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Sun, 18 Nov 2007 13:05:12 -0500

What opportunities and challenges await innovative insurers in the coming year? Members of I&T's Reader Advisory Board report on their priority lists.

The insurance industry faces the coming year with plenty about which to worry, including intensified competition in a finite market, the threat of regulatory compliance-related sanctions and the financial strains of record hurricane seasons. All of these preoccupations influence technology, but technology officers are concerned less about the difficulties of the external business environment and more about their internal delivery capabilities. And viewed through the eyes of I&T's Reader Advisory Board (RAB), 2006 brings plenty about which to be optimistic.

In terms of technology investment, our RAB members' plans suggest a continuation in 2006 of last year's trend, with the great majority reporting increases in spending. Even in the minority of cases for which budgets are stable, a focus on continuous improvement has meant a shift from maintenance to development costs, resulting in increased spending power, as in the case of Allstate (Northbrook, Ill.; $94 billion in assets), according to Cathy Brune, senior vice president and CIO. "As we improve, we free up maintenance dollars to spend on more-strategic initiatives," she says. "It's important to note that although we spend about the same amount, it's not on the same things; we're able to get more done without having to increase our spend."

Maintenance costs have increased at Jacksonville, Fla.-based regional P&C carrier Main Street America Group (MSA Group; $1.4 billion in assets), according to vice president and CIO Joel Gelb, but - as a result of recent development - not for legacy system care. "Our maintenance load is increasing as the applications we have been building are now in production and require care," he explains. But, Gelb adds, "We have managed to cut a significant amount from our budget so that we are maintaining our capacity to engage new development despite the increased maintenance load."

Efficient Infrastructure

Cost reduction continues to be a strong area of interest across the board, but more in a spirit of staying a successful course than in frustration with the status quo. Prudential (Newark, N.J.; $500 billion in assets) CIO Barbara Koster says her organization's main focus will be "gaining efficiencies in our technology infrastructure, using such strategies as consolidation, simplification, standardization and commoditization."

A strong measure of continuity characterizes MetLife's technology investment outlook, according to enterprise CIO Steve Sheinheit. "We continue to advance programs started over the past few years, including driving automation and efficiency through image and workflow solutions, straight-through processing and expanding self-service capabilities," he relates.

Among industrywide issues, Robert Fullington, CIO, Life of the South (LOTS; Jacksonville, Fla.; more than $5 billion in 2005 revenue), identifies the need for better data on a more timely basis. "The ability to get information on a more granular scale will provide better decision making and enable performance monitoring and cost reduction," he says.

Allstate's Brune says her organization will build on successes in its approach to information management and the improvement of its data environment. "This gives us a step up in business analytics, including proper risk assessment and pricing," she says. "I think we'll see the evolution of more technologies that get you to the point where your data allows you to do even more powerful business analytics."

LOTS' Fullington emphasizes the importance of good information for the defensive goal of meeting Sarbanes-Oxley reporting and disclosure requirements. Regulatory compliance, he adds, is high on his list of concerns.

Prudential's Koster shares that concern, saying that the top issues insurers face "are those regarding security, privacy and regulatory compliance and control." She adds that "New technology measures will need to be established as security threats to privacy arise and new regulations come into force."

Federal and state regulations have required full disclosure of any data loss, resulting in heightened concern about current policies and security technologies among companies' risk managers, LOTS' Fullington elaborates. "Having data stolen is now a business-ending event," he says.

In addition to the regulatory burden, P&C insurers face the economic pressures associated with catastrophes and the difficulties of operating in a softening market. But specific technology challenges also raise concerns. Bill Bloom, senior vice president and CIO, St. Paul Travelers (St. Paul; $23 billion in revenue), points to the lack of data standards. "Adoption of data standards and services across the industry would help us deliver applications for our agents and policyholders more quickly," he says.

Srinivas Koushik, Nationwide's (Columbus, Ohio; $16.8 billion in revenue) enterprise CTO, says that among the technology-specific issues faced by P&C carriers are business availability and resiliency, and retention of key skills as the IT job market picks up. Internally, Nationwide faces the challenge of "handling significant growth while managing our current IT backlog," he says.

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

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