2 Gasto TI Implemen TOM

Developing iTOM
(Target Operating Model for insurance)

Presentation to AMIS
Ciudad Mxico, 18.05.2009
Marek Jakubik, Managing Director
Content
Target Operating Model (TOM) Defined - ITGs perspective
Developing and implementing TOM
TOM and IT Real Case Examples
Q&A
Copyright Insurance Technology Group Inc.
TOM Defined
TOM Defined - ITGs perspective
Target Operating Model (TOM) defines following views of the

company:
Processes,
Organizational structures
Human capabilities
Supporting information technology
that have to be created to optimize:

Corporate/internal operations
Service delivery
Value Stream = ALL steps from customer contact to customer fulfillment
Why do we need TOM
TOM allows to understand how operational processes create

value and how to redesign operating models to optimize all
elements of the business
To decide what to change and what to keep the way it is.
To communicate in a comprehensible way to interested parties.
To serve as a roadmap to manage the change process.
TOM Defined - ITGs perspective
TOM is driven by strategic objectives, e.g.

market-share growth,
increased profitability,
cost reductions,
level of customer service
Follows corporate strategy and in particular sales and marketing

strategy/plan
Products by Segment

Channel/Product/Segment: Individual
Intern
al

Developing and implementing TOM
Designing TOM
Follows business and sales and marketing strategy/plan
Decision guided by desired business outcomes
Resolves process issues:

Separates complex processes (e.g. underwriting) from
standardized/simple processes (e.g. small payouts)
Separates long-running processes from short running processes
How it works:
Measure performance of current model
Every process analyzed in detail
Organizational structures analyzed and defined in detail
IT Architecture and solutions optimizes business process model
Measurements of future model prepared
Developing TOM - ITGs Approach

ITG applies repetitive approach to TOM development, usually 2-3 iterations
Products, Customer Segments,
Distribution Channel Details
Customer Servicing Model
Business Organization
Business Processes
IT Solutions
Refine the TOM with every iteration, and building on possible

scenarios and assumptions and desired outcomes is the key
Developing TOM - ITGs Approach

Design Framework - Constraints
Industry models:
- From generic (e.g. IBM IAA, LOMA models)
to company specific
Design principles:
- decision rights
- acceptable policies
External factors:
- market conditions
- customer needs
TOM
Available business/system components:

- organizational structures
- IT systems
Capacity for Change

Measure
Availability of people
10.0
P hysical assets/infrastructure to
support the change
8.0
Staff Knowledge
6.0
4.0
Core apps to Support the
change
2.0
Culture
0.0
Availability of people
5.4
Staff Knowledge
4.7
Culture
2.6
Organizational structure adaptability
3.2
Processes adaptability
3.3
Maturity of organization
3.5
Money available for implementing

change
7.5
Core applications to Support the

change
3.7
Physical assets/infrastructure to
support the change
6.6
Money available for
Organizational structure -
implementing change
adaptability
Maturity of organization
P rocesses adaptability
Rating
Key conclusions:
1. ABC can utilize 3 levers:

Money
Availability (number) of resources
Physical IT assets/Infrastructure
2. ABC needs to further develop the culture
and maturity to execute the change.
3. Work processes need significant
modification to meet the strategic
objectives
Implementing TOM
Implementation Approach
TOM implementations usually span many and complex business

processes, organizational units and geographies
Due to various constraints (day-to-day operations, staffing, budget,

capacity for change, availability of resources) and risk management
reasons usually can not be implemented in one step but require multiple
phases/release
CONs
PROs
Reduces time to market
Mitigates risk by gradual

transition between old and
new world
Better distribution of work and

resource load
Acquire organizational
learning in each phase
Dependencies between
phases have big impact on
timelines, budget and
schedule
Complex dependencies can
exist between various phases
or individual projects
Estimating can not be done
by simply summing up
individual project estimates
Managing Change
Implementing new TOM introduced

significant amount of change at
various levels
Understanding and applying adequate

change management techniques is key
Individuals (employees) and groups

(organizational units) both exhibit
change resistance
Structured techniques need to be in

place to deal with change
Denial
Acceptance
e.g. Align-Respond-Transition
Need to be complemented with a

strong communication plan
Has to be linked to developing high

performance culture as early as
possible
COMMUNICATE! COMMUNICATE!
COMMUNICATE!
Resistance
Exploration
Implementation Governance Summary
President/CEO/COO fully engaged and supporting the effort
Strong and experienced project leadership can not be substituted with

anything else
Very competent project team(s)
Appropriate project structure
Discipline, always referring back to TOM and continuously updating TOM
Clarity around new roles and responsibilities
Performance transparency:
Continuous measurement of progress against set up targets linked to reward system
Staying flexible e.g. capturing unforeseen synergies
Communicating relentlessly
Train, train, train
TOM and IT
TOM and IT
Well designed TOM drives both short-term and longer-term IT

initiatives:
Enterprise Architecture
IT project portfolio plan
IT Governance
Core Insurance Systems selection/upgrade
Shared Services Centers
Cost reduction initiatives
Note: All illustrating examples are based on the real clients

experience.
Future State Architectural Vision

Agent
Portal
Branch
Portal
Security
Profiling
Call
Portals Banks
Center
Consolidated
Client
Task Mgmt
Workflow
Claims
Center
Direct
Diary Contact
Management
Company
Information
Common Front-End Services
Claims
Corporate
Systems
Non-Life
Commercial
Policy Processing System
Consolidated
View of
Commissions
Consolidated
View of Claims
Non-Life
Personal
Investments
Group
Life
Individual
Life
Payables /
Receivables
Health
Consolidated
View of
Payments
Consolidated
View of Policies
Integration
Framework
Commissions
Financials
Data Warehouse
Future State Architectural Vision
Consolidated
Client
Consolidated
View of
Payments
Investments
Individual
Life
Group
Life
Consolidated
View of Policies
Payables /
Receivables
Task Mgmt
Workflow
Health
Security
Profiling
Call
Center
Claims
Banks
Claims
Center
Direct
Diary Contact
Management
Company
Information
Consolidated
View of
Commissions
Consolidated
View of Claims
Non-Life
Commercial
Branch
Portal
Non-Life
Personal
Agent
Portal
Integration
Framework
Commissions
Financials
Data Warehouse
IT Project Portfolio Timeline

1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
2011+
Consolidated Customer Data

Create timely consolidated customer data
Update tools and softw are
Create brow ser view s on consolidated customer
CRM system project
Point of sales/service portals

Phase I: Branch Portals
Phase II: Agent and Broker Portal
Phase III: Call Center to Contact Center
Change non-Life Policy Administration System (PAS)

Analyze ability to w rap INSURER
Product engine
Reporting engine
INSURER replacement RFI and analysis
Consolidate Life systems

Project to convert GUR to KANGUR
Phase out GURIK
Plan for go-forw ard systems other than Group
Complete CORPO
Implement CORPO phase I (3 LOBs)
Implement remainder of non-motor CORPO
Extend CORPO to motor products
Integration framework
Develop inventory of missing interfaces (i.e. w here double entry is required)
and prioritize for development w ith business users
Project for top 3 priority interfaces and extensions
Consolidate claims
Phase I: Project for simple Life claims first
Phase I: Consistent and repeatable interface method for SLS
Phase II:More complex life claims and BPM w orkflow
Consolidate financials
Phase I: Consolidate FKX (2 steps)
Phase II: Unify IT procedures; merge Life and Non-Life
IT Governance
IT Steering committee
CEO, CIO and Management Board Members

responsible for IT
In ABCs case Management Board can likely act as

IT Steering Committee due to small size
Tasked with most strategic direction and decisions
Does not get involved with tactical and operational

decisions
KBT
IT Steering
Committee
(can be
Management Board)
CEO, BU Leaders
CIO
Key business/IT alignment vehicle
Members: BU Operational Leaders, Directors./RMs,

Life, Non-Life and Corporate Systems
KBT
Works of the positive tension between IT capabilities

(throughput)and business needs as well as between
priorities
BU Operational
Leaders
Final IT decision authority on tactical and operational

issues
RMs L, NL, CS
Provides input in all strategic decision-making
Relationship Manager
Key link from IT to business units
Relationship with one or more business units
Represents business unit interests within IT, and IT

interests to business
IT
ORGANIZATION
TOM drives Core Systems selection
How much is enough for software selection?
In practice, most often three levels of depth in TOM
Level 1: High level functional view of the entire scope of business
Level 2 - Extended process and organizational model
All major processes, key steps and information flows

All major organizational units
Key IT systems and functions
Relationship between processes and corresponding information flows

Key application components/functions and their relationship to processes
Decision rights
Detailed organizational structure and roles and responsibilities
Human capability requirements
Level 3 - Detailed process and organizational model
Detailed functional specifications

Data flows
Data structures
Open-ended
selection process


Decision rights

Data flows
Data structures
Closed-ended
selection process


Decision rights

Data flows
Data structures
TOM defines Systems role in a process

Example: Adjust Loss
Advisors
Manage
ment
Reinsurer
Core
Claim
System
Tech.
Support
Claims
Manager
(H)
Claims
Manager
(W)
Examiner
Loss
Assignment:
Complex
Claims 15%
Loss
Information
Loss
Information
Client
Loss
Information
Via Phone
Call
Loss
Information
Loss
Information
Site Visit
Loss
Information
Loss
Assignment:
Simply Claims
85%
Key Best Practices:
Assign the right person with the right skills to complete the right task at the right time
Communicate large losses immediately to the appropriate management personnel
Use statistical data to automate the reserve process as much as possible
Reserve for LAE, as well as loss payout, throughout the process
Allow people to share files by providing multiple access at the same time
Electronically connect all parties involved in the claims processing, including account
teams, claim adjusters, consultants, suppliers, vendors, etc.
Develop and use business rules to integrate and drive claims processing
TOM defines Shared Service Centers function

Example: Notice of Loss
Client
Call Center
Risk
Manager
Core
Claims
System
Claims
Claims
Management
Management
Advisors
Reinsurers
Initial Loss
Notification
Initial Loss
Notification
Loss
Confirmation
Approved
Vendors List
Loss
Information
Loss
Confirmation
Reinsurance
Notification
Handling
Advice
Key Best Practices:

Allow the client to submit the first notification of loss any way that they want to
Capture loss information electronically in digital format at the source and handle
it only once
Capture and manage supporting documentation electronically
Capture the loss as an event and record multiple claims against the event
TOM leads to cost reduction Claims

example
Starting point
Market leader in CEE. More than 2,5

million claims per annum (more than 1
million motor insurance). More than 3 500
employees in claims division throughout
the country. No standardised claims
procedures every branch did as it
wished. Very limited IT support for claims
handling.
Comprehensive IT system for claims

developed (special in-house IT task force
was established for the purpose)
Remote (telephone and internet)

communication with clients initiated
Paperless information flow established
Due to the scale of the venture, it took

more than three years to finalise the
project.
Actions taken
Procedures manuals prepared for all

types of claims
Non-massive claims (rare cases) taken
out for specialised, centrally managed
unit
Efficiency standards for all parts of the

claims process established.
Some parts of the claims settlement

process centralised
Results
Average claims settlement time reduced

by more than 30% after 1st year of
implementation
15% of claims local units closed
Workforce in claims division throughout

the country reduced by more than 700
FTE
Who is ITG?
Why ITG?
Exclusive focus on the insurance industry with key strengths in in front

and back-office operations
Objectivity and independence with no other affiliations or agendas
50+ industry experts with minimum 15-20 years of hands-on experience

in managing insurance operations (CEO, CFO, COO, VP, Director level
from Underwriting, Claims, Operations, Sales, Marketing, Actuarial,
Product Development etc)
Experience in both developing and developed marketplaces with

particular focus on transferring know-how between developed and
developing marketplaces
Not only deliver a Report but help implement and share risk with client
Library of best industry practices in insurance developed through handson work with clients (business processes, organizational structures, IT
solutions, products and distribution channels etc) to speed up
development and implementation
Why ITG - Our Experts Experience
Allianz
Link 4 SA
Allstate
Manulife
AXA Insurance
Motorist Insurance Company
Aviva
MI Group
ABN Amro
Pilot Insurance
Bank of Montreal
PZU
Banco de Mexico
RBC Insurance
CDP Capital
Royal Bank of Canada
CIBC
Royal Sun Alliance
Cigna
Samopomoc-HDI
Credit Union
Saudi National Bank
Dominion of Canada
Secura
DST/Corfax
Standard Life
Dunav Insurance Company
TU Samopomoc S.A.
Farm Bureau Insurance of Michigan
Warta S.A.
Gerling
West Bend Mutual Insurance
ING
Winterthur
Ingostrakh LMT
Zurich Financial Services
Kemper Insurance
Q&A
Insurance Technology Group Inc.

marek.jakubik@insurancetg.com
+1 416 301 9006
Toronto, Canada

2 Gasto TI Implemen TOM

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Developing iTOM

(Target Operating Model for insurance)

Marek Jakubik, Managing Director

Target Operating Model (TOM) Defined - ITGs perspective

Developing and implementing TOM

TOM and IT Real Case Examples

Copyright Insurance Technology Group Inc.

TOM Defined - ITGs perspective

Target Operating Model (TOM) defines following views of the

that have to be created to optimize:

Value Stream = ALL steps from customer contact to customer fulfillment

Copyright Insurance Technology Group Inc.

Why do we need TOM

TOM allows to understand how operational processes create

Copyright Insurance Technology Group Inc.

TOM Defined - ITGs perspective

TOM is driven by strategic objectives, e.g.

Follows corporate strategy and in particular sales and marketing

Copyright Insurance Technology Group Inc.

Copyright Insurance Technology Group Inc.

Copyright Insurance Technology Group Inc.

Developing and implementing TOM

Follows business and sales and marketing strategy/plan

Decision guided by desired business outcomes

Resolves process issues:

Copyright Insurance Technology Group Inc.

Developing TOM - ITGs Approach

Customer Servicing Model

Refine the TOM with every iteration, and building on possible

Copyright Insurance Technology Group Inc.

Developing TOM - ITGs Approach

Available business/system components:

Capacity for Change

Organizational structure adaptability

Money available for implementing

Core applications to Support the

Money available for

1. ABC can utilize 3 levers:

Copyright Insurance Technology Group Inc.

TOM implementations usually span many and complex business

Due to various constraints (day-to-day operations, staffing, budget,

Reduces time to market

Mitigates risk by gradual

Better distribution of work and

Implementing new TOM introduced

Understanding and applying adequate

Individuals (employees) and groups

Structured techniques need to be in

Need to be complemented with a

Has to be linked to developing high

Copyright Insurance Technology Group Inc.

Implementation Governance Summary

President/CEO/COO fully engaged and supporting the effort

Strong and experienced project leadership can not be substituted with

Very competent project team(s)

Appropriate project structure

Discipline, always referring back to TOM and continuously updating TOM

Clarity around new roles and responsibilities

Continuous measurement of progress against set up targets linked to reward system

Staying flexible e.g. capturing unforeseen synergies

Train, train, train

Copyright Insurance Technology Group Inc.

Well designed TOM drives both short-term and longer-term IT