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Executive Search Firm Consultants Discuss Roles and Responsibilities of an Insurance CEO

Few have a better understanding of the insurance carrier CEO role than consultants for leading executive search firms, such as Korn/Ferry, Heidrick & Struggles and Spencer Stuart, which have helped countless insurance companies find, recruit and hire candidates for C-suite positions. Consultants with these specialists offer their views on what makes insurance CEOs effective and how an understanding of technology can better equip them to face current and future industry challenges.

I&T: When evaluating insurance carrier CEO candidates, how important is it for them to be tech-savvy?

Mike Magsig, Korn/Ferry International: More and more insurance products are being purchased through the use of technology. A CEO needs to understand what can be done to make a differentiated, fulfilling customer experience. They have to be able to understand how technology and marketing can come together and create a distinct, positive experience.

Erin Hamrick, Heidrick & Struggles: In broader financial services, we will get requests [from company boards] for a new CEO to be tech-savvy -- not a technologist, but someone who understands technology and the utilization of technology as an enabler. But we don't get those requests as often in insurance. In the insurance industry, technology has not been viewed as a business enabler. If they don't have that perspective, it's difficult for them to reach back and see that as a valuable skill set. It's getting better and it's better than it's ever been. The demand is increasing, but it is by no means prevalent.

Frank Marsteller, Spencer Stuart: There are some companies that have pushed the technology envelope quite far and CEOs are making sure that, for example, there is the most sophisticated information available for catastrophe modeling and catastrophe exposure management. We're going to see more and more companies utilize that kind of technology to improve risk management and in the potential securitization and even trading of insurance risk.

I&T: Have the qualifications for an insurance company CEO changed recently -- perhaps as a reaction to the corporate scandals in the past decade?

Marsteller, Spencer Stuart: We're on the downside of that emphasis because companies have restructured and complied with Sarbanes-Oxley. The emphasis now is going to be back on growth and core earnings because the economy is not going to grow as fast. The focus is going to be on core performance, streamlining organizations, greater use of technology, effective distribution and sales organizations. Frequently, the issue in the insurance sector is not the product; it's effective sales and distribution organizations.

Magsig, Korn/Ferry: In regard to the governance side, absolutely things have changed. One point in particular that is evaluated much more closely is a CEO's willingness and ability to work with a much more active board. The governance structure today has prompted boards to become much more involved in the day-to-day operations of the company. A CEO has to be able to manage that dialogue today and be willing to understand the importance of that.

Hamrick, Heidrick & Struggles: Historically, a CEO would have come from either marketing or finance, rarely technology. But there wasn't this requirement for them to be knowledgeable in a variety of different back-office functions. That's what has changed. Security, risk management -- these things touch technology. So it's requiring CEOs to get a little bit deeper into those areas than they've had to be before. They can no longer just delegate that to the head of technology.

I&T: Do you anticipate more CEO hires from the CIO ranks?

Hamrick, Heidrick & Struggles: I don't see that happening in the short term. Insurance is based on underwriting and actuarial analysis. It is difficult to bring anyone into a CEO role that doesn't have that sophisticated financial acumen. Therefore the CEO roles tend to be looking inside the industry for that expertise. For the most part CEOs have come from the three financial sides of the house -- finance, actuarial and underwriting. That's the case certainly for life and annuities, reinsurance, and commercial lines. There might be more flexibility in personal lines because of the consumer orientation.

Marsteller, Spencer Stuart: In the personal insurance lines we may see more consumer-oriented CEOs that definitely have either sales or technology-enabled distribution backgrounds. In the institutional space we will see more CEOs from, potentially, debt and capital market backgrounds, or even trading backgrounds. More technology-oriented leadership is starting to boil up in many organizations. Beyond a marketing and product management background, we're going to see more backgrounds in operations moving up into the executive suite, which usually means a great deal of involvement with technology.

Magsig, Korn/Ferry: The CIOs and CTOs that are most marketable in the industry today are those that view themselves as business people first and then technology professionals second. The extent to which they can develop the ability to look at business problems in a broad context will be very valuable.

I&T: What are the biggest challenges facing new insurance CEOs?

Magsig, Korn/Ferry: How to create above-average, sustainable shareholder value [and] how to build and nurture an organizational culture of top performance. [A CEO] really has to create a continual learning culture, where people will continually measure themselves against best practices in the marketplace.

Marsteller, Spencer Stuart: The biggest thing a company can do today, and a CEO can lead this, is [facilitate] the development of leadership inside the company and create an effective succession planning function. There are numerous ways a company can lose its competitive edge and that all gets down to people. Today there is a high demand for the best talent and it is in short supply. Not all companies can develop all their talent requirements from within -- and that's when we get called -- but a CEO must make sure there is a sufficiency of highly talented individuals in all the key spots of the company.

Hamrick, Heidrick & Struggles: Insurance companies still have not addressed their legacy technology and operations issues. The fact that technology is moving so quickly is forcing CEOs now to get involved and understand what the issues are. The consumer is demanding the service that they're getting in other sectors.

I&T: What are some factors that could affect what companies look for in future CEO candidates?

Hamrick, Heidrick & Struggles: [CEOs will] have to be much more facile in different aspects of their business. So, as opposed to purely coming up through underwriting, they will have rotated through a variety of businesses -- where they will have run claims, maybe been a No. 2 in operations, etc. -- so they have the full perspective of the organization. That will allow them to be more effective. But the insurance industry has not done a lot of cross- pollination. Insurers have not effectively rotated their executives through a variety of roles. What they're demanding is difficult to find because they haven't been doing it themselves.

Magsig, Korn/Ferry: There will be a need for CEOs to become knowledgeable in how technology can help companies reach the new forms of opportunities that are being created by changing demographic patterns. We're on the cusp of beginning to understand how the buying habits of those in target markets are changing and how technology is going to play a key role there. The other factor I see -- and this is really coming up like a firestorm and starting to catch people unaware -- is the need to respond to changing demographics with regard to how it is affecting the composition of executive teams. The aging workforce is starting to create a considerable amount of additional turnover in the executive suites of companies.

Marsteller, Spencer Stuart: Within the next 10 years, the retirement boom will increase the demand for technology. It'll put greater pressure on CEOs and organizations to offer state-of-the-art information technology. There's probably still not enough visibility of the information technology capabilities at the highest levels of organizations. But we are clearly beginning to hear that mission being spoken of in the boardroom and among CEOs. There's a greater emphasis on the use of information rather than building retail offices or more sites around the world.

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