Despite insurers' best intentions to align business strategy with IT strategy, recent studies show that more than 80% of insurance companies can improve on that alignment.That's according to Deborah Smallwood, insurance practice leader at TowerGroup Inc., a Needham, Mass.-based research and advisory firm. At press time, Smallwood was completing a study of six property/casualty carriers, and, although she couldn't release her findings, she said she gets frustrated because the alignment still isn't there-and there's so much need for improvement.

Of course, some insurers are better than others at closing the gap between IT and business goals, Smallwood admits. But often organizational structure is an impediment to alignment.

For example, IT organizations usually do not have direct dotted-line reporting authority to business executives, she says. Instead, there are the business executives and operational managers, and there's usually a liaison group a couple levels down that works with the senior people in IT.

The question is, according to Smallwood: Are the executives and leaders really looking at ways they can leverage technology in their business strategy? "No," she says. "They usually come to IT and say, 'I need a new claims system,' or 'we have to address Sarbanes-Oxley,' or 'can you help us with a portal?'"

In other words, she says, business leaders approach IT with technical decisions, instead of with strategic business goals. But business executives should be working directly with IT on issues such as, "We want to grow our business; we want to improve our retention-how can technology support that?" she says.

When insurers do try to resolve the problems associated with poor alignment, they often reorganize the IT department, says Smallwood. "It's like reshuffling the same deck. And, fundamentally do they have the executive business sponsorship? IT continues to reorganize, but the business isn't reorganizing," she notes.

The structure of the IT organization should mirror the business structure, writes Smallwood in a report titled, "Insurance IT and Business Alignment: Checklist for Bridging the Gap." Make sure direct and indirect linkage points exist between business and IT leaders, she says, and run IT as a profit-and-loss center or as a separate business unit.

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