Insurance solution case study:

Product innovation and speed to market are the keys to competitive advantage.

PPS brings unprecedented exibility to the South African insurance market

Overview
Business challenge
The Professional Provident Society (PPS), a leading provider of specialised insurance services for more than 200,000 professionals, wanted to improve its ability to bring new products to market in order to respond to changing customer demands and sti ening competition.
The objective has always been to provide a solution to the Industry challenges of legacy, competition and administration costs. Having achieved these objectives, I hope for the opportunity to use this solution to redene the Financial Services industry for the future. Many businesses are challenged to predict the future to prepare their applications for future challenges. Guesswork is a poor argument for investment. You cannot know the future, but you can dene agility and coupled with a solution that is as agile as your business intellect, you will be well served when you realise that future. - Stephan Clark, Executive Life Administration & Systems

Solution
Working in close collaboration with Silvermoon Group and IBM, PPS replaced all of its legacy systems with a completely new, modular application infrastructure based on the principles of the IBM Insurance Application Architecture (IAA)the rst end-to-end implementation of IAA in the South African market. The common IAA-based platform uni ed several previously disparate policy systems. The project was completed in 9 months.

Key benets

Allowed rapid modi cation of new products in response to competitor actions in a matter of weeksan entirely new capability; 50% reduction in application development costs; 80% decrease in audit ndings (items requiring remedial action); More than 90% elimination of system code; Signi cantly improved controls for collecting premiums; Provided tailored UIs to meet a number of di erent audiences and channels, including call centre agents, brokers, direct and back o ce sta , accessing the same backend.

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In their rst year after going live, PPS were able to introduce 9 new products, whereas only 1 new product was introduced during the preceding three years. More recently, in July 2011, PPS introduced a further 16 new products within 4 weeks, using only 5 developers. This represented an average of 2.2 days of IT resources to release a product after these had been de ned by PPS actuaries. Using the same modular approach, a brand new mobile device frontend based on iPad and Android technology was introduced in less than 3 weeks. Self-service customer transactions are performed directly on the same backend used by PPS back-o ce sta , avoiding costly re-entry of information. As impressive as these achievements are, the Silvermoons Insurance Solution strategically allowed PPS to manage its holdings by separating a speci c countrys administration into its own chart of accounts. In addition, the implementation allowed PPS to administer commission clawbacks internally, instead of relying on often inaccurate reporting from third parties. PPS have extended the Platform to address CRM and Commissions issues, and are aggressively leveraging mobile and web technology to penetrate new markets and better serve their clients. None of these innovations were a possibility prior to implementing Silvermoons Insurance Solution.

to introduce new products into the marketplace: Before implementing the Silvermoon Insurance Solution PPS had only introduced one new insurance product in three years. In order to overcome this obstacle, PPS had to change the way the game was played on a fundamental levelmaking incremental advances in capability would not be enough. PPS knew that its competitors faced similar development challenges, so the company decided to make an end run around the rest of the industry by completely replacing its systems and reinventing the business. In an industry as conservative and risk-averse as insurance, the willingness to undertake such a dramatic change was remarkable, and unheard-of in many insurance companies. But the move paid o , and the results have been astonishing. In less than two years, PPS has introduced 25 new products into the marketplace, taking their competitors completely by surprise.
Our end-to-end implementation of IAA gave us [that] solid core, and weve been able to build on it and leap far ahead of the competition. David Gnodde, COO at the time, PPS

A clear, objective viewpoint sets PPS apart

An important insight on the part of PPS was to recognize that whats truly important is not what the company does di erently, but rather what makes the company better in what it does similarly to its competitors. According to David Gnodde, PPSs chief operating o cer at the time, Many insurers focus on what they believe they do di erently and as a result get tied to old systems and processes, believing them to have some intrinsic value. But the fact is, from a systems administration and business process point of viewthe behind-the-scenes activitiesinsurance companies around the world are all actually performing the same business. This has important implications, because it means that its possible to devise an industry-speci c
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A challenge of exibility
The Professional Provident Society is a provider of insurance products to a highly-specialised market: graduate professionals such as doctors and lawyers. The company has been in existence since 1941 and is a leader in its niche, but increasing competition has been putting pressure on PPS to innovate and introduce new products into the marketplace. The inherent nature of its legacy systems made application and product development very complex, costly and fraught with risk. As a result, it took years

architecture that will apply to any insurance company. Thats what IBM did in the 1990s, when it created IBM Insurance Application Architecture. IAA is a widely accepted business and application architecture blue- print for insurance company core operations with an homogeneous coverage across all lines of business. PPS was familiar with the suite of models and chose to adopt it in its entirety, using IAA as the centrepiece of its transformation initiative. This end-to-end service-oriented architecture (SOA)-based implementation of IAA, the rst of its kind in South Africa, set PPS apart from its competitors, which have only adopted IAA in a limited fashion.

Collaborating to innovate
PPS knew up front what it needed to make the transformation happen.
Our strength is in knowing what an insurance company needs in order to run efciently. What we wanted was a partner with the technological expertise to make that happen. We wanted a close collaborative relationship, says Gnodde.

Breaking the development logjam

Introducing new products to the market in the insurance industry is so di cult because of the way legacy systems work. Our legacy systems were bound up, so to speak," says Stephan Clark, Executive Life Administration & Systems at PPS. As is typical of older architectures, there were many dependencies and a great deal of duplication of data. What this meant was that if you wanted to change a rule or a policy in the system in order to introduce a new product o ering, youd have to change not just one part of the system, but many, while still keeping everything in sync. It was very riskythere were so many interdependencies that any one problem could bring multiple systems down. By contrast, the modular nature of the new infrastructure driven by product speci cations and reusable processes vastly simpli es matters. Now, a given piece of data or code only appears once and is reused over and over, instead of being duplicated and embedded throughout all our systems, Clark says. The new systems are thus much more streamlined with approximately 50,000 lines of code versus over 600,000 lines in the legacy systems. Development of new products is a much simpler task than it had been.

PPS found its partner in Silvermoon Group, an innovative IT solutions company that specialises in modular, service-oriented applications that rigorously follow the IAA model. IBM Global Business Services also played a role, providing IAA training to PPS. IBM Software Group provided the WebSphere software to host the Silvermoon modular, service oriented application components; the IBM Rational Rose tools for application development and maintenance. IBM also provided the servers and the storage area network to host the data.

Why it matters
Specialty insurance provider Professional Provident Society (PPS) dramatically improved its speed to market by changing its IT architecture and business processes to a degree unseen in its local market. PPS implemented a rst-in-market, end-to- end service-oriented architecture based on the IBM Insurance Application Architecture that has allowed it to leap far ahead of its competition with an unprecedented rate of new product introductions (25 products in 2 years).

Compelling results
Not only has PPS been able to introduce new products at an unprecedented rate, the modular nature of the infrastructure and an administration system driven by product speci cations make modifying those products very simple. Our competition responded to one of our new product introductions with an o ering of their own, says
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Clark, but within a matter of only a few weeks we were able to modify our o ering in reply. Our newfound agility has allowed us to catch our competitors completely o guard. The reinventing of business operations at PPS has resulted in a number of bene ts beyond the immediate goal of improving the companys speed to market. An important bene t of adopting the IBM Insurance Application Architecture is that it provides a comprehensive, validated structure for the entire business, across all lines of business, which helps companies comply with regulatory audits. The insurance industry is very tightly regulated and companies are routinely checked for compliance. By embracing IAA principles, PPS has reduced its audit ndingsitems requiring remedial actionby some 80%. The new applications are also producing improved business results, with signi cant improvements in controls for collecting premiums.

hampering them. We focused instead on the core of the business and thought about how to make those core functions work better. Our end-to-end implementation of IAA gave us that solid core, and weve been able to build on it and leap far ahead of the competition.

About Silvermoon Business Systems

The mission of Silvermoon is to empower insurance companies to be the best they can be, by enabling their business leaders to be more innovative and creative without being constrained by legacy systems and traditionally rigid business models. Silvermoons award-winning Silvermoon Insurance System o ers a cost-e ective approach to achieving product exibility, speed to market, customer centricity and improved risk management. We bring more choice to the insurance industry. We help clients plan for market and technology changes. We supply world-class software to the insurance industry, and we constantly improve our solutions by working with an extensive network of business Partners globally.

The implications of technology

According to Gnodde, it takes considerable courage to let go of the past and use technology to innovate, especially in a conservative industry like insurance. Doing what weve donefully embracing a proven architecture and deploying a service- oriented architecture based on itis in a sense straightforward, but in the context of this industry and this market, a fundamental change like weve made amounts to a whole new way of doing business. Our competitors are so focused on the perceived value of their existing processes, systems and o erings that theyre unwilling to break free of them or even see that those legacy assets are in fact

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