NU Online News Service, May 23, 11:18 a.m. EDT,Orlando,Fla.--Insurers' chief information officers facecontinuing challenges from entrenched attitudes, a new regulatoryenvironment and management with a different vision for technology,analysts told a systems meeting here.

In the insurance industry there have been a lot of companiesthat think "if it isn't broken, let's not worry about fixing it,"especially when it comes to replacing older legacy systems, saidKimberly Harris-Ferrante, vice president and research director atGartner, Inc.

Ms. Harris-Ferrante was one of a panel of technology analystswho spoke at yesterday's Town Hall Meeting at the ACORD-LOMAInsurance Systems Forum. The group advised that there is a newbusiness landscape offering opportunities as well as problems forCIOs.

Discussing discretionary information technology spending, Mr.Harris-Ferrante said, "we've heard many companies complain aboutthe new [governance] regulations and regarding compliancereporting, and how they had to decrease their discretionary[technology] spending because some of the money they were going tospend on more core activities has been diverted into complianceinitiatives."

Additionally, when analysts ask CIOs where they are investingtheir tech budgets, "we are finding that CIO priorities are not inline with CEO objectives. CIOs tell us that their major issues areprivacy, security breaches, regulatory compliance and how to dealwith business disruptions," said Ms. Harris-Ferrante, while CEOscite retaining customers and growing revenues. "That's like numberseven [for CIOs] compared to all the operational areas they arefocusing on."

The problem today, she said, is that "we can talk about greatdeeds, looking at new customers and growing market share, but thereality is we are spending more time on operations. That's whereour technology money is going."

When it comes to the IT budget, the challenge is to realign thepercentage of spending for maintenance with investments intransformation projects that can grow the business long term, notedTodd Eyler, vice president of financial strategies for Gartner,Inc. "When you look at a typical IT budget, a big chunk isdedicated to just keeping the lights on," he said.

Still, the smartest companies are those that look ahead andlaunch initiatives to improve their systems, according to thepanelists, who said such forward-thinking efforts will paydividends very soon.

"The smartest companies--those that will be leaders in fiveyears--are really focused on aggressively consolidating the backoffice," said Mr. Eyler. Indeed, the panelists warned that focusingon revenue growth without also paying attention to policyadministration, claims and other support functions will preventcarriers from fulfilling their promises to new customers.

The panelists advised that CIOs must deal with a new regulatoryenvironment, which offers opportunities to streamline business datamanagement, but at the same time can drain resources that could goto broader and strategic information technology projects.

"Now, for example, mutual insurers have to respond much morelike a publicly traded company than in the past. Regulations aredemanding it. If you can't get a view into your financials acrossyour organization easily at any given time during the day, you knowyou will have some problems," said Matthew Josefowicz, manager ofthe insurance practice at Celent Communications.

Ms. Harris-Ferrante, also noted that the reason insurers arestill coping with inefficiencies such as duplicate data entries isthat "application systems and developments of standards like thosefrom ACORD have all been works in progress in the last few years,"she said. However, she noted, the industry is just at the pointwhere standards initiatives are coming together.

"This gives us an opportunity to put the systems together andhave the data flow seamlessly through the organization, and to haveit in a common standardized format," she said. "So, I think we arejust now at the turning point where we can start tackling this headon."

Cynthia Saccocia, research director for insurance at TowerGroup,observed that when she talks to insurer CIOs, she notices they arestarting to incorporate more language similar to that heard in themanufacturing sector--such as comparing their processes to aconveyor belt--and as a result to embrace more efficientdata-management systems.

"They are talking about moving data and information on theconveyor belt and moving away from double-data entry and get awayfrom separate silos," she said.