Hanover Insurance Group Executive Willard Lee on Innovation Through Co-Creation | Technovation 670

Thank you very much. I appreciate you guys having me today for us to talk a little bit more about the Hanover's journey. I'm looking forward to that.

Yeah, no, we're a leading property and casualty insurance company. We have three main divisions in the company: a personal lines business, a core commercial business, and a specialty business. For us, our uniqueness in our operating model is that everything that we do is through our independent agents. We partner with a subset of what we consider the best-in-class agents. From there, we have the typical services of self-service for our customers and on to the claims process. But the uniqueness for us is that subset of agents that we work with across the United States and the partnerships that we create with them to really make sure that the businesses they're bringing to us and the services we're bringing to them and their customers are world-class and excellent.

Yeah, so the innovation piece started off first. A little bit of background about myself: I'm a bit of a boomerang back into IT. I started off my career in IT here, went off and did a couple of different business roles. I worked in our corporate development area for about six or seven years when we were building our specialty practice, basically bringing on and doing due diligence on companies. From there, I went into leading our product area of the insurance products, and then from there I went into this innovation role first. But before I had the IT piece, the innovation side of it has always been the part that, when we think about the future of where the company is going, where we think P&C is going, that outside-in view of where our distribution partners with our agencies are going, what we think is happening with digital self-service with our customers — that's the leading edge where I started with the innovation side. Then about two years ago, I also took on the CIO role. Together with the leadership of the company, we decided to keep those two pieces together because in today's world, it's such an exciting time to be in technology. Literally everything that we do is around technology. The innovation side of the house, where we're looking at trends and piloting things and trying to do quick tests and learn type pilots, is a version of technology that we're doing. At the same time, on the other side, there's the more traditional IT where we have to worry about the infrastructure, cyber security, to keep our company safe. What we're really trying to do is blend those two worlds together because in today's world with how quickly things are changing in the P&C world, having those two pieces together makes the most sense.

Yeah, no, I mean, one of the previous roles I was talking about from the corporate development side, you end up getting a sort of financial acumen as to what really makes money in the P&C world and the financial levers that you can actually pull. Having that sort of insight grounded is very helpful from a financial acumen side of just understanding how the company makes money and the levers we can pull. Then when you get to some of the more operational roles like managing our insurance products, being the operating officer over on the specialty side, what that really does is that as I'm now supporting those as my customers inside the company, I can actually say, 'I've walked in your shoes.' I understand the decision-making they're trying to do, the connection with technology, and really helping them shape what might be there for the future. I think that's one of the largest pieces as we move forward and think about where the CIO's role goes in the future. It's a hybrid role. You have to understand the nuts and bolts of the infrastructure and security side of things, but at the same time, you're a change agent for the company. You're essentially trying to move forward with enabling technologies, trying to move the company forward. That's a different type of role than we've thought of traditionally as a CIO. Having those different diverse backgrounds helps in that change management area because you actually understand what's changing. It's not just technology; there's a whole process and operation underneath it and a business model that might be changing as well.

Yeah, no, so a lot of this was not just me; it was a lot of hard work that our IT team has done over the last, gosh, probably five to seven years. The recognition was that if we don't modernize some of our legacy platforms, really trying to be more nimble and having the optionality in the future is just a lot harder to do. So what we really put in place, and this has been a five to seven year journey, is we've spent over 200 million dollars on basically touching every large platform in our ecosystem, from policy admins to billing to claim systems, and really trying to put upgrades and platforms and middleware in place so that the flexibility is there. Meaning if I need to have an API layer to connect into third-party data for data analytics, or if I need to connect to another outside source for a different platform, we're able to do that in a cost-effective total cost of ownership way. We feel like we're never completely done with modernization efforts. It's one of those things where once you finish painting the bridge, you kind of go back to the start, and hopefully it's just a lighter coat the next time you have to do the painting. But we feel like we're in a place today where we've created that optionality and flexibility, so now it really starts to get into this whole piece around how we think about the future. This is where the innovation arm starts to come in, the solutioning we're doing, and the co-creating we're doing with our business partners around, 'Okay, now that we have all of that foundation in place, where do we think the puck is going to go?' To us, that's the value add that we're bringing to the equation. We can't do all of that without some changes on our side too, so there are some imperatives we're working on as well, just trying to set ourselves up for that future.

Yeah, no, so the innovation team really is embedded within what I'll call the solutioning side of the business. When we think about the co-creation with the businesses, we think of it sort of like in a dual horizon environment where you have the problems of today and then you have potentially the problems of tomorrow or the advantages for tomorrow. We join those conversations together with our business leaders because at the end of the day, it's hard to separate one from the other. You start to get into the optionality and decision making of, 'Should I be trying to optimize what I have today, or should I be just building for tomorrow?' The conversations come together. I love how it comes together because even if you're not going to do it the next year, it's on a roadmap, it's on our city plans. We know this is something that we're thinking about for this business unit or functional area. Having those blueprints and those roadmaps is critical for us as we think about where we want to prioritize our work within our value chain, where we think we're getting the most strategic advantage across our agent, customer, and employee journey maps. All of that has to come together when we think about how we want to spend the company's money from a technology perspective. From an innovation perspective, it really is brought together at the front end of all that solutioning. Then when you think about how we do our typical agile execution of development, that's broken out by business unit because there are a lot of platforms and business strategies that are particular to those business units that we want to keep intact and make sure that our business leaders get the SME knowledge that our technology folks are bringing to the table. So those are broken out into the different business unit areas and functional areas, but at that front end of the solutioning, the innovation pieces are together with how we think about it as we talk about the dual horizons.

Yeah, so I'll start with the agent journey map. For us, as we were talking about, this is the bread and butter to the strategy — the deep partnerships that we have with our agents. The journey maps of the agents really start from the distribution strategy and how they interact with us from both a quoting perspective, a servicing perspective, and so forth. We have agency councils built to be able to listen to what our agents are saying through the innovation side of it. We have committees that we've joined to get that outside-in perspective. That agent journey map is relatively specific to how an agent interacts with us. There are a lot of trends today around trying to get more efficient in the data passing back and forth, the security around that. There are some connection points though with our customer journey map as well. When we think about our customer journey map, at the front end of the selling cycle, the agent is actually selling to that customer. We think a lot with our agents around what's the best way to actually sell an account to a customer. On the personal lines side, we're going after the emerging affluent customer, so we're interested in their home, their auto, the toys they have, if they need cyber security. There's this approach with our agents to even think about how our customers really want to interact with us to try and get that account sell, and where are the right times and moments in somebody's life where these things start to matter. There's a lot of the maps where we try to map out even from an agent interaction what that interaction is with our customer. Then when you think about the customer once they become a holder with Hanover, you start to get into a lot of the self-service capabilities of how to pay a bill, make a change to a policy, put in a claim. What we've seen there is now we've started to see a little bit of overlap between our personal lines customers and our small commercial customers because essentially the small business owner is the one dealing with the insurance, not a third party or an employee. So a lot of the digital trends of self-service between our personal lines customers and our small commercial business owners are starting to converge. You see a lot of the same similarities of how they want to pay a bill, make changes to their policies, see a claim come through and see the progress. Finally, on the employee side, that's one we've really put a focus on since the pandemic. A lot of that is because it's changed a little bit with a more hybrid working model. Trying to keep the culture and the connectivity that we've had with people being in the office, we're trying to create some of those same things now in a hybrid environment. A lot of that has to do with technology and how we think of how our employees are onboarded, how they're mentored, how they're having good career development discussions with their managers. We've been thinking a lot of that through with our own employee journey maps as to what does a person who's not in one of our major offices experience life at Hanover versus somebody who's in our Worcester office. That by itself is an awesome challenge for us from a technology perspective because there are lots of tools that can be used, but a lot of it is that the secret sauce is the culture and the pieces that make us a great company to work for. We need to keep that stuff sustained through this time. I believe it's going to stay a bit more hybrid than what it was pre-pandemic. For us, it's trying to get the best of both worlds, being able to give people the flexibility they want, but also excel in our execution and get the work done. From an IT perspective, over the last two years, our teams have worked harder than ever during this time of having them leave the office, bringing them back into the office, all the protocols, the security, the cyber security that went around that, but at the same time keeping up with all of our business responsibilities and helping grow the businesses as we wanted to. It's been a really exciting time, but that employee journey map will become more and more important as we go through time.

Yeah, so one of the examples that we talked about before was just on the agent journey maps and the efficiencies that our agents are looking for these days. They don't necessarily want to go to every competitor carrier's point-of-sale site and create all of the same data around a certain account six or seven different times to generate all these quotes. So there's definitely leverage ability of the data analytics at the front end of the acquisition of a quote. If I'm a shoe store in midtown Manhattan in New York City, there are a lot of attributes that I can gather from third-party data around that store that will really help with the quoting process and it's less work for our agents. What is it next to? What stores are next to it? There's a piece around revenue of that company, how many employees they have. We're able to access that information easier than we have in the past. So there's a use case around data analytics for efficiency for our agents, trying to make it easier for them to do business with us. On the flip side, on the underwriting side, we get into insights that we can gather. Some of it is at a blunt level of would I write this risk or not, but then you also get into the fine details of whether the actual account is priced correctly. Can I get down to a different level of segmentation around a certain business to be more refined in my own pricing, either less or more on the premium, to try and get a little bit more granular about what the risk really is instead of a blunt view. If an underwriter just Googles a bunch of information about the company, maybe there's more that we can bring to the table that we can serve up to them. From an efficiency standpoint, if it's a shoe store in Manhattan, this is what they're looking for for information, and we're able to serve it up faster and more accurately. Those are the use cases that are most helpful from a day-to-day perspective. There's no silver bullet to data analytics. We've realized there are some things that certain companies are really good at getting, like employee counts. There are other things where, for a restaurant, we want to know if they have delivery. Those things are harder to get because you're trying to use AI to derive whether that company really has a delivery service or not. Sometimes it's a hit, sometimes it's a miss, and it's constantly getting better and better as the weeks and months go by around refining how those AI engines work. But it is very, very promising for us as a company to be able to get that kind of information more easily. It obviously helps from an efficiency side, but also helps from a loss cost side as well of just getting more granular.

Yeah, so from a philosophy standpoint, we approach the insuretech very much how we approach our own agency partnerships, where it's a smaller subset but a deeper relationship. We spend a lot of time trying to figure out who we think within our value chain where our advantages are, targeting companies that are in that part of the life cycle of our insurance life cycle, and then really trying to build a deep relationship with them. The way we're investing in them is with our time and our knowledge of the industry. We're trying to help them. A lot of these guys aren't exactly sure of the problem that they're solving, and we try and help them curate it a bit more, get a little more pithy around, 'This is the problem that you're trying to solve.' We've done that with a handful of our insuretech partners that we were there with them day one when they started, and we're seeing them and helping them get into our agency plan, and helping on the carrier side too. There are organizations like accelerators that are trying to bring together the agent and carrier communities because you can't just have one piece and not the other; it turns into a chicken and egg problem on the insuretech side. For us, the way we're investing in these companies is through our time and knowledge and really helping curate what problem they're trying to solve, help them target, and obviously help pilot and test and learn on some of these pieces. That's been our approach, and that's very similar to how we think about our agency plan as well — a smaller set, deep relationship, and we're there to lean in and help them.