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INSURERS FOCUS ON STANDARDS, PROJECT MANAGEMENT ... AND STANDARDS

Although discretionary IT spending is almost extinct at many insurance carriers—and even non-discretionary spending is under pressure—insurers are spending IT dollars on specific initiatives that will help them remain competitive going forward.

Although discretionary IT spending is almost extinct at many insurance carriers—and even non-discretionary spending is under pressure—insurers are spending IT dollars on specific initiatives that will help them remain competitive going forward, according to a panel of insurance industry IT executives and analysts in the opening session at the ACORD 2003 Annual Conference, "Pathways To Business Success," which took place in Orlando this week.

"We are all facing the pressures of the economy," said Ursuline Foley, senior vice president and chief information officer at XL Re. "Our strategy is that we have to spend now, otherwise we will not be efficient and competitive going forward."

Francis Chung, assistant vice president, technology services group, Lincoln Retirement, added, "Competition is tight and budgets are small, but technology is moving forward. Insurance companies can't afford not to spend on technology now," or they risk being left behind the competitive curve.

Paul Fox, chief information officer at Guy Carpenter agreed. "Short-term spending is gearing us for long-term growth over the next few years," Fox said.

But even though the perception is that insurance carriers are spending less than they did a few years ago Joel Gelb, group vice president and chief information officer at MSA Group, maintained that—although there may be slightly less spending—it is not as reduced as many suggest. "We are still spending, but we have a large focus on managing all aspects of information technology," Gelb said. "We are focused on better project management."

The focus on project management and making sure that any spending meets higher project management standards is one reason why approval of IT spending is taking much longer, according to Kimberly Harris, insurance research director, Gartner.

And while IT may, or may not be, spending less, it is being called upon to do more in many areas—including enhancing existing systems and channels. "We need to find the right level of integration with technology for newer products and information," according to MSA's Gelb. "We have one distribution channel, the independent agent, and we are not looking to move to other channels. But we are moving forward with better service for our agents and we are working to make it easier for agents to work with us by providing better technology to them," he said.

To meet the challenge, said Matthew Josefowicz, senior analyst, insurance, at Celent Communications, carriers need to move, albeit reluctantly, towards SEMCI (Single Entry Multi Carrier Interface). "Agents want easier transactions and want SEMCI," he says. "Carriers 'say' they want SEMCI, but they don't really mean it. If carriers build their proprietary systems on the ACORD standard, they will be better able to go to SEMCI when the market really demands it."

Lincoln Retirement's Chung added, "Standards must be brought into the strategic planning of IT. A strategic alliance with ACORD is needed for standards to work."

And to make sure that standards are used throughout the insurance organization, said XL Re's Foley, "you need to educate the business about the value that the ACORD standards bring. You will need the senior-level support" to develop initiatives on the standard.

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

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