17 Nov CIO Leadership: Acuity's Neal Ruffalo stresses internal systems development
Sheboygan, Wis. – When you’re an insurance company and you serve independent agents, who by definition can leave for other carriers, you’re constantly seeking an edge that makes it easier for them to do business with you.
Such is the case with Acuity, the Sheboygan-based insurer that has emerged as an award-winning adopter of information technology, at least as far as 39 ACORD, the InformationWeek 500, and the Applied Systems Client Network are concerned.
Acuity has been recognized by each for its ease of doing business with insurance agents, which is made possible by the ASIST suite of tools it has built to connect with agents and reduce friction they incur when trying to book a piece of business. The tools, which help agencies conduct cost-saving downloads and real-time transactions, are among the internally developed systems that represent more than 90 percent of Acuity’s application portfolio.
Only its payroll and accounting systems are purchased, which is a testimony to the work of Vice President and CIO Neal Ruffalo and his IT staff. Ruffalo has been with Acuity since shortly after his 1980 graduation from the University of Wisconsin-Stevens Point. He joined the organization as an entry-level programmer, and is now considered an “IT All-Star” by Tech Decisions magazine.
As Ruffalo explained, ASIST is not new, and not an attempt to fix something that is broken, but just the next evolution of an existing internal system. “It’s anticipating need, trying to make it even easier for our agents, who can work with any carrier, to do business with Acuity,” he said. “If they start finding any type of slowness to the process, they will turn to someone else, assuming that other things like price and service are equal.”
Who’s mining the data?
Independent agents aren’t the only constituency that Ruffalo has served with IT. More areas of the company are inquiring about the value of business intelligence tools.
Each year, Acuity spends a significant amount of time to talking to industry experts to get an idea of what’s happening in the marketplace. The company takes that, marries it with its own market assessment, and moves on 20 or 25 strategic corporate initiatives.
IT is involved in a good number of them, including a business intelligence program that seeks to capture and use data for rate-making, calculating the percentage of renewals, purchasing and pricing, fraud detection, and soon fraud prevention.
Given its potential applications, Ruffalo doesn’t believe the push for BI is coming solely from vendors anymore. He would be surprised if organizations weren’t already moving down this path, or aggressively pursuing ways to get engaged. Whether it’s called business intelligence or business analytics, he believes organizations need to adopt this approach.
“You really need to understand your book of business in some level of detail,” he noted.
Acuity has had a number of initiatives that seek to provide precise answers, but that can’t be done without first having the data to analyze and the tool sets to conduct predictive analytics. With Acuity, BI is particularly important in terms of risk management and fraud protection, but the CIO is no longer the one pushing it. While IT is in the front seat, BI is starting to get germinated more by people in a strategic information and actuarial areas.
“We have business units actually pursuing it,” Ruffalo said.
In terms of BI, Acuity started with the age-old data warehouse, making sure it had clean data in a relational structure – claims, quotes, policies, or agency-related data – and then purchased some tools (both Cognos and Business Objects) to go along with it. Over time, Acuity has empowered people with these tools to track and trend, look at hunches, and try to understand which quotes are sticking.
The response to those tools has been strong as data, which can amount to information overload, is brought into every market, product, or rate discussion. In the past, organizations were information starved; now there are so many charts, graphs, and other ways to look at data, decision-making has been transformed.
Commercial underwriting, actuarial, and claims are areas that have used BI to good affect. Claims frequently uses these capabilities to examine exposure to loss and risk, and to better understand liability and fiscal damage exposures.
Actuarial is the area that suggests rates, so as organizations like the National Council on Compensation Insurance and the International Standardization Organization put out new rates, and Acuity decides whether it wants to adopt or modify them, it can track and trend what the competition is doing with regard to rates.
In the insurance space, companies that don’t use BI will be at a competitive disadvantage, Ruffalo asserted. “Assuming you have clean data, if you’re not using BI anywhere near to the level that we’re using it, you’re probably going to be adversely selected against,” he noted. “That’s because I can price your risk as an individual versus putting you into a pool of individuals, and we may have nowhere near the same propensity for loss.”
There one potential snag. With the consolidation in the BI industry – Cognos acquired by IBM, Business Objects by SAP, etcetera – some negative trends are starting to rear their head, and CIOs must take this into consideration. From personal experience, Ruffalo said there are some challenges as soon as one vendor absorbs another; while the tool sets are working as well as they ever have, he said pricing and support get to be a concern.
IT’s ability to develop systems internally is one way Ruffalo senses that his staff is delivering business value, but not the only one. He’s especially proud that IT is no longer the main driver of ideas, and that people outside of IT are seeking technology-based solutions. “One of the best measures of whether you’re having an impact is that people are inquiring about resources and you can’t deliver enough because there are so many ideas they want to put in play,” he stated. “We’ve created an environment where they know how much automation can help them with their daily jobs.”
Ruffalo also touts a metric that the entire organization had a part in, including IT. There was a point in 1990s when Acuity had $220 million of written premium and more than 1,100 employees. Today, the company has more than $800 million in premium with a little over 800 employees, an impressive ratio of $1 million in premium per employee that speaks volumes for doing more with less.
That’s not to say the CIO job is devoid of challenges. Two issues – new compliance requirements from the Payment Card Industry and the process transformation challenges of disaster recovery – consume much of his time.
In Ruffalo’s view, the PCI requirements are almost unattainable because organizations have to build so much sophistication with hardware and software that it almost gets to be cost prohibitive, and the return on investment will not be there.
“It is a challenge for us,” he said. “Now we could say we’re not going to do anymore credit card paying, but if we want to play in that space we have to adhere to those regulations or face fines from them, or higher fees.”
As for e-discovery, the focus is on two-pronged approach, but the bottom line is process, process, process. First, Acuity wants to make sure it has strong and adhered to document-retention policies for its data. Second, the company is working to build all the processes and procedures for what to do and when, and who is responsible for what.
The key is going to be communicating these processes to employees who must know the company’s procedure like the back of their hand, or face the possibility of being tripped up in court. “Those haven’t been fully defined, fully baked yet, so once we have those, then employee training and employee communication is going to be strategic in our process,” Ruffalo explained.
Jack of all trades
Since joining Acuity as a programmer, Ruffalo has served as an architect, a team leader, and a director. Serving in all those roles with the same organization has helped him prepare for the business responsibilities of the CIO’s role, where he is in charge of application development, research and development, telecommunications, technical support, and all software and hardware infrastructure.
“It’s certainly helped me understand insurance to some degree,” he said. “I’m certainly not an insurance expert, but it’s certainly helped me understand insurance to some degree, and understand the power that developing your own systems bring into play. We find that that is certainly one of our competitive advantages.
“I know a lot of the companies either can’t do it that way or have decided not to for whatever reason, but it helps you understand the full life cycle of a project from just an idea being loosely talked about all the way to implementation.”
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