Jahangiri: The online channel is increasingly becoming a focus point for attracting new customers. In your view, what’s the next big thing in online insurance?


Coles: The internet channel has really taken off for us since the launch of the My Allianz portal and   it is now one of our fastest growing channels.  We predict that it won’t be long before we achieve more sales through the internet than we do through the call centre.


I’d argue that there is not necessarily a ‘next big thing’ for online insurance but rather the internet channel is an area that requires continuous evolution.  Therefore, the areas that we are currently focusing on include: improving the user interface and increasing personalisation; extending self-service beyond quote, buy and claim lodgement; increasing product choice and flexibility for our customers; and increasing channel integration.  Above all, we like the internet channel as it empowers our customers, provides choice and flexibility, and allows customers to benefit from the lower channel costs through online discounts.
 
Jahangiri: In late 2009 Allianz embarked on a major cost-cutting initiative as part of its $4 million overhaul of its technology infrastructure. How has that progressed; and what were the business drivers behind this initiative?


Coles: We have always maintained a healthy focus on expense reduction but this was certainly sharpened during the global financial crisis.  We spend considerable energy examining our expense structure and overall expense ratio to understand how it can be optimised to benefit both our business and our customers.  For example, if we can achieve a lower IT expense ratio than our competitors, it may result in a premium saving of $10+ per individual motor policy or $100+ for each package commercial policy.  In a highly competitive market these savings have the potential to provide an important point of differentiation.


However, cutting IT expenses without delivering value is not our goal.  We separate our ‘run the business costs’ from ‘changing the business costs’ and have a relatively simple plan to reduce our ‘run the business costs’ and redirect savings towards ‘changing the business’.  In 2009, we kicked off a program called IT SEE Change which exceeded our expectations and achieved an ongoing reduction of 13 per cent in our baseline run the business costs.  This was quite an achievement given our expense structure was already competitive.  Much of this saving was used to fund new projects for the business that may not have been undertaken otherwise.


Jahangiri: What are your top IT development priorities for the year ahead?


Coles: We have several key priorities we are striving to deliver this year, including:

1. Making better use of the internet to enhance our services to customers and improve profitability;
2. Improving operational efficiency and effectiveness across insurance operations. We have trained our employees in operational excellence and have coupled this with business process management technology to deliver some significant benefits;
3. Improving integration between distribution partners; and
4. Improving our underlying products to ensure competitiveness and alignment with our customer requirements.

Underpinning this is the ongoing migration towards our target architectures and strengthening the tools and capabilities within the IT group.


Jahangiri: Allianz has reportedly gained a lot of commercial value from virtualisation. What is the next stage (if any) of virtualisation at Allianz?


Coles: We have achieved significant benefits through virtualisation but are only part of the way along our journey.  In terms of physical virtualisation, we continue to migrate towards our goal of reducing our footprint to two data centres and are just about to embark on a desktop virtualisation project.


The model also means that we can improve the robustness of the environment in areas like the use of common toolsets, multi-level monitoring, capacity management and disaster recovery.


We are now uncovering the value of operating applications on the same virtual environment in terms of tighter integration, re-use and lower ADM costs.
 
It has also been pleasing to see our power consumption dramatically drop from 44KVA down to 4KVA.


All this is on top of our original annual savings of over $1 million annually, so we are strong advocates of virtualisation.


Jahangiri: What is the most interesting insurance-related technology trend, here or abroad, that you are keeping an eye on?


Coles: There are many interesting trends emerging, however, I would probably pick business process management (BPM) as one of the most exciting.  While the core principles of BPM have been around for many years, there are few success stories in the industry.  However, I believe that the increased awareness within the business of the importance of processes, coupled with the developments in BPM tools and service-based architectures, means that the time has never been better to exploit it.  Our experience is that not only do we achieve a higher level of efficiency and effectiveness but we develop an insight into our business process and operational performance that we had not seen before.


Jahangiri: You have said that Allianz is transforming the IT function into one that is more customer and commercially focused rather than technically focused.  How will you measure the success of such a transition?


Coles: My first goal on taking over the IT division was to develop the right IT organisation with a leadership and culture that would embrace a new way of working.  We test this annually and we moved our divisional leadership culture from the worst to the best in the company in two years.  This provided a real mandate to make changes towards being more customer and commercially focused.


IT is becoming increasingly important in the delivery of services to our customers and it is vital that each member of the team understands the impact that they can have on the end customer.  I make sure I meet every new employee who joins the division so I can outline our expectations around customer and commercial focus, which is reinforced through our IT Customer Service Charter.  We measure internal customer feedback through the Net Promoter Score Methodology, which gives stakeholders the opportunity to provide feedback on what we are doing well and where we can improve our support and services. This feedback program has been running for over two years during which time we’ve seen our feedback score improve considerably.


Embedding a commercial IT focus has to start with a clear strategy.  Ours is to reduce ‘run the business’ expenses and redirect savings towards ‘changing the business’.  This has helped create a culture of expense focus and maximising return on new IT investment.  It is really satisfying when we can say to a business unit that we can deliver a project because we have made savings in IT running costs and I am very pleased that we have been able to say that a lot over the last couple of years.


Jahangiri: How close do you think the insurance sector is from championing the single customer view; and why?


Coles: Allianz along with other players in the industry has gone a long way to achieving the single customer view.  However, this is an enabler towards the real goal of being more customer focussed and it is how it is used that will be the real differentiator.  For example, we have had a lot of success through providing customers with the ability to manage all of their insurance through a portfolio manager on the internet that we call My Allianz.


Jahangiri: What are your views on virtualisation, Software-as-a-Service and cloud computing; and do you foresee the insurance industry embracing these technologies to the same extent as retail banks?


Coles: We have gained a lot of commercial value through these technologies and so I am a big fan.  SaaS has enabled us to get to market with rich functionality quickly through services like Salesforce.com.  Virtualisation has been invaluable to us in reducing costs and complexity – earlier this year we migrated all of our web environments running on 60+ servers onto a new Z10 Mainframe under Linux.


Jahangiri: Where do you draw inspiration from to keep abreast of the technology curve?


Coles: Keeping abreast of the technology curve is tough given the exceptional pace of change.  At Allianz, we subscribe to various services but typically I find that I learn more by talking and listening to people in the market.  I also try to meet several IT providers a month to help ensure I keep my finger on the pulse.  I’m also conscious that, as an industry, we are often chasing  our tail to find the next ‘magical silver IT bullet’, when in fact it may be more effective to understand the commercial value of technology that has  been around for a while and delivering it.


Jahangiri: What IT skills are ‘in-demand’ right now and how do you see these changing in the next three years?


Coles: Most IT skills are in demand right now.  I learnt early on that the Australian IT market is a high quality but fairly shallow resource pool and very sensitive to large investments from particular industries or even companies.  Our focus shifted early on towards looking at this challenge more broadly as talent management covering the acquisition, development, and just as important, the retention of key employees.  This is challenging for any company to manage and I don’t see it getting any easier in the future.
 
Jahangiri: Every IT leader has a legacy they wish to be remembered for. What is yours?


Coles: I hope my legacy is that I helped establish an IT culture of customer and commercial focus that encouraged agility and built-in robustness. I’d like to be remembered for establishing an increased understanding that change will not happen unless we are prepared to take risks and that risks can be positive as long as we manage them carefully – insurers are in the risk business after all!