transaction

Configurable products, plans and groups

• Add or change products, plans and groups without any programming• Roll out products, plans and groups in a fraction of the time

Configurable business rules, calculations, and validations that are available on-line

• Automate for handling business exceptions• Have environments where many people know how to do a variety of

types of tasks

State of the art technology, software architecture, and tools

• Have quicker turnaround of change requests and new innovative features

• Have more of your business needs met for a lower budget


Insurance Systems Evolution

What is the Next Generation

• Small components designed to be replaced

• Incremental replacement strategy can be used

• Appropriate balance between horizontal infrastructure (rules engines, workflow/ orchestration) and domain specific components

• Leverage/wrap existing components (i.e. don’t have to replace “whole systems”)

End Result

• Frequent upgrades and avoidance of future “big bang” projects

• Eliminate/minimize redundancy

• Implement new features incrementally

• Shorter project cycles

• Lower costs and risk

• Customers get the functionality they want, not something forced on them

Next Generation Technology for Life Insurance

Pre-1990 Monolithic systems

1990 – 2005 More targeted applications

2006 –2011 Consolidation attempts and

hub integration

Next Generation


Business Process Driven

Application Commissions Regulations Authorization

Disbursements Accounting Suitability Underwriting

Policy Party Agent Correspondence

Collaboration Recruiting Notes Requirements

Banks Suspense TaxOther

Services / Components

Change how we think about IT Architecture to start with the business process

instead of the application or system


Connecting the Business Process

Data Service(s)

•Pre-built components -Gathers appropriate data from various components

Decision Service(s)

•Calls rules engine to determine logic and forms

Calculation Service(s)

•Calls calculation engine to perform mathematic or formulaic calculations

External Service

•Makes a web service call to an external web service

Sub-orchestration

•Calls another orchestration

Orchestration

Business

Event

Business events are triggered in various ways

(a user clicking a button, a change in status,

or based on a specified schedule)

Orchestrations connect a series of activities

(data gathering, decisions, calculations, and

calls to external systems) to define the

business flow

Business events trigger orchestrations that tie together data rules calculations

and other processes


Configurable Systems

Many areas that are normally “hard-coded” are now

configurable

Allows choice of configuration methods

Strong governance models

Configure inputs, outputs and calls to pre-existing

APIs or Web Services

Automated testing

Taking agility, flexibility, and configurability to the next level

• Business processes

• Products

• Commission calculations

• Commission schedules and

rules

• Integration

• Validations

• Business events

• Business rules and exceptions

• Data model

• User roles


Software Configuration Process

Cost M

ete

rConfiguration Tools push

80-90% of the work closer

to the people who know the

requirements

Business

Partner

Liaison or

Customer BA

Software Vendor

ConsultantOff-shore or

local Developer

Software Vendor

Technical Lead

Enables the people closest to the specific business needs do the

work with the same amount of effort it would’ve taken them to

communicate and iterate

Eliminates interpretation and touch-points to significantly reduce

cost and risk while increasing likelihood the customer’s needs will

be met the first time

Groundbreaking tools and software governance finally provide ability

to profoundly change how insurers can manage software


The Only Constant is Change

Why should customers have to think of

everything up front?

Why do we have to spend time talking

about things we may never do?

• Why can’t the customer have something think of later in the

project instead of something they thought about in the

beginning?

– most times, the things they realize later are higher priority than when

they were in their “creative zone” thinking of everything they wanted up

front

Project teams need to accept the inevitability of change and

embrace it rather than resist it


Comparing Implementation Methodologies

Challenged Failed Successful

49%

9%

42%


Source: The CHAOS Manifesto, Standish Group, 2012

Both methodologies have advantages and disadvantages, but Agile has

had more recent success and is where most companies are trending

57%29%

14%



Avoid rebuilding existing legacy processes into modern technology

Taking smaller “chunks” incrementally rather than big scope

Limit “committees” and “group think” on basic decisions and

preferences by establishing accountability with a core group of decision

makers

Leverage an iterative, business process driven approach

Maintain architectural integrity that is in alignment with the overall

vision

Guiding Principles

Once established, it must drive decisions at all levels

Guiding principles help projects stay on course and help influence

prioritization


Based in Madison, Wisconsin

Offers auto insurance, homeowners insurance, life

insurance, umbrella, business and farm/ranch insurance in

19 states

Been in business for more than 80 years

Ranks 373rd on the Fortune 500 list

American Family – Company and Personal Bio


American Family

WHAT

HOW

WHY

Why?Be able to explore new distribution and customers

How?Keep things lean and reduce constraints. Implement

flexible technology and processes to increase speed to

market.

What?Build an adaptable model to sell life insurance


Approach

We were forming a new function…

Kept the team small

Secured a work location separate from American Family

Home Office

Analyzed current technology and capabilities within the

enterprise as well as outside the organization

Created an implementation strategy that focused on minimal

viable product

Formed agreements with selected vendors and service

providers


Creating a Minimum Viable Product

Our goal was to get into production and let customer feedback

drive design


Creating Business Alignment Among Vendors

We focused on getting everyone on the same page for

creating joint solutions

Aligned on project vision & approach

Vendors were able to understand all the pieces that needed

to come together

Our team created a foundation based on proposed

business process flows

Team identified ways to share information across

boundaries

Made decisions and assigned high level responsibilities


Challenges


Challenges

As with any project, we faced some challenges…

Meet aggressive deadlines

Adapt to a different approach and way of thinking

Manage mid-project operational

Align development milestones across vendors

Onboard vendors at staggered times


Best Practices

We did a lot of things right…and we built a team that was

resilient to change

Leadership support

Agile development

Having a single business owner

Co-locating teams during key parts of the project

Automated testing

Team building

Alignment of goals


Lessons Learned

Avoid travel to the east coast during the “snowiest” winter on

record

Spend time upfront to clearly define roles and

responsibilities

Agree upon methodologies and how to integrate plans

across vendors

Accept that the final outcome won’t be perfect


Results

We did what we set out to do…

Implemented a minimal viable product in 8 months

Constantly prioritized what was most important

Used customer feedback to drive enhancements


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Documents

Transformative Approach to Solving Insurance Challenges 2015...Configurable business rules, calculations, and validations that are available on-line •Automate for handling business