Having just returned from the annual PCI Technology Conference, it seems an appropriate time to reflect on some of the macro trends discussed. As is usually the case, it was packed with interesting and actionable content. It’s also one of the few conferences where the networking and perspectives exchanges amongst participants is as valuable as the sessions themselves. This year, among the usual pledges to do more with data and analytics, and to keep powering through those core systems transformations, there was one other theme that is worth noting.
In his annual update, Matt Josefowicz of Novarica provided some interesting data and perspectives on the forces propelling IT initiatives and their corresponding spend in the industry. However, the one that really caught my attention was a slide that Matt noted had not changed much, if at all, in at least the past ten years, and perhaps longer. And that was a graphic illustrating the amount of money insurance companies were spending on technology, as a percentage of direct written premium. That percentage was, is, and if you were an actuarial reviewing the trend line, will be, 3.5%.
Wait a minute. Based on the many discussions over the strategic importance of IT and technology to insurers, at this conference and over the past several years, it does not seem plausible that the investment amount has not increased. In fact, PCI featured a couple of excellent sessions wherein CIOs and their bosses – in this case a CEO and a COO – extolled the strategic import of technology in everything they were doing, and were planning on doing. They were preaching to the choir of course, but it doesn’t seem to align well with 3.5% investment statistic. Why should this be the case?
There may be many external factors, including macro market conditions, investment returns for insurers, underwriting profitability, etc. But I can’t help but believe that there may be another factor at play, as incongruous as it may sound, and that is that IT leaders, when it comes right down to it, still struggle at some level to effectively communicate the strategic value of IT that would justify additional strategic investments in technology and IT. It’s difficult to believe that would still be the case, but it’s also difficult to believe that the investment amount has not changed across this long time frame. If one didn’t know better, or hear the conversations in the PCI technology conference, one might simply look at that 3.5% investment over time as just another budget line item, like for real estate or office supplies. But that’s not the case, and it’s certainly not how some of those who make these investment decisions view the importance of technology, based on the many conference conversations over the past few years.
It seems for the 3.5% number to increase, IT leaders are going to have to become much better at communicating what they’re bringing to the table, and what that can do for the organization over the short and long term. That can be done, but it requires a different communications approach for many IT leaders when they meet with their executive steering committees and their boards. We have written recently on the importance of finding a common communications language that will resonate with an organization’s top decision makers. If the needle is ever going to move on the 3.5% investment number, this is the place to start.
I’ll be presenting my work in this are in a free webinar on Thursday, September 24, at 2:00pm EDT. Pre-register here .