In its 2012 Global Insurance Outlook, Deloitte Research insurance leader Sam Friedman issues a fascinating description of technology leaders in the insurance industry. He describes their work as "revolutionary" and points out the important decisions CIOs make today are less about software or reengineering processes and more about transformation.
"CIOs are evolving into key players within the C-suite to develop and execute strategy," he says. "They are expected to be transformational."
Technology today is viewed as a way to change the business culture.
"Maybe it's a culture that's insulated in the sense they always do things in-house, work with existing systems, and adapt the best they can with the systems in place," says Friedman. "Now [CIOs] are being asked to come up with more ambitious game plans to change the culture and the approach—and not just technologically, but from a business operations standpoint. Technology facilitates the business operation."
The C-suite within an insurance company has expanded in recent years, explains Friedman. CEOs, CFOs, and COOs remain lead players, but newer titles—chief risk officers, chief information officers and chief technology officers—are playing important roles in the enterprise.
"Their roles are not simply to take marching orders from the C-suite and execute strategies," he says. "They have a more influential seat at the table in terms of setting strategy, planning how that strategy will be executed, and having a say on what resources will be available—particularly outside resources like software and the people involved."
Because so much technology is being outsourced—in part because of the growth in cloud computing—technology leaders need to perform a tremendous amount of due diligence, explains Friedman. Outsourcing requires carriers to put a great deal of faith in the infrastructure and the personnel from outside the organization.
Friedman concedes it is difficult for some to view insurance CIOs as revolutionaries since the industry is perceived as a less than revolutionary type of business.
"Insurance tends to change slowly," he says. "Product development is incremental. You don't have the introduction of a revolutionary product that changes the landscape very often. Technology is an area where you can bring transformational change within insurance. The decision to outsource to a cloud is revolutionary to many insurance companies that either kept patching their legacy systems or kept reinventing the wheel in house."
Social media is not viewed as a transformative tool and is mostly used as a marketing tool for insurance carriers to interact with policyholders on social networking sites such as Facebook. But Friedman believes IT leaders need to view social media as a collaboration tool within an organization, particularly for multi-state or multi-national carriers where employees are not in the same office or even in the same country.
Friedman points out the social media site Yammer has become an important tool the research firm uses to conduct business. Deloitte facilitates knowledge management by setting up internal Yammer sites to discuss issues in real time rather than brainstorming on a conference call.
"What we found is on a call someone is leading it and sometimes people are hesitant to speak out," says Frieedman. "The experience we've had is people are much more interactive in the social media platform rather than on the telephone. There seems to be more content generated and information exchanged than on the phone or in a live meeting. [Workers] seem to be more open on the social media."
Friedman believes similar results can be found within insurance organizations. For example, the person in charge of distributor relations at a carrier could hold a session to deal with their independent agents to discuss a new product or a new twist on an existing product like telematics, or strategic planning for product development.
"Rather than having conference calls and live meetings, maybe it's less expensive and perhaps more effective through social media," he says. "There are many other services out there. The software itself is secondary. It's really about transformation for the business operation. The CIO can lead that."
Most insurers have a social media policy in place, but Friedman wonders how carriers are quantifying and benchmarking what they are accomplishing—particularly in contrast to their competition. Carriers need analytics tools to answer those questions.
"There's work going on to try and solve [benchmarking issues] through advanced analytics, it's just a matter of what the field of information is going to be and how it is weighed against the competition," he says.
Friedman also is excited by the new hardware for agents and consumers: the smartphone.
"Think of all the things you can do from a smartphone," he says. "It is the most insurance-friendly device invented in a long time."
Policyholders can document an accident with a still photo or a video, write all the details of the accident on the phone's memo function and email it to the insurance company, and go online through the an insurance app and the GPS function will tell them where the closest repair facility is located. Customers also can get quotes on their smartphone.
"It's an amazing device," says Friedman. "It can transform how an insurance company does business and it's all under the CIOs purview."
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