The trend toward ever greater integration of insurance into theworld of financial services could place CIOs in an attractivefinancial position over the next few years. Salaries for insuranceCIOs are likely to increase, particularly among carriers that wantto transform their business by leveraging technology. Today,insurance CIOs generally are earning salaries on the lower side ofthe financial services. But as insurers become bigger cogs in thefinancial services wheel, insurance CIOs will discover onewonderful fact: CIOs within the financial services industry receivethe highest average compensation among CIOs in all industries.

Those are some of the findings and opinions of companies such asMETA Group, which is in the final stages of presenting its annualIT Staffing and Compensation Guide, and Spencer Stuart, the globalexecutive search firm, which recently completed its own ITcompensation study.

Carl Gilchrist, a partner at Spencer Stuart in charge of theNorth American CIO field, says his companys report concluded thereis a scarcity of top information officer professionals with aproven track record, and that continues to drive CIO salarieshigher. Spencer Stuart claims the total average compensation forCIOs in financial services is $459,123. Included in that is a bonusaverage of $178,021.

META Group program director Maria Schafer pulled out severalinsurance salaries from the compensation guide she was preparingand found the highest salary for an insurance CIO was $300,000 at anortheastern U.S. insurance carrier. Salary for an insurance CIO ina western state was $250,000, according to Schafer. My observationon insurance data over the last couple of years is there are twoextremes, she says. There are those at the topthe leadingcompaniesthat are trying to transform their business and movetoward greater degrees of automation, and they want to leveragetechnology to do that. She believes those insurers are willing topay for top help, whether in the form of salaries or bonuses.

The other extreme has smaller companies trying to eke out everylast dime and still using manual processes, she says. They dontleverage technology and are probably not the kind of places you orI would want to work.

By geography, the East and Midwest have the highest-paid CIOs,Gilchrist points out. Financial services still is the highest-paidindustry, he says. Although many would guess the eastern states inparticular would be home to the highest-paid CIOs, the SpencerStuart study shows the Midwest is ahead in average totalcompensation. Midwest salaries ($285,000) in financial services areslightly lower than in the East ($290,000), but Midwest CIOs earnedgreater bonuses ($238,000) compared to those in the East($182,000). The South and West clearly trail the other regions,with the West coming in third in total compensation with $362,000and the South last with an average of $347,000.

Numbers that are insurance specific are a little harder to comeby. While Schafer does not have the final numbers for this yearsMETA study, she reports that data from last year showed a mediansalary of $185,000 for the three-dozen insurers that reported CIOsalaries in the survey. The figure does not include an averagebonus of $80,000.

Her study of salaries a year ago showed an average total cashcompensation of $297,000 for CIOs across all industries with themedian total compensation at $264,000. It seems to me that withjust the three or four data points [for insurers] Ive pulled up,you get to just about the median, she says. It looks like about$190,000 [in salary] for an average CIO in insurance. Thats alittle bit below the average when you look at other industries, butwhen you figure the other industries include financial services aswell, perhaps thats not totally surprising. Insurance has nottypically been known as the best place to make the best buck.

Schafer believes being tied to financial services is a benefitto insurance CIOs, particularly as insurance carriers are linkingthemselves to other sectors such as asset management, investmentbanking, and others. I think the problem for CIOs in insurance iswhich perception is going to dominate, she says. Is itinsurancethat stodgy, old thingor is it insurance as part offinancial services. Somebody who is savvy is going to be able topick that out, but there is a negative stereotype attached to a lotof insurance stuff. Its not necessarily the forward-looking profilepeople would instantly think of, so the association with financialservices can be only beneficial.

Bonus Question

Many companies are turning to bonuses for their CIOs to boostcompensation. Jane Koppenheffer, CIO at Penn National Insurance,supports the idea, both for herself and her employees. Within ourcompany we have a very good mixture of fixed compensation andincentive compensation, she says. That applies not only to myself,but to about 50 members of my IT staff who are on an incentivecompensation plan. That is roughly 40 percent of the Penn NationalIT staff.

Tying excellent compensation to delivery results really ishelping our company, says Koppenheffer. The incentive compensationarea is where specific results are expected, and thats tied intosignificant financial rewards.

For herself, an incentiveis tied to corporate results,specifically the IT departments contribution to the bottom line.There also are objective criteria Koppenheffer is judged on. Everyyear they can change, but for the past year its been certainstrategic projects being completed on time as well as being anactive contributor to the strategic direction of the company andbeing able to help the business units proactively in identifyingsolutions, she says.

Percentages vary from five percent to 15 percent of base salaryfor most jobs, but the total can go higher, although Koppenhefferdeclined to reveal how high. Its a very attractive incentive plan,she says. Its something to shoot for and helps focusperformance.

A year ago, bonuses were going down, but Schafer believes theyhave rebounded for insurers as the industry has dug itself out fromunder huge losses. Still, struggling or not, CIOs are not lookingto move if they cant improve their situation, and often that meansa higher salary. The knowledge level of leading CIOs also meansthey know what to expect in the job market. This is one area yourenot going to be able to cheap out, says Schafer. Youre talkingabout someone with a depth and breadth of experience thatencompasses finance, management, and technologythe whole array ofcompetencies to be effective.

She says a CIO needs to know how to operate in differentenvironments. To be an effective CIO, in many ways, is like being apolitician with an accountants cap and a pocket protector, saysSchafer. You need to operate in all those spheres. Youre not goingto find too many people easily able to be a good CIO, so salarieshave tended to be pretty stable.

The Little Guys

Bonuses can be valuable for smaller companies, particularlythose trying to retain a CIO or a top technologist. Schafer pointsout that many smaller companies have different titles for thepeople running the IT department, and CIO is not necessarily one ofthem. Typically they are more of a general manager, and often theyhave the title of director of IT, she says.

Base salaries are lower, as Gilchrist points out in the SpencerStuart survey. The average total compensation for financialservices companies under $1 billion in revenue is $380,000. Forthose between $1 billion and $10 billion, the average compensationrises to $483,000. For companies over the $10 billion mark, thenumber is $656,000.

Still, as smaller companies turn to technology for more help,they find they have to up the ante for good CIOs as well. Moreoften than not you are going to see salaries lag behind the majorfirms, says Schafer. But a lot depends on how much influence theCIO is going to wield. If the company is highly tech driven, it hasto be willing to pay comparable salaries because thats the only wayit is going to get someone. A CIO with a smaller firm may not haveas large a budget to manage, but for the companys success it isimportant to have someone sophisticated enough to acquire the righttechnology and use it the right way, she says.

Playing Catch-Up

Schafer believes technology is changing the insurance industry.Its one of the areas where we see this rush to make technology anintegral part of what theyre doing, she says. Insurance was alittle later to the game, but theyve really gone after it,especially in companies where there is a recognition thattransformation needs to happen. She believes many insurancecompanies refused to view their industry as technology driven, butthat is beginning to change. With the Internet being able tooffload agents into portals and being able to manage certainaspects of what has been a highly administrative-centric type ofbusiness, it clearly shows they need to make transformations tosustain the higher level of profitability they need, she says.Insurers clearly need to look for CIOs who can perform those tasks.Thats part of the profile for a CIO anywhere nowinsurance or prettymuch any sector. The absolute skills a person needs are not justthe technology skills. You need to be technically competent, butmore and more were seeing companies want to hire folks in the CIOrole who are able to muster resources, communicate with seniorexecutives, plan, deal with strategy, understand what the peoplerequirements are, and where the need for change is going to be.Thats more of a business profile.

No Argument Here

The days when promoting your top technologist into the positionof CIO may not be over, but there is no guarantee that someone withonly a technology background will take that seat at the executivetable. Koppenheffer is a good example of that. Her first job in thetechnology sector of Penn National is her current position:CIO.

I came up through the business sideunderwriting and marketing,says Koppenheffer. My main exposure [to technology] had been as themajor project sponsor for our commercial lines projects. She saysPenn National had a number of good technical people, but thecompany felt there was no one available within IT to link businessneeds and strategies to the technical solutions available.

The kinds of skills Penn National was looking for in thisparticular situation had to do with basic managementprojectmanagement, expense management, people managementand the ability tolink the business strategy with the technology, she says.

Koppenheffer claims she would never have taken the position ifshe had not felt so strongly about the technical skills of the ITstaff. She believes her familiarity with the staff made it easierfor them to accept her. There was less trepidation than if abusiness person had moved in from outside the company, shesays.

Having a strong business background is an important factor foran aspiring CIO, Schafer says. Many technology people are movingover to the business side to broaden their background beforereturning to IT. The lure that keeps pulling them back is thetechnology itself. One thing about IT people is they typically liketechnology, she says. Some people come back to IT as a CIO, whichis a happy blend for the companies that hired them. You dont haveto be steeped in technology to be successful and make a companysuccessful, but theres no question it does help. You clearly needan aptitude for whats important, whats coming down the road, andwhere you should be spending your time. She believes a good CIOunderstands more than the technology. Good CIOs are able to weighthe costs of new technology against whether it is the right timefor a company to make a capital investment. Its more of aninvestment management approach, notes Schafer. Companies withreally savvy CIOs are looking at IT as part of the asset base thecompany manages, and you need somebody who understands how thatwhole asset management thing works.

Improving Your Stock

Gilchrist offers several tips for CIOs looking to improve theirposition with their current company or looking to find a new home.Align with the business people, he says. You have to demonstrateyou have an aptitude for understanding P&Ls or bottom-lineorientation. Show visible improvement. Attract top talentyou areonly as good as your people. Be prudentdemonstrate you are fiscallyresponsible.

Knowing where your company fits with major technology trendsalso is important. You better not put your head in the sand, saysGilchrist. The last thing you want is your CEO to come by and say,By the way, I think we better start outsourcing.

That fits in with Koppenheffers belief that the CIO positiondemands strategic thinking. Its not coding and programming, shesays. Its setting out project priorities, vendor management,project management. Its helping to educate the executive team.

Schafer believes the business profile has replaced the technicalside for many CIOs. More and more of what a CIO needs to do isrooted in understanding, articulating, and managing the financialaspect of whats going on in the IT department, she says

Gilchrist asserts executives moving up through the IT departmentshould have a heavy dose of business applications rather thaninfrastructure knowledge. Its good to have a mix, but most peopleare getting jobs because of the business application side.

He adds most CIOs with whom he meets have degrees in engineeringor business. One trend he is noticing is in advanced degrees. Afair amount have advanced degrees, he says. Usually an MBA. If youget into a more technical sector, you may see an advancedengineering degree.

Stepping Stone

CIOs may dream of having the big office in the executive suite,but Schafer says being a CIO has yet to become the key part of arsum companies are looking for when they want to hire a CEO. Theresa natural bias if you have a lot of technology in your background,says Schafer. Is this guy anything more than a tech geek? CIOs haveto focus on building business capabilities, being able to toutthemselves, and have a record of success to demonstrate why theyshould be given the reins of something larger than IT. The talentis there, Gilchrist believes, but there are easier paths to the topjob. Some of the CIOs out there are capable of being a president ofa company, he says. I dont think its the logical path, but it couldhappen.

The Economy

There is little doubt the economy has hurt some salaries,particularly with bonuses and stock options, according toGilchrist. But insurers better not think they are going to get abargain if they go shopping for a new CIO. When we move CIOs to anew company, they are trying to improve themselves, he says. Theyare not going for a break-even situation.

To attract top talent you have to improve the situation for thenew person. They are attracted by maybe the reporting structure,the challenge, the industry. Usually there are a number of factorsto get somebody to pick up and move. Money is one of the factors,but not the only factor. The real good ones want the opportunity.There certainly is a financial component, but I dont think its thetop one. People arent going to move just for money if the situationisnt right.

Whether it is a stepping stone or not, Koppenheffer believesbeing an insurance CIO is a wonderful challenge. Its a positionthat has a lot of pressure, accountability, and responsibilityassociated with it, she says. Whenever projects go wrong, systemshave problems, or security issues pop up, its the CIO who has theultimate responsibility. As a long-term employee who feels PennNational is doing some really good things, I want to be a part ofthat, and being recognized for the contribution I make isimportant.

Top Incentives for Key Performers

4 Training in excess of 15 days per year for development of hotskills

4 Work/life balance incentives:
On-site dry cleaning services
On-site gym
On-site day care
On-site postal services

4 Paid elder care

4 Financial assistance for personal needs (e.g., house, car)

4 Financial assistance for adoption

4 Additional paid time off for employee and family, including along weekend or a week at a resort or spa

4 Transportation services provided at no charge (taxis, vans,etc.)

4 Zero-deductible health care

Source: META Group

Ranking of Insurance CIOs TotalCompensation

Source: META Group