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Tucson, Ariz. — Every stage of the carrier product and policyholder lifecycle involves creating, communicating and analyzing information, making insurance an information business. As our market demands grow and the technology behind information processing becomes more sophisticated, however, business executives are becoming well versed in the role IT plays in creating value.

Yet many see the growth in recognition of technology’s core position in an insurance organization as a mixed blessing for IT executives. No longer just expected to build and maintain information systems, they’re now counted upon to measure and communicate their value in more than just the typical performance metrics. Further, they are supposed to define technology’s value in measurable business terms.

In a special session held at a conference sponsored by Cedar Rapids, Iowa-based Fiserv Insurance Solutions last week in Tucson, Ariz., Matthew Josefowicz, director for the insurance practice at New York-based Novarica, tackled this topic. Josefowicz cited results from a report created earlier in 2008 and the research firm’s interviews with 59 P&C CEOs.

“We are moving toward a common language for business and IT,” he said, “but our key findings reveal that the challenge remains for CIOs to make a better business case for the technology that will power an insurer forward, and help educate the CEO as to what the technology can really do.”

CEOs recognize the impact of technology on the policyholder, especially in regard to service and distribution, according to the Novarica report, but tend to generally undervalue the potential of technology and product development, and in marketing—both of which could potentially be transformed by improved data analysis.

“We think this is the next big thing,” Josefowicz told Insurance Networking News, “because data analysis and its proper use to funnel intelligence forward will help make that case.”

CEOs also underestimate the technology savvy of their customers, with potentially dangerous competitive implications, added Josefowicz. “In our study, we found that CEOs believe agent portals are the most important investment made recently.”

That CEOs might have misconceptions about where technology might best be applied within their organization is only part of the problem. More and more, notes the Novarica report, the CIO is expected to fully understand and speak the language of business.

Another false impression held by CEOs: the most technology-savvy people work for insurance companies. “This awareness needs to change,” notes Josefowicz. “We need to ask them “Do you really believe this?”

Novarica also believes that getting the CIO to understand the CEO’s world is easier said than done. The report points out that insurer CIOs who use cost metrics as their primary data in communicating with their business peers risk cementing a position for themselves as a cost center rather than as a strategic partner. “There’s only one thing to do with costs: cut them,” says Josefowicz.

Further, if a CIO uses performance metrics, they can easily open themselves to criticism by their business peers. “Performance metrics are, to the business side, a measure of failure,” notes Josefowicz. “You can never exceed these metrics.”

For example, if the IT metrics report an initiative that’s 80% on time and on budget, the business side will ask about the other 20%.

“Engineering usually goes nuts at this point,” Josefowicz says, “In IT circles, these metrics look great, but that is if you are running an IT business. If you are running an insurance company, you need better metrics.”

Novarica advises CIOs hoping to deliver IT value metrics to put the “B” back in CBA, and the “R” in ROI, notes Josefowicz.

“There is still an obvious disconnect,” notes Josefowicz, “But with open lines of communication, CIOs who are willing to embrace business value metrics, and a common understanding of the role technology plays in company growth, insurers can stay focused on their priorities.”

Sources: Novarica, INN archives

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