Insured Stability

When IAG merged with another insurance company, CIO David Issa used the new operation's increased scale to reduce costs, creating a virtuous loop that passes the benefits on to customers.

When the Insurance Australia Group (IAG) took ownership of CGU in January, CIO David Issa knew that the only effective way to bring the two organisations together would be to adopt an entirely new business model.

Clearly, it would be important to merge systems wherever a synergy could be found, as with any merger between two business entities, but equally clearly, IAG would need to move with great caution because CGU was by nature a very different beast from IAG. With fundamental differences in their modes of operation, Issa was convinced failing to define a new business model before beginning any kind of technology merger would be a recipe for disaster.

"We had some areas where there was very little overlap [in systems] because CGU is predominantly what we call an intermediary business, meaning they sell their insurance through insurance brokers and financial institutions," Issa explains. "A lot of their technology sits with, for example, insurance brokers who actually then write the insurance business for the customer. In the rest of IAG we are what we call a direct business, so we deal directly with the end customer, predominantly through call centres but also through branches and through the Internet. So in those front-end systems, there is very little overlap."

With such radical differences in the business models of the two organisations, Issa knew a fine line had to be walked between the adoption of best of breed applications and processes and ensuring those actions did not put the customer side of the business at risk. That meant consolidation would predominantly occur at the back end - but not until IAG could define an entirely new business model for the expanded entity.

"When you bring two organisations together it's not just a matter of bolting one to the other, you've got to start looking at where there is a best of breed in like functions in the organisations, and to try to make sure that you're getting the benefits of that," Issa says. "At the same time, what you don't want to do - and this is the fine line that you must walk - is to actually put at risk the customer side of the business. You don't want to make changes that get some benefits, for example at the back ends, if what it does is to impact the actual front-line staff that deals with the customers."

Under those circumstances defining a new business model was an entirely natural precursor to action. The IAG approach was to start with an understanding of which functions should stay the way they were because they had a direct relationship with the customer and the revenue stream produced from the customer, and only then to consider what could be merged at the back end with transparency to how that customer is being dealt with. It was a detailed, complex process that should culminate in a fully merged operation by the end of this year.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

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