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For the Insurance CIO, the Future is Now

George Grieve | February 03, 2015

I recently completed a series of updates to the “Insurance 101” class that I run occasionally.   Part of the class covers insurance performance metrics which usually has me knee deep in the latest Insurance Information Institute (III) Fact Book, a compendium of industry statistics which I highly recommend if you want to geek out on insurance-by-the-numbers. 

As I tell my students, insurance has more stats than baseball.  In fact, wading through the 2014 International Fact Book provides an obvious reminder of the very nature of our industry: We are data-based and data-driven.  We don’t fix cars or rebuild houses; rather we facilitate these events with money and services.  The money and services which are the delivery of the “insurance promise” are facilitated by capturing, storing, massaging, and moving electronic data.  Our industry is now mostly bits and bytes, and will be even more so tomorrow as we extend the computer’s domain into the selection, pricing, retention and servicing of customers.

You heard it here first: Computers are here to stay! 

Weak humor aside we have considered previously the fact that there are no significant business initiatives in insurance that can happen without major IT and data involvement, and that is before we consider the next wave of “digitalization,” which the pundits assure us is about to challenge our industry in the shape of the Internet of Things, wearable devices, artificial intelligence, drones and aerial imagery, and driverless vehicles. 

Perhaps the most threatening reassurance as to the digital nature of our industry is the rise of technology giants such as Google, Apple, and others as potential competitors in the insurance vertical.  A 2013 study by Accenture found that more than two-thirds of customers would consider purchasing home, auto and life insurance from businesses other than insurers, driven by lower prices and more personalized service.   Within the context of these findings “personalized service” does not mean a human being on the other end of a phone who knows who you are; rather it means a combination of service options and channels based around mobile distribution, social media, business intelligence and analytics, product and pricing personalization, and superior customer experience and relationship management. 

The cohorts driving these results are the younger age groups—many of us older folks would be delighted to have a human being actually answer the phone at a business—and of course the 18- to 30-year-olds are the future of the industry; losing them would represent an industry-wide form of adverse selection.

So, and to the point of this article, if data rules our industry what of the role of the CIO in the enterprise to which he or she now owns the keys?  A generally agreed observation is that the profile of the CIO has risen along with the perceived importance of data- and information-processing to the insurance enterprise.  The CIO, the narrative goes, now enjoys a seat at the big table with the executives of the corporation and is a strategic partner in all new enterprise initiatives.  The term CIO apparently no longer stands for Career Is Over.  Here is my take on the evolving role and position of the CIO based on having been one (a long time ago, in a galaxy far, far way), knowing and talking with current CIOs, and reading various articles on the subject. 

The trajectory of the CIO and the IT function in the insurance enterprises is consistently upward.  More CIOs now report directly to the CEO (or COO) than did in my day.  As has been noted consistently in the press, IT is now viewed more as an enabler and facilitator than a necessary evil to be tolerated due to there being a lack of alternatives. 

This is partly due to better delivery performance by IT, which in turn is partly due to the improvement of vendor software and delivery—a subject we have discussed at length in the past and will no doubt revisit in the future.  CIOs are now viewed by the CEO as a strategic partner.  This is partly due to the following: 

  • The CEO now realizes that she/he cannot get very far with new initiatives without data
  • CIOs have woken to the realization that in order to be effective they need to speak and think in the business language of their clients
  • An increasing number of CIOs have spent time leading business units and were business operations executives before they were CIOs. 

However, it is important to appreciate that the CIO lives in a schizophrenic world. The business side of the CIO’s role is an opportunity to deliver value, move the organization forward, become appreciated, and succeed.  The technical side of the CIO’s world is mostly an opportunity for failure.  Business people do not understand, and do not wish to try to understand, the risks and complexities involved in technology.  None of these people appreciate the fact that the systems were available, that performance was fine, or that their website didn’t get hacked.  In this realm no news is no news, not good news.  These results are both vital and assumed. 

My last CIO job ended largely due to tension between my boss’s wish to get the company on the Internet and my almost total focus (in 1998) on helping the company survive Y2K.  There is no upside in keeping the trains running, but there is hell to pay if they run late or stop. Y2K, while being a great example of the non-upside of technology, is becoming a distant memory. 

So what about systems getting hacked?  Anyone know what happened to Sony’s CIO?   I guarantee she/he is crippled for life professionally, if not outright dead.  The language of CIO postings has changed over the years.  It’s nowadays common to see words like “visionary”, “strategist” and “facilitator.”  What the posting never says is “ability to keep one eye on the train time tables.”  

In reality of course, except for the smaller IT shops, the CIO has a direct report who looks after the trains and keeps them running.  Another major factor in the evolving role of the CIO is that of leader and manager.  Never before has the CIO needed to be a capable leader and manager.  The simple fact is that the technology world is now so complex that no one person can be expert in all its core competencies. 

We marvel at the capacity of brilliant men like Leonardo Da Vinci to have conquered such intellectually diverse fields as art, engineering, architecture, mathematics, cartography, botany, and anatomy, but the reality is that notwithstanding his genius, Leonardo lived in a time when there was so much less to know about anything, allowing him to dominate in multiple fields. 

So with today’s CIO. The core role of the CIO now is to identify opportunities and challenges, set the course, hire the best experts in the field, and get out of the way.  One example close to my own heart is that of core system vendor selection.  Rather than selecting the vendor and their software, many CIOs now focus on selecting the consulting advisor who will lead the carrier in selecting the software vendor.  This form of specialization is a market response to the rise in complexity references above. The CIO’s job is to stay in control of the complexity, maximize the benefits that it brings, and minimize its risks.

There are, of course, exceptions to these trends. There are still CEOs who are frightened and confused by technology and who do not understand or trust their CIO. Also, the “cost center” view of IT still prevails in too many insurance companies.  There seem to be two ways that this type of IT shop can go: They get better at delivery or they get outsourced.  In a real sense having the IT department outsourced is the ultimate failure for a CIO; they didn’t just get fired, they got their whole department fired.  Ultimately, and appropriately, the future of the CIO (and his/her department) is dependent on the delivery of measurable business value while minimizing technical risks.  

As the proverb says: “Nothing succeeds like success.” 

 


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