Insurance & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Policy Administration

11:11 AM
Connect Directly

The Wrong Stuff: Cautionary Tales of Insurance IT

Successful technology executives are rightly celebrated for their positive contributions to the success of their companies. But what might be called their negative contributions-the ills they avoid-deserve attention too.

An investment in capable insurance technology leadership is-like insurance itself-a risk mitigation measure. And those risks may be greater than commonly believed. Improved governance measures, project management disciplines, innovative staffing approaches and greater business/IT integration efforts all improve the chances for success. But triggers of failure still abound, and in the absence of sturdy IT leadership, the probability of failure may be greater than ever.

Generally speaking, IT projects are still more likely to fail than succeed, and the larger the project, the more likely the failure, believes Judy Johnson, vice president of insurance strategy, Sapiens America (Research Triangle, N.C.). The single greatest reason for failure, she says, is the failure to match the demands of initiatives to the capabilities of participants.

Johnson cites a technology horror story in which a "big bang" policy administration project ran to five years of work, and consumed millions of dollars, but in the end yielded nothing. "They pulled down a whole bunch of technologies they had never used before, and weren't too careful about how they selected vendors," she recalls. The company attempted to utilize technology with which the internal IT staff was unfamiliar, and given the lack of technical expertise applied to a complex project, the result was an unworkable application, Johnson relates. Begun with poor vendor selection, the project suffered from incomplete definition of business requirements and was plagued by poor communication and continuing friction between the stakeholders as it progressed. The IT organization came in for a rude awakening when they were informed by a vendor that it would take about $50 million in additional hardware just to run the application. "It was a terrible mismatch between what they were trying to do, what they were trying to use to do it, and what they were skilled at," Johnson laments. "It was a case of 'You don't know what you don't know.'"

The problem with a high incidence of failure in the industry is that it tends to breed further failure. For example, the kind of failure of leadership that precipitated the above disaster limits future opportunities for leadership by undermining the business's confidence in IT.

"If IT fails to demonstrate the leadership ability to fit the right people in the right job at the right time, they may not get asked again to participate," observes Billy McCarter, client engagement executive of Torrance, Calif.-based ePolicy Solutions-and former CIO of Fireman's Fund (Novato, Calif., $11.5 billion in assets) and a 2002 I&T Elite 8 honoree. "The result is you have business units determining IT strategy before IT gets involved."

The business/IT relationship will inevitably become adversarial, because the business-established direction may not be in line with the company's IT architecture and other investments. "I've seen situations where the business units lost confidence in the IT organization, went out and invested over $1 million in a solution and then got it to a point where they needed to come back and connect it into the bigger network of the company-and the investment to connect it in was larger than the initial investment they had made," McCarter relates.

Even when the technology leadership has control, playing it safe can be as hazardous as being blindly ambitious. "Executives will often choose a big brand because that provides accountability if things turn negative," asserts Max Drucker, managing partner of P&C software solutions vendor SteelCard (Santa Barbara, Calif.) and a former I&T Elite 8 honoree while CIO of eCoverage. "But the reality is that having a robust safety net is not the goal. Just because you ensure you're in a position to sue the vendor three years into your implementation doesn't mean it's not a complete failure-a disaster."

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

1 of 4
Register for Insurance & Technology Newsletters