A Look Ahead

Like anybody else, senior insurance technology executives wonder what the year ahead will bring. For many, it is a question of survival. Last year saw the departure of numerous insurance CIOs - for a variety of reasons, including well-earned retirement. But whatever the reasons for the turnover, it's clear that the expectations for the insurance CIOs who survived 2004 will be just as great in 2005. In fact, those expectations are more comprehensive than ever, with greater consequences for the enterprise.

Today's CIO has a hand in several parts of the business, encompassing both profit and cost centers. CIOs thus have a special responsibility to keep the business on track (both from investment and project management perspectives), evaluate the abilities of technology to serve the business in an ongoing fashion, and provide leadership on regulatory compliance and security issues.

Dennis Callahan, EVP and CIO, Guardian Life Insurance Co. of America (New York; $34.1 billion in assets), says that the CIO has become a strong financial planner, manager and communicator in the vernacular of business, not just technology. The importance of those abilities for Guardian is that the CIO directs an organization that Callahan characterizes as "uniquely positioned to identify enterprisewide opportunities because it supports every business."

As CIO at Guardian, "I report directly to the CEO and participate in the development of business strategy across our operations and profit centers; I sit on the firm's executive vice president-level risk and product committees; and I chair the security and e-business committees," Callahan says. Additionally, a central focus of Callahan's role is to define and implement best practices in business innovation and cost-effective resource management. "As a result, my corporate responsibilities have expanded to include management of Guardian's facilities and business process outsourcing," he adds.

Modest Increases

CIOs' increasing financial management responsibilities go hand in hand with institutionalized parsimony, at least compared with the technology spending binges of the '90s. But 2005 will see moderate increases in spending, according to several CIOs polled by I&T (see related story, page 32). Guardian's Callahan says his 2005 budget will be about the same as 2004's budget, which saw a 6 percent increase over the 2003 budget. "We will continue to make strategic IT investments that drive business efficiency, customer service and new product launches, while maintaining a robust and fully protected infrastructure," he says.

Steve Sheinheit, CIO, MetLife (New York; $350.2 billion in assets), reports "modest increases in budget and staff as we continue to grow to meet business-related demands, including growth in volume, new products and services, and new regulatory requirements." MetLife faces increased costs related to the need to expand capacity to support increasing business transaction volume and to meet risk-related requirements, according to Sheinheit. The carrier's technology organization also faces growing demand from the businesses for new products and systems that support their strategies and meet market demand, Sheinheit continues.

Technology areas MetLife will be focusing on include the Internet, which "will continue to grow in importance as we drive more business through this channel, with concomitant growth in self-service and straight-through processing," Sheinheit says. "On the back end, image and workflow will continue to be used to reengineer business processes, eliminate paper and enable straight-through processing," he adds.

The carrier also will develop wireless technology toward the end of supporting "work from anywhere" devices, as well as expanding its use of Voice over IP (VoIP) technology and increasing the use of collaboration technologies for planning and project management, according to Sheinheit.

"The shift to a more component-based application design and architecture will continue, with the use of application platform suites in support of a services-oriented architecture to enable, for example, Web services and trusted authentication," Sheinheit says. "There will be increased use of data warehousing, data mining, business intelligence, document management, storage archive and retrieval, and mirroring technology."

Shrinking Choices

In seeking to invest in technology, insurance carriers face an increasingly consolidated vendor market. Along with their counterparts in other industries, insurance technology officers have been watching carefully deals such as Oracle's (Redwood Shores, Calif.) acquisition of Pleasanton, Calif.-based PeopleSoft (see article, page 14). M&A activity has continued among vertically oriented vendors as well. With fewer technology vendors and software choices, "The buyer's market of the past several years is tilting toward suppliers," says MetLife's Sheinheit. One way MetLife deals with the changing market is "to select strong partners and leverage their products, services and capabilities," Sheinheit says.

The way to best do that is to develop good vendor relationships, opines Greg Tranter, CIO, Allmerica Financial (Worcester, Mass.; $26.5 billion in assets). "A good relationship can result in sometimes getting functionality from a vendor that we may have had to wait for otherwise," he says. The advantage, Tranter elaborates, is that "we may be able to be a potential tester or early adopter of the technology and get the functionality before the rest of the vendor's customers."

Allmerica employs what Tranter characterizes as a reliable vendor management process that considers cost avoidance as well as cost reduction. Nevertheless, a challenge remains, according to Tranter, in "striking the right balance between going with a big vendor and anticipating that they will deliver on emerging technologies, versus finding and selecting a best-of-breed smaller vendor who is focused on a particular emerging technology."

In the current climate, however, others may find that challenge a bit like walking a tightrope. Robert Fullington, CIO of Life of the South (LOTS; Jacksonville, Fla.; $200 million in premium income), says he takes a vendor- rather than product-oriented approach. "I am looking to who is going to survive rather than who has the best-of-breed product," he says. But safety is not the only reason to look to end-to-end rather than incremental, modular functionality investments, says Fullington. "The value of integration compensates for the cost of slightly less function."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio