The old adage of "What, me worry?" isn't part of the lexicon of CIOs, CTOs and other senior level executives in charge of IT functions at life/health and property/casualty firms, according to a survey completed by Celent Communications Inc. in partnership with Insurance Networking News.Twenty executives from small, medium and large carriers paint a picture of insurance IT organizations in a double bind of diminished resources and increased demand this year and anticipated again in 2004.

Having to deal with constrained resources-such as shrinking budgets, cost containment pressures, and the pressure to deliver more IT projects-is the most often-cited management concern. Business/IT alignment, infrastructure, efficiency/productivity, and security rank second through fifth, respectively.

What's also clear from the survey is that senior IT executives have singled out five major strategic initiatives and made them the top priority for the 2003-2004 timeframe.

Security, regulatory compliance, business intelligence and data warehousing, agent/advisor portals and commission and distribution management rank highest for life/health insurers. For property/casualty insurers, the top priorities are security, rating, Web services and direct online sales/wireless.

Top priorities

"Enterprise security is the top issue for both life/health and property/casualty firms because of increasing privacy regulations and system-damaging viruses and worms," says report author Matthew Josefowicz, manager, insurance group, Celent Communications Inc., New York.

Life/health carriers are placing significantly more weight on regulatory compliance initiatives such as HIPAA, Sarbanes-Oxley and the USA Patriot Act than are property/casualty firms.

Furthermore, business intelligence and data warehousing initiatives are important because both life/health and property/casualty carriers want to give knowledge workers and business analysts the right decision-making data at the right time.

Echoing the emphasis on multichannel distribution, more than 60% of life/health carriers and more than 40% of P&C insurers have an agent/advisor portal. Such portals and Web services round out the top five IT initiatives in progress or a 2004 priority.

"Commissions and distribution management are high-priority areas especially for life/health insurers," explains Josefowicz. "They are turning to enterprise incentive management vendors (because) legacy systems used by many carriers to manage their commission structures are too inflexible to keep up with rapidly changing market demands."

The surveyed IT executives also reveal a shift toward less expensive infrastructures. When the senior executives were asked to project what IT platform/operating systems they would be using three years from now, a whopping 63% anticipated using more Windows than now, compared with only 21% each projecting more use of Unix or Linux.

"This shows the maturation of Windows as an enterprise-class platform," points out Josefowicz.

Some 21% of respondents say DB2 accounts for more than half of their database infrastructure, compared with 11% for MS-SQL and only 5% for Oracle. Within three years, 47% expect to be using more MS-SQL; 21% expect to be using more Oracle; while 37% expected to be using less DB2.

"This demonstrates how much Microsoft is moving upstream from its historical desktop roots and being embraced at the enterprise level," says Josefowicz.

CEOs and CFOs are increasingly focused on business/IT alignment and are heavily involved in either a program office or an IT steering committee.

Sixty-one percent of program offices include the CEO, and an additional 11% include a representative from the CEO's office. Exactly 50% include the CFO, and an additional 22% include a representative from the CFO's office.

"Program offices are now important enough to get the attention and time of C-level executives, and top executives now realize their business strategies and the coordination of IT must occur at the enterprise level," Josefowicz adds.

Dispelling a myth, business/IT alignment was overwhelmingly cited as the primary objective of program offices (78%), ranking much higher than cost containment (33%) or creating a common architecture (17%).

Seventy-two percent of respondents say legacy systems have negative effects on their ability to conduct business while only 28% claim no negative effects. Yet, only 6% plan to replace them within two years, while 29% plan to replace within four years. The remaining 65% expect to take between four and 10 years to replace systems.

Highest ROI

Also, policy administration, imaging and data mastery were cited by 33% of the participants as one of the top three initiatives that returned the highest ROI during the last 24 months.

Another interesting finding is that the issue of J2EE versus .NET is also changing. Although 21% of the executives are standardized on J2EE and another 21% generally prefer it, there are 26% who prefer .NET. "It's only a matter of time before .NET starts to catch up to J2EE," Josefowicz says.

Brian S. Moskal is a business and financial writer based in Chicago.

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