First established in 1852, The Hanover Insurance Group is one of the oldest property and casualty insurance holding companies in existence. These days, the company is applying digital tools to streamline every aspect of the property and casualty (P&C) insurance value chain, from underwriting to claims. They\u2019re even exploring the use of drones for risk management. Recently, I spoke with Hanover\u2019s CIO Will Lee about how he and his team are driving these cutting-edge initiatives. What follows is an edited version of our interview.\n\nMartha Heller: How would you describe The Hanover\u2019s business transformation? \n\nWill Lee: Our value chain starts with customer acquisition and agent interaction and goes through underwriting, servicing, and claims. Our digital transformation focuses on enhancing experiences for each part of that lifecycle.\n\nWe engage our customers through an omnichannel experience with self-servicing capabilities so they can easily check claim status and receive payment. We are using APIs to get quotes to agents faster and artificial intelligence for claims efficiency. In the area of risk management, we leverage the use of water sensors and drones for early recognition and prevention of potential damage.\n\nHow are you using technology in underwriting?\n\nWith underwriting, the key is to get a quote back to the agent as quickly as possible, but that process requires a lot of data. Let\u2019s say the customer is a restaurant in New York City. Does the restaurant offer delivery? Do they have a grill? Who are their neighbors? We use AI engines to gather information behind the scenes, which lets the agents ask fewer questions when providing a quote.\n\nMuch of what we are doing involves headless API interactions, where we plug into our partners\u2019 ecosystems. Traditionally, an agent would enter information in our browser-based point-of-sale system to receive a quote. But that process required them to enter the same information into six carrier systems to get six different quotes. In the future, agents will enter information once into their platforms, and those platforms will use APIs to connect to our system.\n\nWhat should CIOs keep in mind as they develop API-based architectures? \n\nThe first is security. We are sending information, including customer data, back and forth between partners in our ecosystem. Every connection point is an opportunity for a bad actor to intercept the data.\n\nAnother focus is data logic. When we connect to another ecosystem, we don\u2019t always receive the data exactly as we want it. How do we give our agents a quote if the data we receive is not an exact match? Should the numbers round up or down?\n\nWe call this bumping and slotting, which is getting the data to a place where we can provide an accurate quote. We need to embed business logic in our APIs to define how we want to receive the data in order to scale.\n\nWhat is your target architecture?\n\nIn addition to security, we focus on scalability and the total cost of ownership (TCO). As we move into the cloud, and our transaction volumes grow, we have to make sure the TCO still makes sense.\n\nThe third is optionality. The P&C market is so dynamic that we can never be 100 percent certain where the industry is going and how our value chain will change. Build-versus-buy decisions are much more granular these days; they have moved from the system level to the capability level. We might need to go outside for one capability, build another ourselves, and swap out vendors easily. Our architecture has to have optionality built in so we can pivot.\n\nWhat are the keys to building in that optionality? \n\nRight now, we use our APIs to plug into many different front-end ecosystems to support the customer through multiple one-off connections, rather than expecting external ecosystems to connect with us in a specific way. But supporting so many different APIs can get expensive. Our strategy will have to play out as the industry produces API standards for how data should look coming in, so that carriers on the back end, like The Hanover, do not have to do as much translating. It\u2019s a bit of a chicken and egg problem: When will those standards exist? Will people adopt them? Will our partners just create their own custom APIs and say, \u201cHanover, when you connect to me, here are the 20 fields I'm giving you. Figure it out.\u201d\n\nWhat are the two horizons of your digital transformation? \n\nHorizon one is where we optimize processes for our business and the industry today. This involves making our underwriting more efficient and improving the agent and customer experience. That\u2019s what pays our bills.\n\nBut at the same time, we are seeing so much change in the market, which impacts our entire lifecycle, that we also have to put our chips down for the future.\n\nSo, our IT team must live in both worlds at the same time. When you\u2019re moving from today\u2019s tactical problems to tomorrow\u2019s innovation, it can be hard to know what to focus on because you are living in two different worlds.\n\nWe can't over-index on fixing today\u2019s problems because we'll be left behind. But we can't just think about the future and forget about the issues and concerns today.\n\nWe have an operating model that supports both horizons to support both optimizing an existing technology pattern versus reimagining a portion of the life cycle.\n\nWhat is your approach to talent development? \n\nI joined The Hanover in 2003 and have held roles inside and outside of IT. That background gives me the ability to understand the full lifecycle of insurance, from distribution to claims. While I do not expect all our IT leaders to work outside of IT, I want them to have a similar understanding of our lifecycle and of the technology that sits behind it.\n\nThe overall culture at The Hanover promotes a lot of movement between IT and our business units, and we ensure that people will have a soft landing if you try something and it isn\u2019t quite a good fit. We want people to stick their necks out and try new things, so we can\u2019t ding them if a new role doesn\u2019t work out.\n\nThat is one of the reasons I have an innovation team within the IT organization. Innovation, as with business architecture and M&A, is an area where the work rotates around you versus you having to find the work. We try to put people into these roles as early in their career as possible, so they are exposed to a broad spectrum of work. People stay in those roles for a year or two and then stay in IT or move into the business.\n\nWhat leadership lessons can you share from your work at The Hanover? \n\nDriving both horizons is all about change management. We\u2019ve thought about hiring a transformation officer over the years, but I believe IT is the transformation engine. The biggest lesson I\u2019ve learned is that we cannot blaze a trail without our business partners. It\u2019s great if you are super smart and can dream the big dream, but you cannot keep it all in your head. It is hard to operationalize that dream, but that is my job. I spend most of my time on culture and communication.\n\nHow is the CIO role evolving? \n\nFor years, CIOs have worked hard to make IT a utility where, like electricity, it just works. But now, CIOs are shifting from running a utility to being thoughtful business partners focused on business solutions. A lot of the work we used to do will be automated or outsourced. To me, the keys to the kingdom are problem-solving and solutioning. Our role will be to co-create the dream with our business leaders.