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CIO Leadership Series: Byrne Chapman, American Family Insurance

Madison, Wis. - When it comes to innovation, American Family Insurance's Information Services Division doesn't wait to take direction.

The direction comes from within, and Byrne Chapman, vice president of the IS Division, can sum it up with a familiar phrase: nothing ventured, nothing gained. To build a culture of innovation, the IS Division has established a “venture program” modeled after employee-driven, quality-control programs.

While management experts like Tom Peters advise businesses to allocate 15 percent of their budget for “truly radical” ideas, the American Family program commits both budget and time. It encourages IS employees or teams to bring forth innovative ideas, perhaps receive approval and funding for them, and then take 100 or 150 man-hours to develop and test them.

The ideas have to be new, and their business value must be evident, but they don't necessarily require elaborate explanations. They can be summed up in a short elevator pitch.

“We don't want to make it so tough that they don't bring forth ideas,” said Chapman, who is in charge of the division's strategy, budget, and its 1,000 employees.
Chapman has received anywhere from 15 to 20 ideas per quarter, and he has accepted as many as all of them, or as few as just a couple. Some have been developed into innovations that deliver real benefits to employee user groups and customers.

Application applications

One example of a venture project that now pays handsome dividends is the company's new “e-application” that agents can fill out online. Prior to its adoption, American Family received thousands of insurance applications on paper, but now agents can enter them in an e-form. Once the new e-application went online, “we went from pure paper to pure electronic process, freeing agents' time,” Chapman said, and ensuring that policies are issued faster with more complete and accurate information.

“In the past, we had a certain percentage of applications returned to the agent that were missing data or had inaccurate data. It really helped us improve in that area.”

In the first evolution of the e-application, the e-form was identical to the paper application to accommodate the agents' learning curve, but it led to venture ideas for “e-underwriting” and “e-pricing.” The concepts not only help contain operating costs, they are aligned with the core mission of the business - the provision of property-casualty, life, and commercial lines of insurance.

The venture program has been productive enough to consider applying it on a company-wide basis. “We encourage our technical staff to take risks, but safe risks,” said Chapman, who earned a bachelor's degree in business from Edgewood College. “Basically, we ask them to invent ways for IT to drive business value.”

Transformational IS

American Family, which is approaching its 80th anniversary, is in a transformative period involving technology. Seven years ago, when Chapman was elevated his current position, management knew that information technology was an important part of the business, but it was not necessarily aligned with business. Now, business processes do not change without the IS Division, formerly run by current American Family Chairman and CEO David Anderson.

Driving business value has been at the heart of several information technology projects at American Family. The company has been rolling out a merged customer record to combine customer and policy information in an electronic format that agents can access in the field following a major storm.

More recently, American Family has used a Microsoft encryption solution to protect business and customer data in the agency environment - one that crosses 18 states. The company, which has 8,100 employees, has gone from having data encrypted on a restricted number of platforms to having it on 4,000 servers and 25,000 machines, one-third of which are laptops.

Its key 2007 initiative, which will probably take more than one calendar year to complete, is to reinvent its claims process with a new, web-based claims processing structure. The project involves the implementation of scanning technologies that accommodate paperless processes and the establishment of four call centers for 24/7 claims support, but it does not represent a huge investment in capital. The biggest expenditure, Chapman said, is the technicians' time to write the new software.

Technology lessons

The best lesson Chapman has learned from IT implementations, the successes and the failures, is to structure progress in digestible chunks. “I think the biggest learning over the last three or four years is, even if we had very large projects, you compartmentalize those projects and identify deliverables that you can roll out every quarter, rather than the big-bang approach,” he said.

“We've seen the risk of a project where you work on it for a year, or work on it for six to eight months, and implement a big-bang approach at the end of the project. It's pretty risky. We found out that our users, our client base, is pretty accepting of an implementation where they see new functions, new features, quarterly.”

To Chapman, the essence of CIO leadership is to take on the visionary aspects of his job, whether that means assessing the fit of emerging technology, making sure that new solutions have strong audit trails to comply with new e-discovery regulations, developing existing staff, or spending time in the university environment to assure tomorrow's workforce that IT is a good career choice.

“I really think it's over-the-horizon, making sure we're ready to add business value with the solutions that are out there, making sure that we are staffed, trained, and ready to go with new technologies that add value to the company, and working with [American Family] peers so they understand the kinds of things we can do to help the business and provide business value,” he said.

“We tend to talk in very tangible terms, so how does it help productivity? How does it help customer satisfaction?”

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