2012 Insurance IT All-Stars: Rich Pedersen, National Life Group

In defining an insurance company's culture, Rich Pedersen, senior vice president and CIO of National Life Group, believes it is important to understand what the existing culture is, what are the norms of the people working for the company, and what are the structures those employees work within.

Coming to National Life four years ago, one of Pedersen's mandates was to change the culture around IT within the carrier. There were some sidesteps brought on by forces more powerful than he, but Pedersen is progressing toward that goal.

"You can't just transform any one area alone, whether it is process, culture or systems," he says. "You have to create a unifying message of transformation to get people to understand there is a larger purpose for which you are about to lead them through—including a bunch of painful changes—and then lay out the steps."

It's a slow process in the beginning, but Pedersen believes it builds momentum through constant communication about the rallying call.

(Read more about all our 2012 Insurance IT All-Stars: Peter Moreau, Thad DeBerry, Rick Roy, and Bryan Fowler.)

It helps that Pedersen has spent time on the business side and has worked to share that knowledge within IT and with his business partners.

"The ability to relate to the business—how money is paid, how distribution works, and following the dollar—is imperative," he says. "IT, in a financial services organization, isn't for the sake of IT. It's to help bring value to the business so you can go to market more efficiently and service your client more effectively. It is fundamental to being successful as a CIO."

Pedersen came on as CIO at National Life just as the financial crisis played havoc with the life insurance industry. Looking back on the end of 2008 and the entire 2009, Pedersen today can reflect on what a valuable learning experience it was for him and the industry.

"To think I had the opportunity to be at the helm with a peer executive group to navigate probably the most tumultuous time since the Great Depression was an opportunity of a lifetime," he says. "You can only call it an opportunity in hindsight, though. When I was brought on it was to deal with the strategic initiatives that we were going to build on for the next three to five years. We were going headlong down that path, assessing the strategic competitiveness and the strategic differentiation of our organization, creating a vision mission statement, creating the overall three-year strategy for the corporation."

When the crisis hit, though, it was "all hands on deck" throughout the financial services industries, points out Pedersen.

"At that point it was a time to be supportive of the new mission over the short run," he says. "We made as much progress as we could on the legwork. We knew we were going to come out of the crisis and we actually turned a profit in all years—including 2008 and 2009."

It was not a time to focus on new IT initiatives, but it was a time to focus on the IT division, which hadn't been functioning at the highest level, according to Pedersen.

"We instilled a lot of rigor knowing the pace of execution was going to go up in the coming years," he says. "Many of the things we knew we needed, we started building at the end of 2008 and through 2009. We launched into strategic initiatives in 2010. These last three years have been the build-out from a much more solid foundation within IT."

Pedersen believes the industry has now reached an extraordinary time in the insurance business.

"We're at an inflection point," he says.

Insurers have an aging, imbedded base of insurance producers and a buying public that is younger and savvier about technology.

"The up-and-coming middle class and the emerging affluent—younger people making money and buying houses—have grown up around a technology-oriented lifestyle," says Pedersen. "They are people that have never known anything else but to have a computer and information at their fingertips. The whole notion that insurance is sold and not bought is in flux right now."

Pedersen describes the insurance world today as at a pivot point where these young information gatherers are beginning the sales process themselves. They are doing the research on financial services and what they should be doing at life-cycle points and they are not interested in having sales people conduct a transaction in their house.

"You need to prepare your IT organization and your operations centers for that change and how the transaction life cycle will be conducted using technology such as social media, multimedia, information sharing, browsing technology, search engine optimization, and Skype for the interview process," he says.

Cybersecurity is Pedersen's biggest worry for the future.

"There are a lot of bad guys out there," he says.

Carriers need to remain diligent and try to stay in front of what the bad guys are thinking. He points out that the more information that becomes available, the more bad guys want to get their hands on it.

The trend today is for insurers to conduct more business through electronic transaction, which calls for far more security.

"When business was done with a handshake and a pen and submitted to the back office, the availability of the financial transaction wasn't as great," says Pedersen. "The opportunity didn't exist as much for it to be corrupted. The more business is conducted in a public medium, the more you have to be diligent about how you secure it. Ensuring you have the appropriate built-in redundancy, fault tolerance, and disaster recovery is always a challenge."

An inside look . . .

Rich Pedersen started working with Mass Mutual in 1986 and spent over 22 years with the financial services company in a variety of technology and management jobs—including four years on the business side—that eventually led to a position as divisional CIO for the U.S. IT division.

"I was also asked to lead a modernization effort of business transformation," he says. "I was trying to bring a focused effort on fundamentally changing the old way [Mass Mutual] went about doing business and rearchitecting it to become a modernized business process with modern systems supporting it. It was enormous."

A call from a head hunter led to Pederson heading to National Life Group four years ago and a position as senior vice president and CIO.

"It's a much smaller company, but with the same aspirations of fundamentally transforming the company culture," he says.

Karen Pauli, research director at TowerGroup describes Rich Pedersen: "Rich Pedersen's breadth of experience ranging from a jumbo insurer to a midsized insurer allows him to blend the best of both worlds—global complexity and laser-focused market relationships.  One of the most difficult things for technology professionals to do is to understand issues from the business perspective and Rich excels in this area.  He is most specifically in-tune with what distributors need and this is mission critical given the tough customer/distributor market we are in.  Rich has an excellent understanding about the cultural side of IT transformation initiatives and was able to successfully guide National Life Group.  Rich also is keenly aware of the need to right-source transformation initiatives for maximum results and he established a strong partnership with an IT service organization to optimize results."