Contrary to what critics say, this title regularly finds that CIOs are operating at the senior decision-making level of the business, whether on the board, leading major change programmes or acting as non-executive directors.

James Fairhurst, CIO for insurance intermediary Hastings, was part of the senior team that led a management buyout of the company from its previous owner IAG in early 2009. Fairhurst told CIO about the experience of being involved in an MBO and the challenges facing the insurance sector, including rising fraud levels and how CIOs are part of the fraud-defence team.

Hastings, based near the Sussex town from which it derives its name, is an insurance services firm best known for its car- and household-insurance products. The company has three main operating centres: the Hastings office at which we met Fairhurst, Newmarket in Suffolk, plus an underwriting business in Gibraltar. Hastings is the main operating centre, housing 1500 staff.

"We are a retail financial services provider of general insurance, with focus in four key product sets: car; home; motorcycle; and commercial vehicle. At present, motor insurance is where the majority of our policy base resides, although focus is moving toward home, with products such as SME or Pet further in the future," says Fairhurst.

Goldman Sachs recently took a 50% stake in Hastings Direct. Fairhurst explains that the senior team had considered an initial public offering (IPO) but, given the market uncertainty and timing, a private-equity deal looked more attractive. This culminated in the Goldman Sachs Private Equity deal.

"This private-equity deal values Hastings at £700m," Fairhurst says.

The Goldman Sachs deal at Hastings and the merger of JLT and Towers Watson hail a return to merger- and acquisition activity in the insurance sector. Rival Aviva has hired Phil Pavitt and Mark Hall to reinvigorate its tech strategy, while LV= has seen good growth in recent years. The insurance industry is clearly undergoing a high level of change following some very difficult times.

Fairhurst explains the difficulties in which the sector found itself: "If you look back over the past few years, most insurers were running at more than a 100% loss ratio; therefore they were reliant on other revenues such as investment income, which was reduced in the post-2008 financial crisis, or they had to pull heavily on reserves. In some cases they went out of business.

"Add factors such as the customer expectation of lower prices, driven from a price-comparison site culture, and an increase in insurance fraud, and you have a volatile situation for insurers," continues Fairhurst.

In recent years the number of claims as a result of extreme weather have had just such an impact.

"Weather or a single event can drive up your claims and losses," he says.

The 2008 MBO was in the eye of global financial crisis, and the leadership team had just six months to turn the business around, or risk failure. Fairhurst clearly enjoyed the challenge, which the company pulled off in just four months.

As custodians of the Hastings company they set themselves an ambitious set of trading targets, remaining aware of the parlous state of the national economy.

"Post MBO the business plan was to make £1 million profit in year one; we made £9.1 million. In the second year we made £19.7 million, £35.7 million in the third and £70 million in the forth. We are on track to make our target for 2013 year end," he says.

To deliver this impressive set of numbers Hastings underwent a massive culture change in business operations.

"It was a silo-type business and there were wood panels everywhere," he says, gesturing around the now brightly coloured and well lit coastal office.

"There were too many excuses for what went wrong and people just didn't talk to each other. When I joined the company there was a poor attitude and the door to IT was locked."

Five values were instilled by the leadership team: brave; decent; together; driven; and accountable. No matter your role or department within the organisation, these values form part of your role and the way you are measured. The various brands operated by Hastings are also held accountable to these values.

"Eleven months post the MBO, I picked up the customer services and back office functions, as well as quality and customer complaints teams for 18 months" Fairhurst says of how his CIO role expanded with the range of departments in which he hoped to change the culture, and the service offered to customers.

"We had to do some big customer service work. We were transferring calls to different departments for a minor refund of £10.

"The CIO role here is to make the organisation as efficient as possible so that there is the maximum amount of revenue available for re-investment.

"Innovation is where the CIO really comes in. At the point of the MBO we were losing £1 million a month, so along with a series of initiatives we pioneered an integrated data and insight strategy. We learned things like, things like, the premium credit default rate in some parts of the country was very high, and the default rate in some parts of the country was very high, and the cost of chasing those defaults was adding risk to the organisation," he says.

Anti-fraud measures

That same focus on data and insight has enabled Hastings to become an award-winning leader of anti-fraud measures in the general-insurance sector.

"Hastings is a leader in using internal and external data real-time," Fairhurst says. It can do multiple checks at the point of quote, including those of previous claims, and vehicle identification and analysis, whether the quote is given online or via a call centre. He is also working to increase the forms of data enrichment in use.

A Broker Anti-Fraud team reports to Fairhurst and operates a grey list of customers with whom Hastings consider it not in its interests to do business.

Fairhurst created the embryonic Anti-Fraud team back in late 2009, and continued to own and develop the function until 2011. Since its beginnings, Fairhurst has envisioned and delivered many significant technology programmes covering the use of many external data sources, as well as utilising internal data sets such as its grey list of customers with whom Hastings consider it not in its interests to do business with.

Hastings today operates real-time credit checks and customer analysis to instantly decide whether it wants a driver's custom. That's impressive when you consider that the company deals with a million quotes a day.

Hastings monitors the online behaviour of drivers seeking insurance, and tracks whether a potential customer changes their accident claims history from nine years to one, for example, to lower the cost of their insurance premium – or, more commonly, the number of convictions they have for speeding.

A key part of the data-led business strategy is the IBM I2 platform.

"I can now go down to a data level of the individual living there," a member of the fraud team explains, demonstrating the visualisation technology that detects links between addresses, telephone numbers, car number plates and a wealth of financial data to see whether a customer could turn out to be a fraudster.

Hastings is already seeing results, too. In a demonstration the system was able to flag up several people with the same address but different phone numbers trying to insure the same vehicle.

Hastings has a rogue's gallery of criminals using car-insurance fraud as a funding model for other criminal activities. Through the industry Insurance Fraud Board (IFB) it has also been able to help the police apprehend suspects. Cases include criminals involved in sex crimes, terrorism, money laundering and old fashioned business fraud.

"These are not people just out to make a fast buck; insurance fraud is a cash-flow source for illegal organisations. We have seen Manchester gangs lower their involvement in the cocaine trade and switch to focus on illegal insurance claims," Fairhurst claims.

Data-based decisions

"We are enriching 50 quotes a second," Fairhurst explains. "As an insurer we can analyse a customer and change our risk appetite or the price we offer them," he says of how the data is used.

Fairhurst and his team have enriched their data sets to the level that they can focus right down to an individual human or vehicle and geographic street level to drive the decision-making process.

"Other firms are taking stock data provided by their software vendors ,which only provides them just a handful of useful data attributes to work with. We have over 200 attributes of data on which to base our decisions. We can analyse data trends such as how many times a person has moved home. "This data lead strategy to acquire and retain business, coupled with anti-fraud protection has saved Hastings over £70 million”, he adds.

Fairhurst abounds with enthusiasm for the next phase of Hastings battle in the insurance business, armed with its latest round of funding.

James Fairhurst CV

September 2011 – present: CIO, Hastings Insurance Services
September 2008 – October 2011: Director of information systems and services, Hastings Direct
November 2007 – June 2008: Interim head of technology, London Metropolitan University
January 2007 – October 2007: CTO, Go Business Mortgages
November 2003 – December 2006: Head of IT, TML Financial Solutions
August 1998 – November 2003: Head of technology, Hays