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Diamond Digital IQ Study: Insurers Yet To Establish True Partnership Between Business and IT

Despite what they say, many insurance business and IT leaders still have a long way to go to establish true partnerships with one another.

Though a large majority of insurance business and IT leaders agree that partnership is an imperative for success, a recent report by Diamond Management & Technology Consultants (Chicago) reveals that when it comes to true IT/business alignment, most carriers still have a long way to go. As Paul Blase, a co-managing partner of Diamond's insurance practice observes, "There are some disconnects between statement and action."

According to the annual Diamond Digital IQ Study, released in December, 85 percent of insurance business and technology leaders agree on the strategic value of IT. But seemingly that's about all they agree on. More than one in three (36 percent) insurance business leaders say they are dissatisfied with the IT strategic planning process, compared with only 15 percent of insurance IT leaders.

Further, Blase contends, few insurance business leaders are satisfied with IT results in terms of on-time, on-budget project delivery. Still, the business isn't completely dissatisfied with IT -- 70 percent of insurance business leaders believe that post-merger-and-acquisition business integration processes are effective. Unfortunately, only about half as many insurance IT leaders agree.

CEO IT leadership chart

A Seat at the Table

True IT/business alignment often starts at the top. "If the company [says it] is truly sincere about the strategic necessity of IT and [the CIO doesn't] have a seat at the table, then they really aren't sincere about the strategic necessity of IT," says Craig Lowenthal, SVP and CIO, New York Marine and General Insurance Co. (NYMAGIC; $1.1 billion in total assets), who stresses that he is included in all top management discussions at NYMAGIC. "Your top managers are the critical decision makers, and I don't care what discipline each top manager represents -- they should all be involved in all the decisions of the company."

Despite acknowledging the strategic importance of IT, however, few business leaders offer IT a seat at the executive table. Only 36 percent of the business and technology insurance executives surveyed by Diamond "totally agree" that their CIOs are involved in the business strategy development process.

Such disconnects, Diamond's Blase says, affect how insurers view IT-related ROI and performance. As a result, IT budgets can be thrown out of whack. "If IT and the business aren't working together on the areas where IT can drive down maintenance costs, the budget becomes bloated in the wrong area and there is less money to free up for IT strategic investment," he explains.

"When you're not at the table, you are given potentially artificial budget caps or constraints that you don't understand or can't see in the larger context," NYMAGIC's Lowenthal adds. "You feel like your hands are tied."

That said, a CIO has to earn his or her place at top management discussions, which means developing a keen business sense, according to Lowenthal. "You can't just be in an executive meeting and just sit there, listen and not understand what's going on until it's your turn to talk about technology," he relates.

And what if a CIO is unable to earn or retain that seat at the table? The insurer shouldn't dismiss IT from strategic decisions, Lowenthal says; it should dismiss the CIO. "If the current person heading IT loses that respect and loses that seat, the seat should still be there and it should be filled with someone else in IT who can command that respect," he suggests.

For those CIOs seeking to expand their strategic business acumen, there are industry organizations that provide valuable opportunities. Lowenthal, for instance, singles out his involvement with the Insurance Accounting & Systems Association (IASA) as a key experience in his development as a business leader. "Over the last decade, I've experienced almost every position by actually volunteering for [IASA]," he says. "I don't think there's any substitute for actual experience like that."

The Diamond Digital IQ Study surveyed 456 C-level business and technology executives, including 44 from the insurance industry. Ninety percent of the companies represented had annual revenues greater than $1 billion.

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