Insurance CIOs Discuss Technology Priorities for 2011

In their increasingly strategic roles, insurance CIOs will focus on new infrastructure, novel sourcing models, increased use of analytics and workforce strategies to drive both efficiency and innovation.

Proven technology solutions, maturing IT delivery models, consumer adoption of anytime/anywhere computing and demographic changes are combining to make 2011 a year of departures for insurance IT decision makers, according to members of I&T's Reader Advisory Board, who recently offered their forecasts for the coming year. These pressures are all the more intense as they come in the wake of the financial crisis and in the midst of a recession.

Life insurance CIOs, for example, have several challenges to overcome in the current business environment, including with regard to product and business model changes, according to Russ Bostick, CIO of Carmel, Ind.-based life carrier CNO Financial Group ($4.3 billion in annual revenue). "Since our products are discretionary purchases, sales are impacted strongly by the state of the economy," he notes. "Also, many of the products sold in the past decade were designed to serve mass affluent consumers with expensive guarantees; these designs are now obsolete."

As an additional challenge, insurers' investment income is down and interest rates are volatile, Bostick adds. At the same time, consumers are looking for simpler, easier access to financial services within a more satisfying customer experience. "All of these challenges put significant pressure on life insurance IT departments to lower costs while simultaneously updating product designs and innovating on access to customers," he says. "While these aren't necessarily new trends, they are much stronger than in previous years."

Under these increased demands, says Bob Fullington, president, Fortegra Financial (Jacksonville, Fla.; $83 million in annual revenue), legacy policy administration systems are showing their limitations. "To compound the problem in many cases, new packaged software is at a cost that aggravates the company's cash flow and therefore is not an option," he says.

Equipping the Business

"We're seeing more interest in an ASP [application service provider] model, where the software can be looked at as a lease versus ownership," Fullington continues. "This alleviates a potential cash flow problem, as the pricing model is more of a variable cost than a large outlay of cash for licensing and data center upgrades."

Property and casualty companies also see opportunity in alternatives to traditional software deployment, according to Mike Clifton, CIO of Worcester, Mass.-based The Hanover ($2.8 billion in annual revenue). "The explosion of various delivery models in software-as-a-service/cloud deployments and mobility are going to allow the true realization of information and security management," he asserts. "The challenge is to equip our [distribution] business partners with the right solutions to optimize and realize benefits within a much shorter time period -- the pressure to understand the options and clearly articulate their value is key to a CIO's success."

CIOs also need to recognize the increasing impact of consumer adoption of technology on user experience expectations, advises Brian O'Connell, CIO of The Hartford (Hartford; $24.7 billion in annual revenue). "As people increasingly interact with technology outside of work, they want to be able to enjoy the same ease-of-use benefits provided by these consumer devices within the work environment," O'Connell says.

As new and better mobile technology continues to emerge, O'Connell predicts, there will be increased focus on applications that are "device independent" rather than built for a specific gadget, as well as a "virtualization of the desktop" with applications that can be accessed from virtually any device with an Internet connection. "We will likely see increased use of private clouds with applications that can be downloaded to an individual user's desktop from a company's cloud rather than being stored on a specific device," O'Connell speculates.

"In addition to keeping data within the company's secure environment, benefits include simplification and associated cost savings," he adds. "For example, it would enable the installation of software updates on just a few servers rather than updating thousands of individual desktops." But, O'Connell cautions, "As with any new technology, having the appropriate tools, architecture and controls in place will be a critical component."

Rethinking the Supply Chain

Exactly what the right tools and architecture will be is likely to be affected by what Piyush Singh, CIO of Cincinnati-based Great American Insurance Company (about $1.5 billion in revenue), calls an industrywide "shakeup" that will cause carriers to focus on one of the most controllable parts of their loss ratios: people costs. This shakeup, Singh says, will be driven by continuing economic pressure from the trough -- or outright disappearance -- of the insurance cycle as we've come to know it. The other factor, he adds, will be an aging insurance workforce.

Singh says he believes the insurance industry will learn from the manufacturing industry's mature measurement metrics and success in separating the knowledge/intellectual aspect of business from the production aspect. "Their significant efforts at addressing the supply chain for the past 30 years have fundamentally changed the relationship between the two core functions -- innovation/design and production," Singh explains of manufacturers. "The new world allows them to focus on innovation on one end and scale their production operations efficiently on the other end."

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