IT Leaders Must Quit Looking at the Past
Robert Regis Hyle | April 08, 2014
Rick Madock is head of strategy and innovation at American Family Insurance. He recently spent some time with ITA Editor in Chief Robert Regis Hyle answering questions on the strategic challenges insurance carriers face today.
Prior to joining American Family, he co-founded InsuranceNoodle.com and served as its CEO. He has worked with CNA with P&L responsibility for the $3 billion commercial insurance business segment.
As a consultant, he has advised several of the largest life, property and casualty, health insurers, and insurance brokers on business and operational strategy, new business start-ups and M&A initiatives.
What is the biggest challenge in aligning strategic objectives between the business side and IT?
Madock: IT priorities are enormous and are constantly torn between legacy and the future. [IT leaders] are put into the position of rationalizing the legacy issues of the past with the demands of the future. It’s not a willingness issue, but more a capacity issue. Most companies spend 80 to 90 percent of their time managing what has already happened and have little time for looking at what could be happening. I look at technology as an immense enabler and I have great empathy for the IT department’s priorities, but without collaboration and cooperation you can’t do much in business anymore.
Where do you find the most strategic thinkers in the insurance industry, on the business side or in IT?
Madock: IT organizations are not designed to be strategic. Their hiring practices and the skill sets they look for don’t necessarily surface in individuals that are trained to understand the strategic components of business opportunities. It’s not so much that they are unwilling or unable, they just aren’t trained in that skill and don’t have the right profile. I would not look to an IT organization to drive my strategy. I would look at them to help me understand strategically what technology is doing, where it is moving, the pace of change, and how it would apply to our ideas, but I wouldn’t look to them to define the direction of the company. I would look to the business side for where they want to go and the IT organization to help me understand whether it is possible, what the constraints might be, and how to employ the best and brightest thinking in the IT arena.
What do you look for in trying to identify new technologies that can help transform the insurance business?
Madock: I look for flexibility so technology can be deployed over multiple environments and not be constrained. Scalability also is important so it can handle the massive amounts of information and data and provide it transparently and in real time. I do look to some degree at cost benefits. I’m not looking at a rate of return, but can the new technology support a return for the investment we are making and not burden us with some economic anchors. The last thing I look for is whether new technology is something we believe we can utilize for an extended period of time. Maybe not the actual application or systems, but either the vendor or the partners involved have the wherewithal to participate with us over an extended period; decades if possible. New technology has to have some significant substance behind it before we bet the ranch. We have to be sure we don’t have a bunch of technology that can’t be supported in the future.
A lot of strategic thinking is aimed at attracting new customers, what do you look for as a way to retain current customers?
Madock: I look at retention as the Holy Grail for any business. You take care of your backyard and everything else will take care of itself. We are constantly looking for ways to improve current relationships, whether that is through product innovation, communication or new tools and services. One of the things I’m constantly looking at is ways to take our customer base and provide them a reason to stay. We have a tendency in the insurance industry to provide our customers with a reason to leave. We either give them poor customer service, we don’t change features and adapt to the marketplace, we are stringent in our requirements, or we don’t recognize changes in culture and behavior of people. I look at the customer base and see how they have changed since they became a customer—not how we have changed—and what are we doing to meet their needs going forward. We have to figure ways the market is going within our customer base and align our products and services to them. If that works you can see growth will come much more easily.
Do strategic initiatives examine the business processes within the enterprise or are business users brought in after the initiatives are prepared?
Madock: I come from a customer-centric perspective. I believe in the importance of employees and being socially responsible to their careers, but we don’t always get to make that choice. Customers are going to vote with their feet. If your business is not providing them ease of doing business, transparency, and a customer centric approach, they are going to find that somewhere else. There are too many opportunities in the market. I think business processes need to be aligned with customer expectations or you have a much bigger problem on your hands than laying off a few people. The only way to sustain employment is to be a part of the best possible company in the marketplace and serve customers beyond their expectations. If you can do those two things you are probably going to be successful and make opportunities for employees they’ve never had before. If you don’t constantly reinvent yourself and adapt to the environment you are going to watch yourself shrivel away.
How different do you see the insurance industry operating over the course of the next five years?
Madock: My feeling is consumers are going to drive product as opposed to companies developing products. I realize that sounds convoluted, but historically companies presented an image of themselves and people would identify with those images. Companies manipulated behavior. The consumer today is too intelligent. The industry is not going to be sustainable based on actuarial data [insurers] came up with 10 years ago. It is going to be driven by consumers. They are going to find real time products and services. I envision insurance of the future to be in real time. You scan your smartphone over the VIN and your auto insurance is billed in real time. You might have some liability coverage you keep, but that’s it. You’ll be charged by the driver, not by the car. I tell people to look around at how they conduct business with other industries—financial services, travel, whatever it might be—but the insurance industry still manages itself with policies, restrictions, and annual billing cycles. Insurance is 15 years behind where people are at. Companies are going to start hiring anthropologists, behavioral scientists, cultural anthropologists. They are going to understand the human dynamic is changing at such a rapid rate that the luxury of policies and legacy systems that last 10 or 15 years is ridiculous and just not going to happen.
(Madock will be one of the guest speakers at the Planning to Go Direct event to be held in New York City at the Grand Hyatt Hotel at Grand Central Station on Thursday, April 24, from 3:30 to 7:30 p.m. The event is sponsored by Bolt Solutions Inc. For more information go to http://www.eventbrite.com/e/planning-to-go-direct-tickets-10957591451)
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The Email Chat is a regular feature of the ITA Pro magazine and website. We send a series of questions to an insurance IT leader in search of thought-provoking responses on important issues facing the insurance industry.
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