Although insurance has long been protected from digital disruption, the industry faces serious challenges in its current form. This episode will explore the digital transformation of insurance with a leading industry CIO.
Digital Transformation in Insurance with Harford Mutual
Vice President and Chief Information Officer
Harford Mutual Insurance
Chief Strategy Officer
Although insurance has long been protected from digital disruption, the industry faces serious challenges in its current form. This episode will explore the digital transformation of insurance with a leading industry CIO.
Tim Baum is the Vice President and Chief Information Officer at Harford Mutual Insurance. Baum leads the IT department as it continues to convert the company’s legacy systems to the Guidewire Insurance Suite. Baum’s extensive technology project management experience allows him to seamlessly take the helm of the Project Team and assist them in the successful implementation in 2017.
Prior to joining Harford Mutual, Baum was the Division IT Director for Zurich Insurance Company Ltd; Vice President of Corporate Development at FEI Systems and Vice President at T. Rowe Price. He graduated from Covenant College with dual degrees in Information and Computer Science and Business Administration and earned his PMP (Project Management Professional) from Project Management Institute.
Dion Hinchcliffe: Hello and welcome to CXOTalk, Episode 211. I'm here to talk about digital transformation in insurance, and we have a very special guest and a dear, old friend of mine who will speak to you shortly. So I'm broadcasting live from Genoa, Italy on a road tour, with a European host on your show, but broadcasting from the United States. So I'd like to talk to on this episode Tuesday, January 10th at 1PM Eastern Time, I'd like to give a welcome to Tim Baum. He is the VP and CIO of Hartford Mutual Insurance, and welcome to him.
Tim Baum: Thank you, Dion. Good talking to you.
Dion Hinchcliffe: Yeah, so we have known each other for twenty, some-odd years now at this point, and we've been involved in a highly regulated industry, and I want to welcome you on the show [...] your position at Harford Mutual Insurance, and I want to talk about disruption that everyone's been talking about. And we'll discuss how insurance is being affected by the changes in the digital world, how IT is being transformed, and kind give us a perspective. We had Alexander Bockelmann recently from UNIQA Insurance, and he gave kind of a European perspective, and I was hoping to put it on you to kind of give us a North American perspective on insurance, which up till now, was a relatively protective industry. And so, why don't you take a few minutes and tell us briefly about yourself, about Harford Mutual Insurance, and your role there.
Tim Baum: Okay, so Harford Mutual; it's a regional carrier based on the East Coast. We're in about seven states plus the District of Columbia, we have about eight different business lines, all commercial, we don't do any personal lines. But the company; we're at about 185 million in direct-written premium. The company, as I've mentioned, is 175 years old. So we've been around for a very long time. I think we have a great opportunity here, in that we've been around so long we've got established relationships, we sell direct through agents, and there's just a lot of opportunities. I think the regional carriers, the technology side of the house, has always been lagging somewhat in internally-developed systems, homegrown, and as the industry has grown, there have been more packages available to use, the integration of those packages. The confluence of digital technology has really started impacting what is going on.
So I've been at Harford Mutual for about four months now, and it's a really exciting time. So one of the major things we're working on is core system replacement. So we had a system that was built back in the 90's, early 00's, developed internally, the resources are still here who developed it, and we're taking that and really trying to move into the 21st century. So, taking that technology, we're starting to improvise on the guidewire package. So if you got there and looked at the insurance carriers, Guidewire's one of the main players in the industry that we've decided to work on.
So, within that, we're really trying to then form a strategy around there. So, just a lot going on, a lot of excitement, a lot of opportunity not only from a technology standpoint, but from a business standpoint there's a lot of technology over that.
Dion Hinchcliffe: Yeah, so are you finding that to be commercial insurance packages, are they supporting the kinds of digital capabilities that we're seeing very rapidly emerging in the space? There are lots of very exciting things happening in digital payments. You have blockchain, you have Internet of Things, all of which we're learning has an impact on the insurance industry, so you know, what are you finding? Is this future proof, or are you building on a foundation that's just not going to move fast enough?
Tim Baum: That's really interesting, because I talk to a lot of people. One of the interesting things is a lot of carriers, they're all doing core replacement systems, and they're all two, three, four years in. And everyone kind of talks about like, "We've just got to get this done, and then we're done." It's almost like, "Then we've hit the end route." Main analogy I always get is, "If you pulled up in your brand new, off the floor dealer, 2013 Buick, and you bring your friend over and you say, 'Look at my new 2013 Buick,' they're going to look at you like, 'What are you talking about? I mean, that doesn't have the variable speed control, it doesn't have the cameras on it. That's not new, but to you it's new!'" So I think one thing that Harford Mutual, and other carriers have to realize is, these core system replacements, it's not a one-stop and then you're done. You've got to do it, and then how do you continue to innovate? How do you continue to expand on the capabilities?
I think the industry also is kind of just with the carriers, and that they're struggling to try and get ahead of, "Do things faster, quicker, think outside the box and how you're doing things. And one thing that I'm thinking about is trying to think of different ways to develop. So get away from the traditional model of, "I have staff, I can use staff augmentation." But can you really look at incubators out there? Can you look at some type of code where you can actually throw something out there and have some [...] developed?
So, I think what happens is while these providers are trying to do it, they're kind of in the same quandary that we're in. And so, how do we get a foundation to build on some of those products, but enable it to move forward? I think seeing some of the press releases from some of the software developers out there, they're trying to figure out how they can deliver faster solutions so that you can go into new states, you can go into new lines of business. So, they're kind of doing the same thing, whether you go to cloud, whether you go to hosted. So it's a combination of how do you... It's also how do you go to, do you use a full-stack, or do you build pieces of it? Do you use AWS and you go out and build some things together and plug them all together, give you a solution and how fast can you do that?
So I think one of the challenges is going to able to be nimble, but yet, still be able to work within a regulated environment.
Dion Hinchcliffe: Absolutely. Well I want to really kind of tease that apart later on in the show. Being nimble and being regulated don't necessarily go together, but there are some interesting things that are happening. So, you're primarily a B2B insurance company. Is that correct?
Tim Baum: Yeah. Basically, you could say that. So we deal with the...
Dion Hinchcliffe: So ... Go ahead.
Tim Baum: So I was going to say, so we deal with agents. So we've got a network of agents. So we're mutual, so we deal with a network of agents that we've appointed to sell within the states that we're in. We don't go direct. But as I think most people in the industry will say is, does that business model go in the future? You know, as the consumer becomes more educated, can they go direct, or do they need that ... How we view the agent is the agent is kind of the educator. So they help ... So we're selling to a business. So does a business owner really understand the risks that he has? Does he really understand the products that he needs to protect himself? And an agent kind of provides that information.
Now can technology change that? Can someone go and get that same information, guide it, and automate it through the internet? I think that's still something to be seen. I think also the ages, millennials coming up: what are they going to learn? Where are they going to get their information? What are their ... Who are their trusted advisors? What are their trusted advisors? And right now for us, it's those agents that have the relationship.
Dion Hinchcliffe: Yeah, and so how does that affect the digital experience? So you've got a lot of design services that deliver value to big agents, and deliver value to the customers, and you want them to prefer to offer your services. Again, you're in highly, I mean a ruthlessly competitive environment. How would a company like Hartford, you know, offer a digital experience that can compete with the big guys?
Tim Baum: It's funny you say that. So the president and I always banter back and forth, because my position is every company is an IT company. We're an IT company that just so happens to sell insurance. He'll banter back, "No, we're an HR company that just so happens to sell insurance." So the human component of it is really important. So it's the relationships that we have. So, we're really involved in the community, we're really involved with the agents because that's an important portion of what we do. The people that work here are really committed too. Our slogan is, "Committed to mutual success." So, we really do want to be successful, but we can't be successful unless you're successful. So then, my job is how do I bring that technology to enable and foster that to happen? So, if you have great people but you have bad technology, it's not going to go anywhere.
So, one of the things that we've recently done is, I'm actually moving one of my individuals out of IT and moving him up into the marketing [department]. So, he's not going to be like a Chief Digital Officer, but he's basically going to be playing a similar role in that he's basically going to out there, and meet with the agents and the customers: "What do you need? What are those functions, what are those services that you need to better enable you to know what you're buying, what risks you're covering? What am I getting for my money?" And so, for him, knowing the technology side of it, and kind of getting in on the marketing side, I think it's going to help us tease out what we really need in order to deliver those systems, those apps, those whatever that can have a better experience. It then will fall back on us in order to construct that and lay that out.
So, that's kind of one of the approaches we're going with because things are changing, and how do we know what the needs are, unless we're really meeting with the users and listening to the users? And to us, that's face-to-face. That's how we're really going to understand what the individual needs, how we can differentiate ourselves from our competitor.
Dion Hinchcliffe: And that differentiation is your strength because of your 175 year old history, that going way back in the day, that you know, relationships face-to-face is what you're actually good at, and are you going to kind of bring the digital version of that to bear, or are you really going to use face-to-face the legacy way and kind of reinforce the differentiation?
Tim Baum: So, it has to be face-to-face, but can it be virtual face-to-face? I don't think we believe you can do anything, that if everything becomes blockchain transactions, where is that human interaction? Then I become a commodity. And, I don't want to be a commodity. I want to have that relationship. So, how do I have that relationship? How do I make that relationship so when we're headquartered in Harford County, Maryland, and we've got something in North Carolina - our president. I'm sure everyone's probably heard of all the wildfires that hit in Tennessee over the past couple of months. So we actually did a lot of insurance and [...] our president is going down there to meet with some individuals, because of the impact that it's had on the community, and our involvement with them.
So we're just not an insurance carrier that you have a claim, we're just going to pay the claim out. We're concerned about the communities that we actually insure with. We're concerned about the agents that actually sell those things. So, it is that personal touch.
When someone calls, one of the things that probably differentiates us: If you call Harford Mutual, you will not be put into a phone tree to get to someone. There is actually someone, Norma, who sits at our switchboard and she answers the phone. And she will direct your call where it needs to go. And it's that type of mentality from the president down. We're not going to go completely digital. There's a human interaction. We want you to know that you call us, you're not just being pumped through some AI system that going to ratch you to the right place. We want to be able to hear you, we want to be able to talk to you, we want to be able to resolve your question. It can't all be resolved through a system. We might like to think that, but there's nothing like human interaction.
Dion Hinchcliffe: Well that really does set you apart, not having a voicemail tree. I think you've got to be one of the last holdouts to not actually have that. That's great to hear! So, please, we have Tim Baum, CIO and CTO of Harford Mutual Insurance on the line. We'd love to take your questions on Twitter, using the #cxotalk hashtag. Please ask your questions about IT, about digital experience, about digital transformation in the insurance industry.
So Tim, we're seeing, though, that certain new versions of new models of technology like social media and social networking, and online video, they're bringing a lot of that human dimension to bear. So we're seeing that even insurance companies are utilizing, they've got to speed up, they've got to do more. And we're seeing the introduction of roles like the Chief Digital Officer in the insurance industry to kind of take and say, "Digital's going to be a P&L soon enough in our industry," never mind mind that we have to really, continually up our game. It's a treadmill now. You can't slow down, so you need someone really in charge of market-facing digital. Where do you guys fit on that point of view, and what are your thoughts on that?
Tim Baum: So, yeah. I totally agree that that's an extremely important role. Now we're a smaller organization, so at the C-level, we don't have that Chief Digital Officer. That's kind of a combination of myself, and this individual that I'm putting up in the marketing area. When I think of digital, I really break it down into you've got your predictive analytics, you've got your customer interaction, you've got the system that is actually delivering the operational systems, and then you have potentially robotics. I think within our realm and how we're structured and how we're sized, the robotics piece of that digital revolution, I really don't see us playing much of a role in that.
Now the other three quadrants, they're actually, from a strategic standpoint, they're what we're working on right now. So predictive analytics: we actually purchased a Guidewire product called Eagle Eye to help us with predictive analytics, help us on the claims and the policy side. So we're actually going to start analysing the data, understanding where the risks are, because if you can't then there's business you don't want. There's business that you want that you might not be selling to, and there's business you don't want. So how do you emphasise and target that business that you really want? And that's where some of the predictive analytics [come in].
So we have a whole project that we're working on that, within which we've got our core system replacement that we are re-doing how we do our billing, how we do our claims, how we do our policy administration; how is the underwriting? So we have that project going then also.
And then the third, to me the third leg is that customer interaction; so do your point of the social, the Twitter, the different accounts, how do we actually get engaged in that realm? And that's where we're really focusing right now on the portal. So, coming up with the digital strategy, where the portal is really the focus, where we can deliver things that are browser, that are device-agnostic solutions out to the agent and the consumer.
And so, those are kind of the three areas that we're really trying to focus on in the coming years, and this year specifically, try to get those things. Our core system replacement is the one that is farthest on the path of moving forward, and then I probably would say after that, we've got our predictive analytics that is next, and then the one we're really going to start tackling in the next couple of months is that whole digital customer interaction strategy that we really need to attack.
I think if you read some of the industry articles, they'll say about 83-87% of carriers are focusing in 2017 on that digital strategy. So in order for us to be around for another 175 years, we've got to be right there with them. We can't be that 13 or 15% that aren't worrying about it. Just because we've been here for 175 years doesn't mean we'll be here for another 175 years. How we conducted business back in 1842 is not how we're conducting business in 2017, and it won't be how we're conducting business in 2050. It will change. We have to stay with that.
Dion Hinchcliffe: Yeah. Exactly. And so, some insurance companies, they'll still feel like they're operating in some, you know, the 1850's, but I do think that's changing. Now we've had CIOs from very large insurance companies say that they believe that in 5-10 years, the classical insurance company will disappear, right? That's what they say. They plot forward the trends and who is buying coverage, how coverage is being purchased, how you can instrument vehicles, you can even instrument homes and see what the actual behavior is so that you know what you're insuring, right?
Tim Baum: Right.
Dion Hinchcliffe: And you can buy, you know, incredible efficient rates, and they get all self-serviced, and that makes the [...] self-insured, too. So, you know, that's the next wave in terms of insure-tech. So, what are you seeing? What sort of relationship between the relentless innovation that you have to undergo, the CIO and the future of your organization? I mean, I'm asking the big questions here, but we're all on the hot seat [...].
Tim Baum: So I think within the insurance industry, there's a delineation between personal and commercial lines. So the personal lines, I think you are. So you've got your analytics, you know, the things you can plug into your car to really say how you're driving. I think on the personal lines, technology, because it is more consumer-based, is probably going to move faster than on the commercial side. On the commercial side, in general, you know, you have larger contracts. You're insuring different things.
But, as you mentioned, the Internet of Things: Do we have companies that have equipment that we're actually insuring, and with the Internet of Things, can we actually pre-diagnose when a problem is going to happen to help shut that down? That gets actually into loss control. So that's a whole other aspect of how do we handle loss control? Can we get that education? Can we actually help the consumer know where the risks are, and how to avert that risk? Because while we insure them, the best scenario for us is they pay us a premium, and they make no claim for us.
So, if we can do ... If we can spend money up front that we can help educate them on how to not have a claim happen, the better off we are financially, and the more successful they are. No one wants to have an accident. One of our lines of business is worker's comp. No one wants to have one of their employees get killed or in an accident. Was is something that could have been prevented? Is there education that could have helped that? So how can we use technology on that? That's the area.
I think as far as what will insurance carriers look like in five to ten years, I think we always think things will happen a lot faster than they actually happen. I think because we're in a regulated field, we're even having to educate the regulators on how we do things.
I think one example is with drones. A lot of talk around drones. My understanding with drones is if you want to have a drone in your claims department to go out and assess - you've got damange on a building, you want to fly it around - the drone operator actually has to have what looks like a co-pilot with him on the ground, where they can fly that around to check out the damage. So now instead of sending one insurance adjuster out to check out the claim, I've got to send two guys? Is that really more efficient?
So, will that evolve where how the regulations can change to enable that to happen? Are there technologies out there that might disrupt, and drones are things almost an intermediary; something like a fax machine, that was really great when it first came out, but, you know, now....
Dion Hinchcliffe: Now, completely outdated.
Tim Baum: Except for insurance companies. We fax stuff out the wazoo. We love fax machines. We use a lot of paper. But how we take that paper, and how we actually digitize that, and move that forward? So I think there are areas of that where there also can be optimization. I think also there probably - not probably - there will be other lines of business that we're going to sell, as things evolve. I think also how we ensure it. So, do you move from, you're going to buy an annual policy, to are you going to buy a policy for an activity? Are you going to buy, to actually be more of a transactional insurance?
I think it will be very interesting to see some of the larger insurance carriers, how they try and handle that, because being large is more difficult to be nimble. I think one of the great things of Harford Mutual is we're small, but we think big. So we don't have a lot of the encumbrances that a large organization has, and allows us to be able to move and target things where we want to go and actually deliver where we want to go.
So, I think, you know, from a whole ...where is it going to be? You know, autonomous cars. Some people think autonomous cars are going to be out next year. I don't think you're going to have the freeways clogged with autonomous cars next year. Now, will they eventually get there? Yes. But, it's not going to be next year, and I think that's the same with technology. There's so much data that is around. There's so many technology avenues that you can go to.
Dion Hinchcliffe: And that’s the thing. You know, there's so many choices, you know, and as Bill Gates famously said, that we tend to overestimate change in short-term, but we end up underestimating in the long-term. We won't believe what the world looks like in fifteen years, but we expect a lot of it to happen next year, right?
Tim Baum: Yup.
Dion Hinchcliffe: And that's the challenge. And so let's turn conversation down a different path, because what I said when you talk to organizations, as you were mentioning - you guys think of the big guys - [you] have tremendous legacy baggage. And that's one of the biggest obstacles to modernization and digitization, and kind of really operating the business. It's great to hear that you want to do the big upgrades and overall, your IT and business application infrastructure, but what did you run into? This is what people really want to know, is what obstacles? As you've been going down this path, you have actually been hitting all the different pain points on change. Do you have a lot of technical debt? Are you finding that systems all talk to each other and your budgets all go into innovation? Sort of the worst story, what can you share with us about why is this hard, and you know what are you encountering?
Tim Baum: So I'm smiling because, "technical debt." If we were on the other side of the technical debt, we'd love to be a bank, because we'd be raking in the money. I mean, we have so much technical debt here because things were developed so old. It's tough to want to upgrade a system, replatform a system, if it's working. What's the ROI on it, what's the CBA on that? It's tough. So what happens is you have systems that then keep running, and you almost have to get into risk management. So, it's ironic we're an insurance company, but how do you manage the risk of your systems that are out there? So we do have a tremendous amount of technology debt, that we have to do something about.
Part of our whole core system replacement was trying to tackle some of that technology debt that we have. When we undertook it, because we are a smaller shop, we have so much debt, and so much the effort to do the core replacement, is really overwhelming. So, we actually had to go from a greenfield approach to how we worked to a brownfield approach of how we were going to deliver the core systems. And so, we do have a stack of technology debt that we are going to have to deal with.
I think one of ironically one of the benefits is that as technology has changed, and has the ability to develop and giving .... So like coding camps: Do we have any means by which we could take one of those systems that is a technology debt, and could we throw it out there, or could we throw it to an incubator and say, "Here's the problem. How would you solution it?" Have a bunch of individuals go off with a bunch of Coca Cola and a bunch of pizza, and they go off for two weeks and they crank something together, using newer technologies, using plug-and-play pieces that again, from a corporate standpoint, we really don't think that way. It's okay, at Harford Mutual, we've adopted the Agile Scrum methodology.
So you know, that's even a little step ahead, because traditionally, it's always been Waterfall, and Agile's been Waterfall, and Agile's been, I would say Agile probably really been used in the last fifteen years or so is when it's really started to get some legs, and comes to starting implementing. But even from an Agile perspective, is Agile, you know, do you have to rethink how Agile works? And so ...
Dion Hinchcliffe: And the whole dev-op [...] now is really emerging to say that the post-Agile view of IT where we expand collaboration far outside the boundaries of development, meaning operations and a bunch of other areas so that we can continuously change, right? It's a very interesting discussion.
Tim Baum: It is, because ... So, in that, we're giving that, [let's] kind of jump back on the digital aspect of it. You know, there is the Kaizen continual improvement. So even though the technology is going to continually improve, I think the processes are going to continually improve. Industry is going to continually improve. So you take all of those, and they're all separate streams running down there, that are, you know, running at different rates and different paths and different flows. How can you cross those over to actually optimize what you're really trying to get done? I think it's a really exciting time. I mean, I think there's just a lot of opportunity that I think the... Insurance has been around .... I think most people would say Benjamin Franklin really had the first insurance company in, like, 1752 Philadelphia, when he did fire insurance.
You know, things have changed since 1852, I mean things have changed from 1752 to 1842 when we started. You know, how are those things going to progress, and with technology and with human capital, how do we do that, and how we understand how people ... I think also then learning and understanding, having a better understanding of how people operate, and what drives people, what drives people's interactions, what drives people's purchase patterns? How do we incorporate that into the insurance industry?
Ultimately, we're insuring risk. We're trying to take someone's risk, and we're trying to cover that for them. But, how do we do that? You know, getting back to what is insurance? Does insurance change from let's say I'm selling you a policy to more of a, "I'm offering you a service, and one of those components of that service enables you to manage your risk, so that the focus really isn't on ...
Dion Hinchcliffe: And all, you know, digital self-help goals are now a floating category; really just becoming a digital risk management coach, right? Forward to charge, you know.
Tim Baum: Yup.
Dion Hinchcliffe: So that's interesting. So this hold that thought: I want to come back to some of the things you just said, we just covered. Maybe you're not a territory, Tim, but about how new ways to change. You touched on some important pieces on a lot of topics in the moment.
So we're about halfway through Episode #211 of CXOTalk. We have a very special guest, the CIO of Harford Mutual Insurance, Tim Baum. We'd love to take your questions about digital transformation, about insurance, and insurance technology on Twitter. We've got questions about a challenge that Tim mentioned, please send them in.
So Tim, you were talking about hackathons, or your know developer festivals. How can you go outside and get access to innovation in kind of a contemporary way? You're always had outsourcing, and staff augmentation, things like that, but those are kind of old-school, compared to you can go and join a hackathon and get young kids who have a lot of great ideas, spare time and try something new. And you really see that. Michael Krigsman, the founder of this show, and the CIO of the Federal Communications Commission, David Bray, is also now a co-host of CXOTalk. You know, we were talking about change agents, and change agency. How do we tap into these ecosystems and the network of people that you have? You know, many agents that have great ideas, "I have better support than you." In fact, customers and you've got development partners, and business partners that have great ideas. How can you unleash them? So it sounds like you're going down that pathway, and you see this in other CIOs. How do we provide more sustainable change, when it comes to technology? It's changing faster and faster all the time, and we haven't changed our model with it.
Tim Baum: Right. So, you know, communication might be the easy answer. But communication, and it's a two-way communication, it's that follow-through. So again, having this one individual that is out there on the marketing side, actually talking to those individuals using technology: if we have boards, if we have ways .... You're always going to .... You know, you got to Amazon and you look at reviews; you could have the best product out there, they're going to get some one-stars on it. How do you get the chaff away from the true value that's in that review? So, how do we do that from the agent, from the ultimate consumer? How do we get rid of the chaff and how we really understand what that stuff is? I think that's where actually it's a human person being able to go in and analyse what value are they looking for? What is the problem they're trying to solve?
So within IT, you know, you always run into problems where the businessmen will come, and they try to give you the solution. They don't give you a requirement, they give you a solution. So, go back and tell me what the requirement is. So in that same sense, go back to the consumer, to the agent, and what problem are you trying to solve? What are those needs that are out there? I think then once we bring it internally, then you have that other half of it, so how do we solution that? How do we solution from an architectural standpoint, from a software standpoint, to an actual development standpoint? And I think that's where. Again, if we look at things more broad, and we don't look at things in a serial manner, we will have more benefit.
You've probably heard the concept of "fail fast." So, you know, go and try. If it doesn't work, that's great. Don't spend a year working on something and then say, you know, this really isn't ... We're trying to put a square peg in a round hole. It's not going to work. You know what? Break it out in a month, spend some money, and if it doesn’t work, that was a lesson learned.
Never fail. Either learn or succeed. So, you know, just because it wasn't successful, doesn't mean it wasn't successful, because you've learned something from that, that you should be able to apply that then in the future. And as long as you can take that and apply that in the future, you're going to become better. So, whether it's through wisdom that you garnered from it, whether it's from a speed that you were able to see and optimize on it, there is benefit, even in the face of what you might deem as a failure. But it's not.
Dion Hinchcliffe: Yup. Failure is one you don't learn from, right?
Tim Baum: Right.
Dion Hinchcliffe: Well said. Although, now we have to have so many lessons learned. I think that's our challenge, and that comes to... It takes us to our next point, which is we look at insurance companies: I’ve worked for a lot of insurance companies over the years and I'm pretty familiar with their culture, and it's not one that's really, you know, digitally-centric, fast-moving, you know? Insurance companies tend to be very deliberate, they're full of actuaries who try and make amazing precise evaluations or you don't make any money, right? And they're not exactly in an exciting atmosphere. So how do you build a digitally-savvy culture that's going to attract the right talent, and compete with these insurance startups that are ... I'm looking at some of the maps them. They're going to be breathing down your neck more, and more, and more, and they're going to be sucking in the best talent. You know, what's the CIO's role in making Harford Mutual Insurance an exciting place for top developers and top technical talent?
Tim Baum: So I think for us, it actually is somewhat easy, because we are a growing carrier. Our senior management staff is the best there has ever been. There is a commitment to the employee, there is a commitment to the community. The amount of investment that we're making within IT is phenomenal for the size of our organization. So, nothing is stopping us from a technology standpoint, so the excitement of being able to get out there and say, "How can we do things?" You know, don't say "Why?", say "Why not?", whenever you ask something.
Marcus Ryu, who's the president of Guidewire, he's got this quote that I actually told him I was going to put it up on our wall; I was talking to him a couple months ago. And it was, "Act with urgency, but not recklessness." And so, if you can instill that with people that, you know, you've got to act with urgency because technology is changing. There are things out there, there are people that are pushing, there are companies that are pushing so act with urgency, but don't do it recklessly. And so, I think if you can foster that within your organization, you'll have people that want to work at your organization.
I think also, it's the relationship between IT and the business. If IT truly believes that they are here to enable the business, and it is a partnership, don't you want to work with a partner? Aren't you going to be excited? So if we can have the technology to back ... So you mentioned about an actuary. I've met tons of actuaries and you're right, they are ... You know, in technology, you'd say you've got your geeks that want to program; but an actuary is probably the brother of, or sister of the geek that's on data, and they think numbers, they think patterns. But in order for them to do their job, they need data. And they need good data, so how can they get data? So can I get them the data that they're looking for, so that they can actually do their job? And again, I think I can in my organization. I think we can. I think we can provide that information that they can use to do their analysis; and then, it's building out the products. Again, what makes it exciting for us? What products out there do we want to offer? How do we structure those products?
You know, we want to go into more states from an expansion standpoint. How are we going into more states? What are the lines that we want to be able to move in those states? How do we take lines of business, and how do we make them more productive? True, predictive analytics? So, there is a whole confluence of things that are going on, specifically at Hartford Mutual that I think makes it an exciting place to work; an exciting time to work.
Dion Hinchcliffe: Well, but you're bringing up some really interesting topics. You're going to push up my next question about public cloud, so think about that for a second. But my question really is, it sounds like you're really getting involved in the business planning and the business strategy of the company, and try to figure out where you can grow and expand from a business perspective, how they get a role in there. And we see that the CIO is becoming more involved in leading the business conversation. Is that what you're seeing as well, or how do you view the CIO's role in guiding the business?
Tim Baum: I do, because what the CIO does is the CIO brings the technology aspect, and they can help solution things when they're talking. They can help widen the minds of the people that are in marketing, the people that are in underwriting, the people that are in claims of how they can do their jobs. So if I know somewhat of how they can do their job, and I can again be a partner with them, and I can raise questions, to be candid, I may come up with some really dumb questions of why do we do that? Why does the industry do that? Because I've only been in the insurance industry for a little over two years, so, you know, part of it I can say, "I don't know! I don't understand. Why don't we do this? So educate me." But I also think it then may pose the question of, "I don't know why. Why don't we do that?"
So you know, do you know the old story about the Mom, she's going and she's cooking Thanksgiving dinner, and she cuts the ham in half, and she puts one in the top oven, one in the bottom oven, and their daughter says, "Why do you do that, Mom?", and she says, "I don't know. That's how Grandma does it. Go ask Grandma why she does that." [She goes] to Grandma, and Grandma says, "I don't know, that's how great-Grandma did it." She goes to great-Grandma, Grandma says, "My oven wasn't big enough, so I had to cut it in half."
Dion Hinchcliffe: Yup.
Tim Baum: You know. So, are we doing things like that, that we shouldn't be doing, that we can say, "Why are we doing business today? What is our process?" I think that is one of the great things, again, that keeps Hartford Mutual great, but it is. But, what is ... We're going through this core system replacement. What are some of the processes that we've been doing for thirty years, when technology first entered the realm within Harford Mutual? And why are we doing it that way? Do we need it? Do we need to print out paper? Does someone need to see a printed report in order to do their job? Or can actually have the system reconciled with stuff, and just say, "You know what, it reconciled. If you want to look at it, you can go to this file and look at it, but I'm telling you, I already put everything in the Excel file and did a match, and they all match, so you're good to go!" And how can I then make that accounting group more efficient, by taking some of that menial work out there, going and checking numbers by numbers down reports, so they can actually be doing better things?
How do we do our billing better? How do we do ... You know, how do we process our payments? We want to pay what we owe people from when they make a claim. How can we do that faster? How can we do that more efficient? We don't want to pay them more than we want to, but how do you become more efficient? And I think that part of a continual improvement. So, it is ...
Dion Hinchcliffe: It sounds like to me, like you have a lot of the Chief Digital Officer role already there. So that really helps from a perspective of the seat I think that technology leaders need to have at the table, and since you guys [...] for having that. So let's talk about how are you accomplishing this system replacement so quickly, given how much legacy that you have. And there's been a lot of discussion of how can you make regulated companies comply using things that public cloud would allow you to move much faster. Dealing with the plumbing, that really all the capacity don't use except for peak periods, all the other upgrades having stuff to grow with having a big foundation that you run your software and your datacenter and you go into public cloud; has that been part of your strategy, or are you doing something different in order to accelerate your digital transformation?
Tim Baum: So, it's funny. I was talking with an individual from another carrier just probably about a month ago about this. And, I might be showing my age, because I still like to ... So we currently host ... We don't host our datacenter. We have our datacenter actually in our office. And while, to me, that's maybe I'm young enough to know why do I want to have a datacenter in my office when there are hosting centers out there that's going to have the security, the fire retardant, you know all those backup generators in there, I don't want to worry about that. But to go to the cloud, I can't put my hands around it, I can't touch it, and so I want to feel like I still have a box there that I know is my box, that I can actually physically get out there and touch. Now we'll all come around in five years where I don't really need that box, because all our boxes are virtual, so even I can touch the box, I can't touch the server because it's a virtual server.
Dion Hinchcliffe: Right.
Tim Baum: The concept of knowing that there's actually a physical piece of hardware out there that I own, and I'm not going to Platform as a Service. You know, something within the cloud.
I think the other thing with the cloud is because are regulated, it opens a whole other, from a security standpoint. When I start putting stuff on ...
Dion Hinchcliffe: It's a whole other bar, and ...
Tim Baum: Right.
Dion Hinchcliffe: ... hearing it from CIOs in the UK, in banking they're like, "No way cloud is happening soon. Of course, eventually, but not for us. We need to control," right?
Tim Baum: Right.
Dion Hinchcliffe: So, it's interesting because I think, you know, by the end of this year, more than half of all enterprise workloads will be on public cloud, so that just shows you how fast it's happening [...].
Tim Baum: Right.
Dion Hinchcliffe: So, it's very interesting. So, we're almost through our very interesting session here, Tim, and thanks for all the insights. You’ve been very useful. I'd like to kind of tap into the store of wisdom that you've built up as an IT leader, in terms of: You've been there four months but it sounds like you've got things really, you know, underway in terms of large changes to the technology infrastructure. What practical advice would you give to CIOs and those who want to be CIOs for undertaking a program of digital transformation in the insurance industry? Given what you're learned already, what might you do a little differently, what advice, what hurdles did you get over that you wish someone had told you?
Tim Baum: So I think the one is to realize that you're in a regulated environment, so there are things that maybe you want to do, that you can't do because of the regulations, because of the security aspect. I think the other thing, you know, you've got to really be sensitive to is in security. So Dion, we briefly talked about Internet of Things. From a security standpoint, is that going to be an entry-point for individuals to come in? While you have that feature within your hot water heater, can someone tunnel in through that to get into my systems, in order to break? So there's a security aspect to it.
On the digital side, realizing that today is not yesterday, and today won't be tomorrow. So things are going to continually change. So how do you keep the business drivers? How do you keep the business informed of what it's going to take to do certain things, so that they can make better decisions of where they want to take the business from a profitability standpoint, from a growth perspective. And so, it's understanding that relationship that I have to have the data as soon as possible from a systems perspective of what it's going to take to formulate and develop these systems so that the business can make decisions of where they want to go. I think that's one key is really being able to try and figure out how to garner that information faster, and how reliable that you can then plan of where you want to take the business. I think that's important.
I think then it's also is really slicing up, from the digital aspect of what are you going to focus on? You can't focus on everything. You might feel like you have to focus on everything, but you're going to have to slice things up, compartmentalize things, attack it, prioritize those things. Everything's important, but you're only going to have one top priority. It's a top priority because it's your first priority. It's not your second priority, it's your first priority. Now, if you can go parallel, that's great, but ultimately, there is only one first priority, and that's the first one.
So it's understanding that there might be a need and demand to do stuff, but trying to prioritize what that need and the demand is, and then it's looking at the technology options out there. How do you solution something? How also, I think from a digital standpoint, realize that the technology is going to change in three years, what we see now is going to, I believe, will be just magnitudinally larger, and a change than what we have now. So don't build something for ten years out, because in ten years, totally different game. So, how do you incrementally move forward, and being able to move forward so that you can then alter, you can then turn, you can then drive to a different direction as needed. So that whole nimble concept. I think it's keeping those things in mind that are going to be the most important thing of, you know what's the technology, what's the human assets that you have that you can actually do things, and then, how do you actually execute that, and piecing things, and figuring out what your priority is.
Dion Hinchcliffe: Yup. Now I think, and this is what we see in leadership survey after leadership survey that too many top priorities are what seem to choke things, so I think your advice certainly resonates with those industry perspectives. And, I think not [...] the oceans, you know. How many strategic initiatives have failed to try to do everything at once? So I think that incremental, that fast, incremental approach is something that I'm certainly seeing is more something we're doing, the industry is doing more broadly as a smart thing to do.
And so great! Well, this brings us to the end of an absolutely terrific conversation. Tim, I can't thank you for coming on more. This is my first CXOTalk for 2017, and we're hoping to explore the industry, the insurance industry a couple more times before we're done. So, please, everyone give a thank you to Tim Baum, CIO of Harford Insurance. Don't forget to stop by CXOTalk.com. We have over 200 other episodes of IT leaders, such as Tim. And thank you very much for appearing, and thank you for watching the show.
Tim Baum: My pleasure, Dion. Good talking to you.
Published Date: Jan 10, 2017
Author: Michael Krigsman
Episode ID: 409