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How Insurance CIOs Are Creating Value: A Dialogue

A new study from Novarica finds that carriers are doing more new development than ever, as compared to spending on maintenance, but that insurers are challenged to make innovation a matter of routine than special appointment.

Novarica's new study, "Creating Enterprise Value as CIO" attempts to give insurance CIOs a basis to compare themselves against their peers. We used the study key findings as the basis of a brief dialogue with the research and advisory firm's partner and managing director, Matthew Josefowicz:

I&T: One of the findings of the research you did, based on a survey of 111 senior insurance technology executives in Dec. 2011, was that most CIOs see themselves supporting strategic initiatives or improving operational efficiency, and that "only about 20 percent see driving innovation as their primary area of value creation." You called that subgroup "innovators." Here's my question: Isn't 20 percent a pretty respectable figure for people primarily focused on innovation?

MJ: Absolutely. Just to clarify, this is 20 percent of CIOs who see this as their greatest area of value, not that CIOs see 20 percent of their value in innovation. I'm actually surprised by how high this is.

I&T: Novarica also found, unsurprisingly, that more than a third of the respondents cited IT/business alignment as the most important enabling factor. You also found that the "innovators" were twice as likely to credit their own knowledge and skills than their business relationships as their primary enablers. Shouldn't we expect that, given that "innovators" are typically hired as change drivers with a consultant-like role?

MJ: Yes, but on the other hand, traditional "Strategic enabler" CIOs are often tasked with driving innovation too, or would like to be tasked with driving innovation. We're pointing out the challenges inherent in that model.

I&T: I was struck by your finding that more than half of insurers budgets are devoted to building new capabilities. Surely this is a big deal. It was not too long ago that we regarded a 75/25 ratio of maintenance-to-new-development as typical.

MJ: Agreed. I think we've seen the traditional "maintenance/new projects" budget start to dip below the 60-40 range as insurers have taken steps to reduce the cost of supporting their existing systems and invest heavily in building new capabilities. As a side note, this is the first time we've used this Run/Build/Transform format rather than "Maintenance/New Projects" framework, and there's probably some bleed between build-and -run when it comes to enhancements of existing systems.

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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