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Insurance Companies Embrace Emerging Technologies to Support a Customer-Oriented Business Model

Members of Insurance & Technology's Reader Advisory Board report that they are embracing newer technologies -- including next-generation analytics and the cloud -- to drive a customer-oriented operational paradigm.

There was a time when the insurance industry was a pioneer in the use of information technology. Carriers were early adopters of mainframe computer technology principally because their work requires collecting large amounts of data and processing it according to the rules associated with the obligations conferred by an insurance policy. The industry since has lived with a "technology laggard" rap in the intervening years. But the latest focus of insurance company spending -- as measured by the priorities and initiatives of

I&T's Reader Advisory Board -- suggests that not only is the insurance industry shaking off its laggard reputation through the adoption of emerging technologies, such as cloud-based solutions, but that the data-intensive character of the industry may encourage future leadership in data management and analysis.

As insurers plan their technology investments, they are coping with a variety of market challenges, including the state of the economy, rapidly changing regulation and a shifting global risk environment. But perhaps the single most disruptive force is the power of the consumer in the market, suggests Piyush Singh, SVP and CIO of Cincinnati-based Great American Insurance Co., a subsidiary of American Financial Group ($32.5 billion in total 2010 assets). Singh sees the challenge that insurance CIOs face as one of a "tectonic" shift of orientation from an "inside-out" to an "outside-in" perspective.

"Within our organizations, we tend to think: 'We are finance,' 'We are IT,' 'We are underwriting, claims,' etcetera," Singh explains. "Drive the same concept further, and within departments there are further silos; in IT, it would be applications, development, support, infrastructure, etcetera.

"When customers call," Singh continues, "we tend to view ourselves as individuals within departments and address queries accordingly. However, when we as consumers call other companies, we do not like hearing the customer rep passing the buck to other departments; we like being taken care of in a holistic manner."

Insurers must make some fundamental changes in culture, approach and process design in order to achieve the outside-in paradigm, Singh insists. He characterizes the shift as moving from a world of green screen, fixed computers and a focus on back-office processing and reporting, to a world of web-based, decentralized, front-office-oriented, mobile, touch-screen, consumer-oriented processes built on decision-making capabilities informed by data analysis.

But it's not just a matter of reorientation, suggests Scott McKay, SVP and CIO of Genworth Financial in Richmond, Va.; it's also a matter of the speed at which the change must be accomplished. "Today's world is faster-moving, more complex and more volatile than any prior period, and therefore we are focused on developing technology that enables our business to effectively compete today and into the future," he comments.

McKay reports that Genworth's IT maintenance budget is down, reflecting the balance of productivity gains versus supplier price increases. Genworth's IT investment budget, however, is neither growing nor shrinking, he says. "We continually invest in IT infrastructure and applications where we can generate real productivity and manage security and sustainability," McKay notes. "More important, we focus our competitive IT investments on our capability to service our customers and manage our products' performance."

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Genworth's technology initiatives for 2012 include a heavy focus on increasing the competitiveness of the company's product management capabilities, according to McKay. "Components of that include next-generation analytical and modeling technologies for product pricing, valuation, projections and economic capital," he says.

Indeed, data management and analytics will be key initiative areas in 2012 for several of I&T's Reader Advisory Board members. Al Parisian, CIO of Helena, Mont.-based workers' compensation carrier Montana State Fund (approximately $150 million in annual written premium), says he will see through to completion a two-year initiative to build enterprise risk management (ERM) capabilities. "We're preparing for ongoing maintenance mode by mid-2012," he reports.

Montana State Fund's (MSF) largest project for the coming year will be a document management replacement initiative, followed by the ERM project and a data management initiative, according to Parisian. "We face fairly typical drivers for these initiatives, with the exception of the document management one, which carries an additional strategic imperative -- it was bundled with our legacy policy administration application and needed to be extricated as part of a long-term plan to make the legacy system replaceable," he says. "The business also decided to replace our medical bill payment vendor -- better deal, better features -- which occasioned quite a bit of systems work and project commitments."

Parisian says MSF's IT budget will be 4 percent higher in 2012 than last year, mostly due to labor costs. As MSF is a workers' compensation carrier, he explains, political and regulatory issues loom large among external forces affecting technology investment, including national economic issues. But since it writes business only in Montana, MSF is sensitive to the economy's effect specifically on mining and extraction industries, Parisian adds. "Our decision making is affected by virtue of trying to right-size initiatives and services for an uncertain next five years," 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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