CASE STUDY Suncorp

CASE STUDY
Suncorp
According to the history of Lloyd's of London, in the late 1680s Edward Lloyd opened his first coffee
house on Tower Street and quickly established a clientele of wealthy merchants, ship captains, owners,
and career sailors. The merchants often served as "brokers" by taking on the financial risk of insuring
cargo ships bound for foreign ports after haggling over the worth of the cargo and how much risk was
involved in the voyage.
The information gained in Lloyd's Coffee House was an invaluable part of establishing accurate pricing
– something that is arguably as important to the customer as it is to the company doing the "insuring."
Today, when things are going well policyholders have time to wonder, "Why should I pay these premiums?"
Further, popular consumer conception is that insurance companies are "getting rich" off their
hard earned dollars. So, when Suncorp, Australia's third largest general insurer with an annual premium
income of over $A2 billion, looked at ways to make improvements in their information technology
structures, systems and processes, they agreed that providing customer value was critical.
By partnering with FJA-US, a New York-based subsidiary of European insurance technology innovator
FJH, Suncorp began the process of improving their rating sophistication with a new pricing engine
using FJA's Product Machine. The goal was not only to make changes easier and increase productivity,
but also to ensure customers their policy pricing was the most fair and accurate in the marketplace.
"One of our core competencies has to be pricing excellence," said Daniel Fogarty, General Manager
Motor Customer Development for General Insurance at Suncorp. "This implementation provides the
tools for us to deliver this excellence."
With outdated mainframe rating systems in place, changes were restricted to periodic releases. Rapid
change was imperative. Challenges facing Suncorp on this project were two-fold:
1. Implement a more granular, more complex rating structure to allow improvement in rating
accuracy
2. Utilize a rating engine outside of the existing mainframe that would allow changes to the rates
and the rating structure often, quickly and easily
For this project, Suncorp brought together "senior representatives from the personal insurance product
areas…as well as senior members from the actuarial team working with several people from IT."
This cross-departmental team worked to ensure that the impending implementation fit perfectly with
the company's main strategy of growing personal insurance portfolios profitably and at a rate faster
than Suncorp's competitors.
"The Product Machine is more than just software," said Dr. Carl Krapp, who is one of two managing
directors at FJA-US. "It facilitates communication between business, IT and actuaries. It ensures each
department is speaking the same language to one another and allows for each department to enter
their domain specific product information directly into the repository."
Munich Hamburg Cologne Stuttgart Zurich Vienna Maribor New York

Suncorp Profile:
www.suncorp.com.au
Company Description:
The company known today as Suncorp came
into existence in 1996 as Suncorp Metway with
the amalgamation of two previously Queensland
government-owned companies, Suncorp
and QIDC, in addition to Metway Bank. In July
2001, Suncorp Metway acquired Australian
Mutual Provident Society's (AMP) general insurance
interests which included the GIO insurance
business. The company was rebranded in
2002 to reflect a simplified name – Suncorp.
Suncorp is the third largest general insurer in
Australia. The company underwrites insurance
products for the Suncorp, GIO, & AMP brands.
Headquartered in Queensland, with 173 Suncorp
retail outlets (including branches and agencies),
and 57 business banking outlets, across
Australia. Suncorp also maintains five major call
centers in Brisbane, Melbourne and Toowoomba,
and 16 claims assessment centers.
Year Established:
Suncorp Metway (Suncorp, Metway and QIDC)
1996
AMP & GIO Insurance business acquired 2001
Suncorp 2002
Number of Employees:
Approximately 8,200
Annual Premium Volume:
General Insurance = $2.5B.
Personal Insurance = $1.1B.
Additional Information:
Suncorp's Corporate Projects Division, in cooperation
with FJA-US, led delivery of the program
in accordance with the Project Governance
Framework. This methodology enables Suncorp
to select which initiatives to invest in while
ensuring appropriate diligence, visibility, and
predictability of project outcomes. Suncorp
entered the successful implementation of their
General Insurance Pricing Engine Program in a
national project management competition
(AIPM) winning the Queensland State Project of
the Year and took second place in the national
award competition against engineering, scientific
and industrial projects submitted from across
Australia.
Suncorp's evaluation and decision-making process took ten
months, and involved many vendors, but only two in detail.
Adrian Quinn, Suncorp's General Manager IT Strategy,
Architecture and Security commented that the extensive evaluation
process "proved to be most effective in gaining buy-in
from senior management on the potential this initiative could
provide to the organization. It also built confidence that the
FJA product set could support our immediate and long term
requirements." The evaluation process enabled Suncorp to
establish a shortlist of vendors, which included FJA-US.
"A key part of the evaluation and decision-making process was
having vendors implement a specified pricing model (provided
by Suncorp) and then demonstrate it in a forum of key
business managers," said Quinn. "Part of that demonstration
was to exercise a number of enhancement scenarios (some of
which were provided beforehand, and some were unannounced).
The objective was to understand the flexibility of the
product and its capability to support 'rapid time to market.'"
Suncorp requested a Proof of Concept (POC) from the preferred
vendor/product (FJA-US and The Product Machine). This
POC allowed the business to better understand the product
capabilities plus prove/understand the technology, integration
and scalability aspects.
With the selection of FJA-US as the preferred vendor for this
project, the stage was set for a successful implementation.
"FJA's sole focus is the insurance industry with implementations
in 20 countries," commented Marc Dutton, Managing
Director of FJA-US. "FJA brings both actuarial and IT expertise,
using technology as a facilitator of business problems in
the industry."
Both FJA and Suncorp understood that change management
and communication were critical aspects. And, since a key requirement
of the project was to get a common pricing structure
across Suncorp's various brands and distribution channels,
the fact that FJA understood the current differences of
the existing products, pricing and supporting systems was
very important.
"FJA's past experience of delivering similar systems was very
valuable to Suncorp during this project," said Dutton. "Our
knowledge of the insurance business in general and of Suncorp's
systems and processes specifically was an integral part
of our ultimate success."

The history of Suncorp complicated the management and implementation
of this project considerably. Suncorp is actually
the amalgamation of several previously separate entities –
the formerly Queensland government-owned Suncorp and
QIDC, Metway Bank, and GIO Insurance. And, the myriad of
systems, platforms and personnel embedded within the company
made it necessary for Suncorp to involve both IT and
actuarial personnel in the project. The cross-functional team
established to work with FJA to develop the Pricing Engine
effectively completed one of the largest technology projects
ever undertaken by the company, and this successful implementation
has been recognized in national Australian awards
for excellence in project management.
"FJA follows standard development and implementation processes
focusing on project transparency, keeping the customer
informed and pointing out potential problems early in
the process," said Krapp. "FJA employs trained project management
staff responsible for successful implementations.
Furthermore, FJA employs actuaries that speak the same
language as the actuaries of our customers."
"The [FJA] system supported our needs of being flexible and
fast to implement pricing data changes," Fogarty said. "The
'define and generate' approach was appealing as it minimizes
the programming work required to implement and change
pricing rules, which is critical in a competitive market. We
anticipate that the system will have wider applicability for the
group as a core platform to support other business functions
than pricing."
When it came down to the actual installation, "core product
installation was relatively simple, as the FJA product utilizes
industry standard technology platforms and approaches (e.g.
J2EE)," said Quinn. "Standard integration products, such as
IBM MQ Series, were utilized to provide messaging capability,
thus making the technical integration easier."
"The design and the implementation of the pricing structures
and rules were quite involved, and were further complicated
by the number of existing systems that had to integrate with
the new pricing engine." "The challenge came with the functional
integration – dealing with the differences across all the
various systems involved," Quinn explained. "A strong focus
was required on defining clear 'interface contracts' between all
the components and ensuring they were 'functionally valid'
across the end to end solution. Testing to verify this was
extensive."
FJA-US/FJH Profile:
www.fja-us.com
Company Description:
FJA-US, Inc., combines expertise in actuarial
science and technology to deliver packaged and
custom software solutions for the insurance
industry. The core of FJA's offerings is the Product
Machine, which helps companies shorten
the time and reduce the cost of product development.
FJA also offers Asset Liability and Model
Office System (ALAMOS), sales and service,
illustration, and rating solutions. FJA-US, is
headquartered in New York City, and is a subsidiary
of FJH AG, Munich, Germany.
FJH AG is a leading consulting and software firm
for the insurance and pensions market. FJH's core
software product is FJA Life Factory ® , which
enables pension and insurance products to be
developed, marketed and administered. FJH
also produces risk management systems and
portal solution, as well as an extensive portfolio
of services ranging from the implementation
and testing of software through to data migration
and consulting in all matters relating to pensions
provision. The FJH Group and its subsidiaries
provide products and consultancy services
to more than 1,000 companies, including insurance
companies, industrial entities, professional
pension funds and individuals, associations, trade
unions, ministries and government authorities.
Year Established:
FJH (parent company) 1980
FJA-US (New York) 1996
Number of Employees:
650
Additional Information:
As a subsidiary of FJH AG, FJA-US has a powerful
base of knowledge and expertise. FJH has offices
in Hamburg, Cologne and Stuttgart, and additional
subsidiaries in Switzerland, Austria, the
United States, and Slovenia. The company was
listed in February 2000 and was included in the
TechDAX premium index in March 2003.

To fit Suncorp's varied needs, the FJA product set was implemented
on a HP-UX operating platform (HP 9000 Series 800)
using an Oracle database. The actual Pricing Engine application
runs in a BEA Web Logic Server application server environment,
while development tools are deployed to the desktop
via Citrix. The Pricing Engine integrates with several of
Suncorp's core business systems, some of which are IBM
mainframe-based, while others are front-end sales systems
used remotely by various insurance intermediaries, agents,
and brokers.
"The program achieved its goals of improved service, increased
profitability and a competitive leap forward for Suncorp,"
Fogarty concluded. "While the program still has several important
milestones to meet as the Pricing Engine is rolled out
across our insurance products, it has provided us with a solid
technologically superior base which we will capitalize on over
the following years. Overall, it positions the business well to
price personal insurance products competitively and profitably,
providing good value for customers and shareholders
alike."
"FJA has a strong understanding and knowledge of insurance
products and processes," concluded Dutton. "This has aided
in the success of developing pointed solutions for the insurance
space. We do not look at technology as a silver bullet,
however, through understanding the problems, we use technology
to facilitate business problems and provide operational
and distribution efficiencies utilizing our offerings. Our
value proposition is to empower insurance companies to be
vendor independent. We want our customers to come back to
FJA because they want to, not because they have to."
CONTACT
FJA-US, Inc.
A Company of the FJH Group
512 Seventh Avenue 15th Flr.
New York NY 10018 USA
Telephone 212 8402618
Telefax 212 8402693
Internet www.fja-us.com/us
FJA's Product Machine Technical Specifications
Platform Specifics:
HP-UX operating platform (HP 9000 Series 800)
via an Oracle database
Running in a BEA Web Logic Sever application
server environment
The PDFS development tool is deployed to the
desktop via Citrix
Integration Specifics:
"The challenge came with the functional integration
– dealing with the differences across all the
various systems involved," said Quinn. "A
strong focus was required on defining clear
'interface contracts' between all the components
and ensuring they were 'functionally valid'
across the end to end solution. Testing to verify
this was extensive. The system integrates with a
number of core business systems – some of
these are IBM mainframe based, others are
front-end sales system used remotely by various
insurance intermediaries, agents, and brokers.
These external intermediaries access pricing
engine from these systems using a HTTP/S
request over the Internet, and integration is via
IBM MQ Series to provide messaging capability."
Were there any specific hardware needs?
"Meeting performance targets was critical," said
Quinn. "As the algorithms within the solution
use significant volumes of 'reference data' (rating
data), there is a heavy dependence on
memory caching. The servers are configured
with a significant amount of RAM (2GB) to support
this. The complexity of the calculations involved
means that the processing is very CPU
intensive. Therefore, good CPU throughput was
required to ensure pricing requests were processed
quickly. Each HP-UX Unix server has
2x875 MHz processors."
As per: 04/2005
© Copyright FJH AG, Munich 2005
20050408