We're about to say goodbye to another year and the further wedistance ourselves from the dark days of 2008, the better thingslook for the insurance industry as a whole and insurance IT inparticular.

There are plenty of issues ahead, though, as we wrap up 2010 andlook ahead to 2011. Tech Decisions asked several IT leaders tocomment on these issues in a Q&A format we call the IT TownHall.

Taking part are StuartTainsky, senior vice president and CIO of PURE; Kevin Gordon,CIO of corporate systems at Genworth Financial; Paul Ayoub, vicepresident and CIO of Hastings Mutual Insurance; Piyush Singh, senior vice president and CIO of Great AmericanInsurance Co.; Tom Peach, CIO, Zurich North America Commercial; andErnie Pearson, IT director, applications development, SECURAInsurance Companies.

We?ve written and spoken about 2010 being a recoveryyear. Has it been that way for your company and your ITdepartment?

Tainsky: While many insurance companies sawthis as a recovery year, PURE continued to see tremendous growth aswe expanded nationally in 2010. We've been focused on rolling outto new markets while also having a keen eye towards enhancing thecompany's operational scalability, using the most innovativesolutions we can find in the marketplace. PURE's IT team hasimplemented some exciting new technologies that have streamlinedthe billing, policy issuance, and underwriting processes to requirefewer manual steps. We have a very aggressive docket for 2011 thatwe very much look forward to tackling.

Gordon: As far as our IT department, in 2009 weweren't doing many large IT programs, but we took advantage of thatand worked on improving our fundamentals–operating technologywithin standards and controllership. I look at 2010 in two parts.I'd characterize the first half of 2010 as getting the machineoiled and running again–reviewing business goals and priorities andopportunities to leverage technology competitively. In the secondhalf of 2010 we launched several significant IT programs.

Peach: The economy has very direct impact onour insurance business and our ability to make profitabilitytargets. The conditions remain challenging and we expect thischallenge to continue into 2011. Yet, Zurich has been fortunate toreport exceptional earnings during one of the most difficulteconomic times in recent history. This success has been a result ofproactive planning and measures taken well before the height of theeconomic crisis. Our executive leadership took early actions tofocus on profitable growth, smart capital management, andoperational excellence. Since these measures were taken years ago,there has not been much impact to the way we run our business in2010.

From an IT perspective, we were also involved in early measuresto reduce expenses and improve flexibility. We dramatically changedour staffing model and increased the scrutiny on technologyinvestments to ensure they delivered value to the company. Startingin 2009 and continuing into 2010, we were able to really capitalizeon these changes, improve delivery, and be an enabler of strategy.The technology focus has been on transforming the business to bemore customer-focused, efficient and effective.

Ayoub: This has continued to be a challengingyear for our company due to the weak economy and weather-relatedchallenges in the Midwest. Our IT department has continued todeliver results with resource constraints, good planning andprioritization.

Pearson: As a P&C company, we've been moreimpacted during 2010 by the soft market, declining payrolls (forworkers' comp business), and weather events than by the economicrecovery. Due to higher frequency and severity of weather-relatedlosses in 2010, it will likely turn out that 2009 was a morefavorable year for our company. It's been business as usual for ourIT department.

Were there any positive points from the last year thatmade it a better year than expected?

Tainsky: At the onset of this year, we madeourselves the process re-engineering client and did someredesigning of what it takes to develop a new state and theassociated products. Through this, we are now able to deliver a newstate in a very compressed timeline. Working side-by-side with ourproduct management team, we are poised to continue to deliverPURE's service offerings to many new markets next year.

This year, we also had a huge success with our electronic policyand bill delivery system implementation. We took on an aggressivestrategy at the beginning of the year to make electronic deliverythe default for the distribution of documents (policies and bills).We kicked the project off in January and distributed our firstpolicy and bill electronically at the end of July. We are thrilledthat as of the end of October, over 45 percent of our new businessis distributed directly to a member's e-mail inbox.

Pearson: We've been able to grow direct writtenpremium better than what was forecasted for 2010.

Peach: Zurich's continued strong financialresults have allowed us to continue developing strategic programswhere many of our competitors appeared to have had to slow up andretrench.

What is the outlook for 2011 for your IT operation andfor the industry at large?

Gordon: The outlook is very positive for our IToperation as we have an opportunity to play an increasinglyimportant role. The desire to better predict future businessperformance is driving investments in business intelligence andanalytics. We continue to have opportunities to better connect withcustomers and automate processes. The regulatory environment,specifically Solvency II, IFRS/US GAAP Convergence, Dodd-Frank, andPrinciples Based Reserving, also have technology implications thatpresent opportunities for IT to prove its value to theorganization.

Peach: I don't expect much change to how wewill run our IT operation next year. I expect we will continue tokeep expenses low and focus our key resources on our larger-impactprojects. One of our primary focuses will be on the continuedbuilding of enterprise level technology products, while reducinglegacy systems. This provides us with more efficient and effectivetechnology platforms, with improved functionality and reducedmaintenance costs. We will also continue to strengthen our dataanalytics.

Tainsky: We will continue to use ourre-engineered processes to launch quickly into new markets in 2011.Aside from that, we continue to focus on straight-throughprocessing, streamlining our business processes, and underwritingdecision support projects leveraging our state-of-the-art systemarchitectures. We've taken some initial steps in 2010 and we're nowready to take more of a leap forward.

For the industry at large, I see a lot of my peers stillfocusing on core system replacements. More is being asked from ITgroups and many of these requests are just not possible on oldertechnology. Combine that with the issues of retiring workforces andsome of my peers have some pretty big challenges. Core systemreplacements and the ongoing maintenance of these legacy systemswill still be on the docket for many carriers. Additionally, I hopea lot of insurance carriers will continue to look at ways to betterconnect with their clients. There's a big opportunity to improveretention rates through better relationships with agents andinsureds.

Ayoub: In IT we are still going to beconstrained from an expense standpoint and will work to do morewith the same. In general, the industry is beginning to come out ofthe recession, but is being cautious about spending.

What issue concerns you the most about the futuredirection of insurance technology?

Singh: The biggest issue that concerns me isthere is not enough venture capital being invested that will leadto innovation concepts materializing into solutions for theindustry. There also does not seem to be an appetite among thelarger players in the software-vendor industry to invest dollarsand be transformational in the insurance industry.

Ayoub: I believe there will be greater focus onmobile computing and the use of social media in insurancetechnology. This is only a concern because of our ability to focusefforts in these areas while managing the demand for moretraditional IT projects.

Peach: My biggest concern with the futuredirection of insurance technology is the ability to supportspeed-to-market opportunities. The insurance landscape is pressingfor new insurance products to be in the marketplace at a lower costand with greater efficiencies than ever before. The technologylandscape as currently defined is having a hard time keeping up.This increases manual operations, which in turn drives up the totalcost of product ownership.

Tainsky: Instead of concerns, I actually seethis as the most optimistic time for technology leaders working inthe insurance sector. The technology available today far exceedsanything we would have thought possible just five years ago. Havingopen architecture systems available where you can easily pull datain and out allows for capabilities we didn't anticipate a few yearsback. In the past, all systems being closed and having to writedifficult interface programs to get them to speak was just a factof life.

Now with these upgraded software solutions opening up to allowfor SOA, being able to do difficult integrations easier and inreal-time is something that makes it quicker to deliver tremendousvalue to our business partners. At PURE, we are taking advantage ofWeb-service architectures in a number of ways. We're saving manhours each month not having to do manual look-ups as the data flowsdirectly in from outside services.

Are you doing more to target consumers directly throughyour marketing or are you refocusing more attention on yourrelationships with independent agents?

Pearson: Our company continues to focusprimarily on our relationships with our independent agents. Ourranking as fourth in the nation in the most recent ease of doingbusiness survey by Deep Customer Connections is strong evidence ofthe success we've had in building these relationships.

Tainsky: We are currently marketing with bothco-branded as well as just PURE-branded pieces. We have a strongpartnership with our independent agents and have developed someinteresting programs with them. In the past year, we launched aWeb-based tool to facilitate our independent agents' development ofco-branded marketing campaigns. We're going to continue to developinteresting methods of helping our agents get PURE's and theirnames out there.

Peach: We have clear strategies to providebetter service to our consumers. In most cases its not an either/orsituation, but a combination of consumer improvements inconjunction with our independent agents.

Ayoub: We are focusing our efforts more heavilywith our independent agents.

What have you done in the past year to improve the knowledge ofyour business users through data projects and predictive analytics?What lies ahead in 2011 for this initiative?

Peach: We have newer predictive modelingcapabilities and we will continue to roll these out to differentproducts over the next couple years. We also plan to continue tomature our data analytic capabilities. We plan to further solidifyaspects of our data governance model and better engage the businesspartners to own customer and distributor information.

Pearson: We are currently implementing majorprojects in the areas of business intelligence and predictivemodeling. Both of these projects will continue in 2011.

Ayoub: We've been developing multi-variantrating in personal lines and doing research into predictiveanalytics for our commercial lines in 2010. In 2011 we willcontinue down this path to determine what is appropriate for ourorganization.

Gordon: Genworth is making significantinvestments in improving our actuarial and risk managementcapabilities. In 2010 we began work on a program to upgrade ouractuarial valuation and projection systems and built the data andanalytics infrastructure to support them. In 2010 we also deliveredthe first generation of an economic capital modeling system.Further investments are
planned for 2011 in both areas.

Tainsky: We spent a considerable amount ofeffort ensuring we have good data quality throughout theorganization. We committed some of our best resources to validatedata and ensure that the entire company was operating from “oneversion of the truth.” We've incorporated some advanced datacleansing and governance procedures that have already started toshow value in the analysis of the operations. In 2011, we are goingto continue to use analytics to help drive business decisions. Weare currently evaluating partners to help us get up and runningquickly with robust dashboards and predictive analytics. Theavailability of some of the new solution providers enables us tohave options in selecting a model that fits our size and growthplans.

How big an issue is improving core technology andgetting away from legacy systems for your enterprise? Have youaddressed it? Are you addressing it now? Is it too big an issue tobe addressed?

Singh: Addressing core systems as well assystems that are peripheral to the core and taking them to the newworld is a responsibility that is squarely on the CIO's shoulders.It is imperative that CIO's address the issue for the long-termsustainability of the organization as it has a direct impact on afew aspects: ease of doing business, time to market, eliminatingnon-value add activities in the information supply chain, and mostimportantly enhancing the data quality so that it can be mined forinformation. We at Great American have addressed the issue head-onand are well on our way to replacing the core and all theperipheral systems. From my individual perspective my argument forfolks who say it is too big an issue is to ask them to answer thisquestion: Is it bigger than the long-term competitiveness of thecompany?

Pearson: In some cases we're improving our core technology byextending legacy systems that are generally meeting our needstoday. In the case of our commercial lines policy administrationsystem, we are working with our vendor partner to migrate off theirlegacy system to their most current version. In the case ofreporting and analysis, we are currently engaged in a project toreplace our legacy systems and myriad data stores with a datawarehouse and business intelligence tools.

Peach: Since Zurich in North America is anassembly of different smaller companies, reducing legacy systems isa big opportunity for us and something that we have been addressingfor a few years now. We are moving away from a conglomerate ofspecialized underwriting tools to a small group of coreunderwriting platforms that will handle the bulk of our proprietaryand ISO-based business. We have almost completed efforts toconsolidate to one core back office and expect to reap the benefitsof this effort in 2011 and take this to the next level. Legacysystems still remain an issue, but it is one that deserves theattention. We are constantly pushing to move our application fixedcosts to more strategic focused project investments.

Tainsky: At PURE, having started businessoperations in 2006, we were able to work with leading-edgetechnology solutions from the onset. We are, however, alwaysfocused on what extension products we can add to enhance ourinternal and external constituents.

Ayoub: This is currently not too big an issue.We have a strategy to use and leverage our legacy systems in theshort term while we plan our longer term strategy.

Are you using cloud computing to address your coresystems? If so, what are your biggest concerns? If not, what iskeeping you from addressing this strategy?

Tainsky: We use cloud computing extensivelywhen it comes to supporting our infrastructure and the criticalsystems on them. We do not employ a true SaaS or ASP model for thisprimarily because there isn't an offering for the systems we use.If there was an offering for our systems–which we are very happywith–we would certainly entertain it.

The taboo topic when it comes to the cloud is security. WhenPURE evaluates a partner as a service provider, we perform atremendous amount of due diligence on them. We confirm that theyhave the right level of security and controls inherent in theirenvironments. We review their SAS70 reports and spend time tounderstand their user control considerations for what ourresponsibilities are.

I've read a lot about pundits predicting that cloud computingwill be the end of the technology need in an organization. Frankly,I just don't see it. I see cloud computing as an opportunity tocommoditize some non-strategic components of an IT enterprise. Itdoes however, have a direct impact on the staff that is responsiblefor the day-to-day management of the servers and infrastructure.Those resources will need to be re-purposed to act in more of adesign, project and/or relationship manager role. An outsourcedpartner is never going to know exactly how to deliver the bestvalue to your company. It's going to be these resources that willkeep the vendor partners focused on what's important and ensurequality is delivered.

Pearson: The use of cloud computing isperipheral to our core systems. For example, we access informationfor VIN verification, medical bill review, FNOL/SROI reporting, andinsurance risk scoring through services provided by externalvendors. Security of information exchange is our primaryconcern.

Gordon: Genworth is currently utilizing cloudcomputing under a single tenant SaaS model for financials, humanresources and investments applications, as well as multi-tenantSaaS, for our salesforce application. Moving beyond the “cloud”buzzword, we continue to find many opportunities to utilizehigh-leverage technology operating models both internally andexternally.

Ayoub: We are not using cloud computing for ourcore systems. The concerns about security, availability, andintegration are factors that have kept us from pursuing thisstrategy for core systems.

Singh: No, we are not using cloud-based systemsto address our core systems. We are currently evaluating or usingcloud-based systems for utility-based functions (help desk,customer relationship management, etc.). The primary reasons fornot using cloud-based computing for core systems are two majorareas: lack of foundational support for easy integration with otherexisting systems and challenges with single sign-on capability.

Peach: We are leveraging the external cloud tosupport commodity services such as barcode generation, CRMfunctionality, and development-environment support. Like others inthe insurance industry our greatest challenge is informationsecurity, and so our efforts will be concentrated on developing aprivate cloud. This will ensure we have the flexibility of thecloud without the security concerns of a public cloud.

In what ways are you addressing your sourcingconcerns?

Ayoub: We utilize contract resources to fillgaps during the recruiting process. We always look at opportunitiesto provide internal training to grow the skills of our existingresources to make them more valuable to the organization.

Pearson: Our IT division has been very stable.We do use contract developers from time to time. By implementingpackaged solutions we are able to effectively outsource much of theheavy lifting to a vendor.

Peach: We moved to a sourcing staffing modelseveral years ago and have fully adapted to this change. We utilizeseveral vendors for sourcing and are able to match the rightresources to the right projects. It was a challenging transition aswe balanced expense pressures with appropriate knowledge transfer,but we are now operating in a true variable staff arena.

Tainsky: Our IT staffing levels remain small bydesign. Through the use of a cloud-computing model, we've been ableto keep our internal employees focused on the business analysis andproject management activities instead of server maintenance andupgrades. We have a team of smart and talented people who have adeep knowledge of insurance and of technology. In the next year, weplan to increase our staffing by adding more people capable ofbridging the gap between IT and insurance.

Using your crystal ball, what issue do you see at thetop of the list for insurance IT leaders in December2011?

Tainsky: It seems like the last few years thepriorities for many of the IT leaders in insurance seem to be likethe movie Groundhog Day. Each year, they include the same item ofcore system replacements and other similar projects. Now,deciphering social media appears to be a repeat list item. Thetechnology available in 2010, 2011, and beyond provides so manyopportunities to deliver some really needed information to thosemaking tough decisions every day. For PURE, we are going tocontinue to be focused on using our data more proactively. Our coresystems allow for us to integrate freely with these open sourcesand create rules and workflows around the data received through Webservice feeds. The use of the data and continuously refining thoserules will be on our plate for many years to come. That will be ourGroundhog Day item.

Ayoub: How we will manage demand for projectsthat have been delayed due to cost constraints in 2011 and are nowcritical to complete in 2012.

Singh: In my view, truly enriching theunderwriting experience using publicly- or subscription-baseddisparate data, converting the data to information content, andusing it to enhance the process of decision making for riskselection will be the transformation that will differentiatebetween leaders and laggards of the future.

Peach: I see data security and privacy as topissues that all IT leaders will have to deal with not only in 2011,but also ongoing. It's a never ending battle to secure consumerdata given the desire for more data analytics. This, coupled withthe explosion of new device computing, will put a premium on datasecurity initiatives. TD