Last week Novarica hosted the latest in our Special Interest Group series of CIO-oriented meetings, which in this case focused on large P&C carriers. This is a line of business facing both heightened competition and significant technology change, which is forcing thoughtful prioritization for project investment portfolios. As carriers grapple with current technical debt issues and the need to remediate aging core platforms they are concurrently needing to keep a sharp eye on a range of emerging capabilities including analytics, mobility and the potential for game changers, such as drones, to emerge as mainstream solutions.
In framing the current state of the technical space, we began our discussion by looking at spending patterns for the industry, which continue to trend in a narrow range as a percentage of DWP. Looked at another way, IT spending continues to grow by 3-4% per year overall. Given the range of new activities being required of IT, this reflects a “do more without much more money” paradigm. From our analysis this is leading carriers to move away from CapEx and toward OpEx where possible. It is also encouraging carriers to rethink what is really “core” and should be kept in IT as contrasted to what may be classified as a “chore”, which may ultimately be a utility function that can best be performed by an outside provider.
A lively discussion ensued regarding the correct way to look at IT spending by insurance companies. Although it has been an industry practice for many years, the participating CIO’s disagreed with measuring IT budget as a percentage of GWP. They felt that their budget will vary based upon major transformations and measuring budget as a percentage of GWP is misleading, at best. We explored how other industries (e.g., banking) approach this issue and why looking at something other than a unit measure focused on a top line revenue number might be more appropriate.
Data and analytics was clearly a hot topic for the carriers at this SIG. Data governance is a top of mind issue, with carriers approaching the (data) ownership issues in different ways. At the end of the day, regardless of process, IT organizations can’t do this alone but must provide enablement and support to other business units.
Another key issue carriers face is finding the right skill sets to perform the data analytics function of the future. In addition to seeking skills from some non-traditional sources (e.g., advanced degrees directly from university programs, with some carriers setting up company operation close to research universities to attract better talent), companies are working to set up internal programs to provide both an appropriate level of support and mechanisms for internal cross-pollination of human capital.
Talent in other areas is also very much a high priority issue. A key area that attracted significant attention during the discussions related to the quest for Business Analysts. One carrier mentioned a successful effort they have for hiring computer science undergrads directly into internally managed training programs which allows them to grow / groom talent for the future. Working closely with universities on curriculum can be critically important as significant differences were noted in the quality / applicability of undergrad experiences. CIO’s reported that a direct and hands on approach to understanding feeder programs can allow them to get best value. They also reported that the best sources may not necessarily be obvious; a close inspection of the talent (e.g., through the use of aptitude tests) can be very important in this regard.
Another carrier noted an interest in working with a broader community of other carriers and vendors to help build appropriate pools of skilled resources, including BA’s. Irrespective of approach to acquiring talent, the need for some of these specific skills was a recurring theme throughout the discussions.
Retirement of old platforms and realization of significant savings when “completed” was noted as a vital objective for some carriers. Maintaining the vigilance to take major transformational events all the way to “done”, which means avoiding a loss of momentum and focus, is deemed central to success and avoiding a situation where new systems deployed without retiring the predecessor platforms can actually make environments more complex, expensive and difficult to manage. Maintaining a shared IT and other business unit focus, collectively, on the financial prize can be key to ultimate success in these endeavors.
Near the end of the session, the discussion turned to BPM capabilities and experiences with them as either alternative to, or complements for, workflow capabilities embedded into core systems from leading vendors. Some success stories emerged for a variety of use cases, including for the acceleration of retirement of MS Office (or SharePoint / Lotus Notes) applications that have morphed from desktop capabilities into mission critical solutions which have actually made current environments more brittle and risky. This approach to “peeling an onion” can actually garner support from line of business organizations while building trust and confidence for broader transformational events.
As always, the format for these Special Interest Group sessions provided for a frank, open, thoughtful and (of course) private sharing of experiences and perspectives. Novarica’s belief is that 2015 will prove to be the year that the future arrived; for the carriers in Boston this week it was an opportunity to explore what it truly means to be at the tip of that spear!
Our next SIG event is going to be focused on Workers Comp carriers on September 9. Life carriers will be the focus for a SIG session on October 14.
Things are moving surprisingly fast in many quarters of the insurance industry and we are looking forward to these sessions. If you’d like to be included in a future event, please let me know directly at firstname.lastname@example.org.