Allstate Learns to Innovate With the Cloud

Mitch Wagner
7/27/2017
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After dominating the insurance industry for almost a century, Allstate faces challenges from online upstarts. The company needs to shake off its long history and learn to innovate.

That's involved adopting agile development methods and teaching IT to think like the customer, says Opal Perry, Allstate divisional chief information officer of claims.

Allstate is big, and the very picture of an industry incumbent. Founded in 1931, it recorded $36.5 billion in revenue last year, protecting 16 million households.

But, like the retail industry with Amazon, Allstate faces challenges from online upstarts, most notably Lemonade, which offers insurance wholly digitally and in some cases can resolve claims in less than three minutes, Perry said, speaking at the Cloud Foundry Summit in Santa Clara last month.

Allstate's Opal Perry
Allstate's Opal Perry

To meet the challenge of today's business environment, Allstate needed to transform IT -- "engaging engineers to delight the customer and drive business results," Perry said.

The transformation started in 2015, as Allstate began aligning its developers to work together in teams, she said.

But innovation is a much older tradition at Allstate. At the time of the company's 1931 founding, the use of the automobile was just becoming widespread, in a period of huge societal disruption.

Today, the transportation industry is once again changing fast. Today's change is coming from autonomous driving and ride-sharing companies like Uber and Lyft, Perry said.

To successfully innovate, developers need the right environment. Perry compared the developer or product team to a tree, nurtured by the sun (customers), air (business opportunities and leadership support), and the soil (the labs environment).

That's a change from how developers traditionally work. "Back when I had my first job and was sitting in a dark cubicle farm, some of my more seasoned colleagues said 'we're just mushrooms; they keep us in the dark and feed us crap,'" Perry said.

Transformation starts with becoming customer-centric, with development driven by needs of customers and users, Perry said. That seems obvious, she conceded. "It's more of a change than it seems if you've been looped into an IT organization that has lots of intermediaries," she said. Previously, someone with 30 years in the industry could draw on that service to dictate development, but that's no longer the case as the competitive environment changes.

Altering the physical operation was also a change driver. Developers were moved to pairing stations, with screens showing the development pipeline. Developers moved from functional teams to cross-functional colocated lab spaces, collaboration spaces and partnering for a lean startup approach, she said.

Allstate found its work with Cloud Foundry to be important, as well as working with Cloud Foundry vendor Pivotal and the entire community.

Training is key. Training is best done concurrently with real work on real projects, rather than removing people from normal work for weeks at a time and then dropping them back in, Perry said.

Allstate shifted from traditional, segmented, "waterfall" development to a more dynamic model, with product managers, designers and engineers exercising critical thinking and working together. Allstate reduced the number of specialists as well.

"It's amazing what we can accomplish with a few talented pairs and a product training and design team," she said.

All of this change requires investment from the top down -- not one-time check-writing, but senior leaders and down providing continuing support, Perry said.

"The future is so bright when I can better connect claims, connected car, roadside services and insurance policies," Perry said. "There is more and more virtue there to be tapped as new business opportunities and changes come."

We've seen several insurance companies, like Allstate, using the cloud to transform their business.

At the same conference at which Perry spoke, Liberty Mutual described how it's leveraging Cloud Foundry and agile to improve delivery of software and services to customers and employees. (See Liberty Mutual Aspires to Be 'Software Company That Sells Insurance'.)


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Last year, another IT executive from Liberty Mutual talked about how private cloud helped it keep costs flat while spinning up 33,000 virtual machines. (See Liberty Mutual: Cloud Reins in Costs of 'Exponential' Growth.)

IBM and AIG recently completed a "smart contract" program using blockchain for the international insurance market. (See IBM, AIG Bringing Blockchain to Insurance Industry.)

And Chubb worked with IBM to migrate mainframe development and testing to the IBM Cloud. (See Mainframe Cloud? That's Nuts!)

Related posts:

— Mitch Wagner Follow me on Twitter Visit my LinkedIn profile Visit my blog Friend me on Facebook Editor, Enterprise Cloud News

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kq4ym
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kq4ym,
User Rank: Light Sabre
8/14/2017 | 6:05:57 PM
Re: Regulation and innovation
I'd be a bit skeptical that the consumer may benefit with the tech changes. The company can certainly  save money.  While it sounds great that insurance companies may become "wholly digitally and in some cases can resolve claims in less than three minutes," one might be a bit careful in just how the customer might come out after an auto crash and the company offers to settle in a few minutes. 
Michelle
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Michelle,
User Rank: Light Sabre
7/31/2017 | 5:53:21 PM
Re: Regulation and innovation
@Maryam So true! All I can think about is cost-savings as it's passed down to the consumer. It's nice to see old industries modernize like this.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
7/31/2017 | 1:37:12 PM
Re: adaptation
Well, at least they're recognizing that Uber and Lyft exist. Heh. 
JohnMason
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JohnMason,
User Rank: Light Sabre
7/31/2017 | 1:46:52 AM
adaptation
My insurance company adapted to meet the changes represented by Uber and Lyft, too. The company basically said, you're not covered if you use your car for Uber or Lyft.
maryam@impact
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[email protected],
User Rank: Light Sabre
7/28/2017 | 1:53:47 PM
Regulation and innovation
Since Insurance is so heavily regulated it forces it to left behind with many technology innovations. It is refreshing to see Insurance companies taking advantage of the cloud possibilities to increase their efficiency and hopefully lower costs long term.
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