Insurers Warm to Flexible Technology Architecture

Technology transformation is being driven by business leaders who recognize the need for a technology architecture that will efficiently support distributors' and customers' rapidly evolving demands.

Something has changed in the way business executives look at technology at The Hartford ($9.2 billion in annual revenue). By way of illustration, Brian O'Connell, enterprise CIO for the Hartford-based carrier, points to a major IT initiative in a critical line of business that is about 20 percent over budget because of shortsighted decisions made over the past several years. "We're having to rebuild in a more flexible way that accommodates the multichannel model," he remarks.

While there's nothing new about the rebuilding itself, there is something very different about the interest the business is taking in it, O'Connell suggests. "Senior business executives are sitting down and asking questions about the architecture that this new platform will be built on and asking for assurances that three years down the road we will be able to reuse the platform and architectural components and be able to give them the flexibility they need," O'Connell says. "They really want to understand."

How far that appetite for understanding extends may be gauged by O'Connell's appointment this past September as The Hartford's first enterprise CIO. The former Hartford Life CIO says that in the past the company found value in the flexibility granted by letting the company's various businesses go their own ways with regard to technology decisions. But even though flexibility may be more important than ever, he adds, as the businesses have matured scale and efficiency have become more important.

While trying to strike this balance, the company also is faced with the need to meet increasing demands of distributors. To succeed in a changing business environment, O'Connell asserts, the business understands The Hartford will need to deliver the right products and services, through the right channels, at the right time. As a result, business executives have changed the way they communicate that imperative to IT; this time around they understand the importance of longer-term architectural planning and the need to "go slow to go fast," according to O'Connell. "They want to move quickly, but they also know that if we take the time to do it right the first time, they'll be able to move quickly the second time."

The changing attitude of The Hartford's business leaders toward technology architecture is not unique, suggests John Seybold, CTO, Guidewire (San Mateo, Calif.). "We've seen a real change in the market," he says. "Five years ago not many insurers were interested in architectures oriented toward flexibility. As one prospect put it, 'I can't take flexibility to my board and get funding for a project.' "

Today, however, more demands for architectural evolution are originating on the business side, according to Seybold, who notes that other drivers for change include consolidation around genuine industry standards and increasing maturity of vendor solutions. "We've seen a remarkable convergence around service-oriented architecture [SOA]," he says. "Although there's still a great deal of hype, the main positive impact is that SOA has provided a realistic platform for dealing with legacy systems."

Slow to Action

But the viability of technology may or may not translate into action. There is still a great deal of resistance among insurers to making the investment in forward-looking infrastructure and architecture, contends Sanjay Mohan, associate VP, insurance, healthcare and life sciences, Infosys Technologies (Bangalore).

"In scenarios such as M&As, most organizations prefer to let things be rather than integrate," he says. "This makes modernization more difficult down the line. Instead insurers should be using such opportunities to re-architect in a way that not only lowers the cost of operations but enhances the competitiveness of the merged enterprise through integrated technology platforms."

That imperative has gained force as insurers face a transformational shift in how customers interact with them, insists Neal Keene, VP, industry solutions, Thunderhead (Elstree, U.K.). As consumers adopt new communications channels, the expectation is that their insurers will as well, Keene argues.

"People of all demographics [and] ages have adopted the Web, Facebook, MySpace and even Twitter for routine communications and in many cases, prefer to communicate with their insurer through these channels," Keene says. "New platforms must have the flexibility to allow for new communications channels as they develop. Insurers must consider the impact that changing communications requirements have on their business and IT infrastructure needs, both today and five years down the road."

It will take pressures such as these to drive adoption, suggests Infosys' Mohan. "Technology modernization cannot be justified on the basis of technical merit alone," he says. "There has to be significant business upside for modernizing or re-architecting to be approved."

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