A time for change: insurers are making strategic investments in information and technology and transforming IT into a business enabler.

Insurers often are hamstrung when it comes to investing wisely in information and technology. For many, their information technology capability is all too often a barrier to business success rather than a key enabler. However, insurers can transform their IT capability to deliver more strategic information and technology solutions to improve their competitive market position.

Industry analysts estimated a total spend of $21.23 billion in 2004 on IT services in the insurance industry worldwide. More important than the amount of IT spend, however, is how effectively it is spent. Many organizations spend significant portions of their IT budget on nondiscretionary items and activities, as well as on redundant, fragmented, nonstrategic and overly complex applications. This reality in insurance IT serves to paralyze some companies, making it difficult for IT to operate as a strategic business enabler.

Leading companies, however, are making strategic investments in information and technology and are throwing off the legacy system shackles. Consider the case of one of the oldest and largest investment and insurance companies in the United States. Despite its enviable market position, the company faced mounting competition, especially in its consumer products business. The company needed to reduce operating costs and also boost revenues by enhancing existing offerings and adding new products to maintain a competitive edge. The company determined that those goals could be achieved by reassessing and upgrading existing technology. With the acquisition of two insurance providers, it became tougher to execute a smooth and cost-effective integration.

The transformation challenge was approached from multiple perspectives. To improve the insurer's product manufacturing capabilities, systems were re-engineered to allow the business to quickly respond to new trends by speeding new products and services to market with limited reliance on IT--a unique capability in the industry. Today, the insurer has grown its market presence as it has become a more agile competitor. Its revamped speedto-market solutions give business managers the ability to identify competitors' weaknesses and quickly respond through new products. The new capability also freed IT managers to focus on more effective and efficient delivery and future improvements. By successfully integrating the two acquired businesses, the insurance provider generated additional revenues as it streamlined operations.

A more efficient, Web-based self-service system was created for human resources, and the process of implementing software to automate claims handling also was initiated. This not only helped reduce operating costs, but it also achieved a primary goal: improved response to customer needs. A smooth integration of the company's two acquired businesses was implemented through a Web-based integration management program as well as through tools and templates for business managers.

The insurer effectively followed its strategy by starting with an analysis of its IT organization to identify capability gaps. This included IT governance and strategy, solutions development, resource management, service delivery and maintenance, and architecture and infrastructure.

Insurers looking to transform their IT capability must have the courage and willingness to address the structure and operating model of IT itself.

Following an acquisition, a large European multiline insurer was offering its 8 million individual, corporate and institutional customers a wide range of products and services. But with the acquisition came the recognition that it needed to transform its IT operating model, which was fragmented and limited in its ability to generate value for the company. After a thorough assessment, the company is building a single-group IT structure for all its businesses that will support its strategy, increase the efficiency of its information systems and generate an estimated 450 million euro (approximately $549.8 million) in cost savings from 2002 to 2007.

To reap the greatest benefit for their IT spend and investments and address the demands of today's marketplace, insurers can strategically use information and technology to improve market position. To achieve this, often it's necessary to transform the IT capability to be more effective and efficient--providing insurers with a simpler and more standard IT capability to control costs and improve productivity; re-engineered technology and solutions for more rapid time-to-market insurance products and services; and a better, proactively managed portfolio of IT investments balancing current and future agendas.

Glenn A. Sieber, right, is the global managing partner for Accenture's insurance practice. Richard A. Chang is the global lead partner for IT strategy and effectiveness in Accenture's financial services group. They can be reached at [e-mail]