Whats on the minds of your fellow CIOs? A recent survey shows investing in growth not just for the short termhas moved up on the to-do list.
For the last few years, insurance IT leaders have been almost maniacally focused on cutting costs, but as weve entered 2005, some of the reins have been loosened. Investment in systems and tools that support growth has passed cost cutting on the technology fast track. There is a primary focus on supporting growth and a secondary focus on cutting costs, says Matt Josefowicz, manager of the insurance group at Celent Communications.
Celent recently completed its annual survey of insurance CIOs and CTOs on their pressures, priorities, projects, and plans. Josefowicz points out lowering expenses never will be extinct in the industry. Cutting costs has not moved off the board in any way, it just moved down a notch, he says. There always is more to cut. The day the insurance industry is as efficient as it can be is a day far, far in the future.
The reason for the increased emphasis on improvement is the complexity of the infrastructures IT departments are handling. Other factors include the complexity of the processes and the fact many infrastructures and processes have a long legacy history and are slow to change and adapt, contends Josefowicz. Insurers need to make changes in business practices, and this requires a certain amount of willingness to swallow disruptions to achieve efficiencies, he says.
One area of investment Josefowicz finds pleasantly surprising is the willingness of insurers to spend on policy administration systems. They are ex-pensive solutions, but theyre not more expensive than living with the issues a lot of old solutions create, he notes. Just in terms of the inhibited flexibility and inhibited accessibility that legacy policy administration systems have, it makes it a worthwhile investment in a lot of cases.
Some larger carriers are introducing new policy administration systems to support new lines of business with the goal of eventually migrating other lines to that platform. There isnt a widespread appetite for rip and replacealthough that does exist at some companies, says Josefowicz. Were starting to see [carriers] going line by line or component by component, replacing the rating and underwriting in the front-end pieces, and maybe billing in the back end, and having in mind they eventually are going to swap out that core record-keeping and reporting piece.
The IT leaders surveyed by Celent indicate Web portals are becoming the default way insurers are communicating with their agents, and investments are being made today to improve those portals. We are seeing people who put things upjust to have something upthree or four years ago now realizing [the portal] is so core to their business, their operations, and their relationships with distributors, they are investing a lot in upgrading to improve the functionality level or the architecture level, says Josefowicz.
Compliance issues also are on the mind of insurance CIOs. Most compliance-related IT initiatives boil down to the same thing as data mastery, he explains. Just make sure you have great records and you are able to access them and understand them. Insurers should do that anyway for business purposes so they have a clear understanding of their business, can improve their profitability, and make better management decisions. In some cases, compliance gives IT the leverage to do the data quality or data infrastructure types of projects it wanted to do anyway, but it hadnt been able to sell the business units on the business benefits. Compliance [issues] are coming in and adding a little weight to that argument.
Many large insurers have ongoing projects, and [compliance] is not quite as disruptive for them, he adds. As for some of the smaller insurers that havent paid as close attention to it, [compliance is becoming] a little bit more of a fire drill for them.
Insurers also report spam reduction is a large problem for them. E-mail is equally important to knowledge-worker productivity in insurance as it is anywhere else, comments Josefowicz. All those
In boxes flooded with spam are a real drain on productivity for the insurance industry just like any other industry. Dealing with the governments anti-spam regulations shouldnt be a problem, though. Most insurers dont do a lot of direct e-mail marketing themselves, he says. Thats more a matter of agents. For direct writers, they just need to make sure they are in compliance.
ROBERT REGIS HYLE
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