Living up to the hype: insurance CEOs see significant competitive advantages--and a new role for CIOs--as technology aligns with business.

Technology has come a long way from its primary role of storing data. It's burgeoned into nearly every corner of insurance companies--all while building a critical bridge with customers and agents. Now chief executive officers have one more thing to be excited about as technology extends its reach even farther by aligning with the business side of many organizations' operations.

Robert Senkler, CEO of Securian Financial Group, based in St. Paul, Minn., knows the changes in technology first-hand. He's seen numerous technological advances over his 32 years in the industry. While technology has always been a critical function to Securian, he said it's now becoming much more integrated at both the business and customer levels. "Thirty years ago, customers really didn't touch our technology, but today in some of our business units, more than 90% of service transactions are customer-initiated," he said.

Much of that customer inter action has been revolutionized with the Internet. Senkler said companies that do the best job of using and energizing personal computing devices via the Internet excel. "Companies literally get in and out of business based on their ability to manage customer interface via the Web."

The Web revitalizes companies' connections both internally and externally. Many CEOs are recognizing significant return on investment from their company Web sites. "One of the things we acknowledged early on when the Web was becoming a powerful tool was that it gives all companies very cost-effective access to [it]. That almost worked in the favor of companies of all sizes; they had to be big enough but didn't have to be too huge to effectively use the tool," said Senkler.

Technology--along with the Web--has opened the door to enhancing the customer experience. For Assurant Health, technology's role is an essential part of its value proposition to both customers and agents, said President and CEO Don Hamm. "And every year that role gets even bigger" he said. Historically, technology was used primarily for processing parts of the Milwaukee-based company's business, such as paying claims and collecting premiums, but now technology is progressing into an even larger part of the company's business. For instance, he said, many of Assurant Health's technology dollars recently were spent to improve the issue and application process.

A Vital Role

Reinsurance is also reaping technology's rewards. Because the group reinsurance business is unique, said Mike Emerson, CEO of ING Reinsurance, it faces the challenge of limited or no off-the-shell solutions for technology needs. That became evident when the Minneapolis-based company wanted to improve its then 15-year-old core administrative system. The answer, Emerson said, was to take matters into its own hands. The company built a new system with the help of internal staff and several offshore and onshore developers. The new system allows employees to access information on a real-time basis, is highly controlled and provides high data integrity. "We're able to do a better job administering our business, which in turn frees up our people to work on ways to make it easier for our customers to do business with us," he said.

Emerson also said technology is an important tool for risk management. "Technology allows us to offer services to our clients that help them better identify and manage their risks" he said.

Technology is a backbone to property/casualty insurer Harleysville Insurance's success, particularly when it comes to acquiring new business and assisting with expense management through improved productivity, said CEO Michael Browne. The Pennsylvania-based company recently put that to the test with the successful launch of a user-friendly, information-rich portal that gives agents increased flexibility in daily tasks such as submitting new business, retrieving information about their books of business, reserving new accounts and obtaining real-time quotes.

Harleysville also deploys imaging technology to remove a lot of paper from the system and increase efficiency for agents. "It's all a big part of our business strategy and is increasingly becoming a bigger part of doing business," said Browne. "This is a very competitive business. Being efficient and making it easy to do business with carriers is important. Technology helps us accomplish that."

When it comes to health care, Assurant Health's Hamm said technology plays a significant role in aligning insurers and health-care providers. "At the time people receive a service, technology helps facilitate the transfer of their identity and payment. This is an emerging area, particularly as Congress looks at transparency and we see more initiatives like personal health records," Hamm said. That will add even more value for customers, he said.

Technology is a big part of Assurant Health's operations. In spring 2006, the company launched its largest technology initiative with Advantage Agent. Two central parts of the system include Ease for agents to issue business and manage new business online, and Express Underwriting, which cuts the paper application from 83 questions to 17 questions online. Nearly 60% of Assurant Health's business is now issued without an individual ever having to speak with an underwriter. "This is a breakthrough and a good example of using technology to support the business," Hamm said.

CEOs across all lines said technology is invaluable in helping expand companies' distribution systems. Securian's information technology team is spending much time and effort in technology to help its broker-dealers and independent field representatives add more value to their daily practices, said Senkler.

But it takes more than just good technology to provide a winning solution, said Hamm. The people behind the technology are key. "I have complete confidence in our IT people. It begins with the quality of those people. If you have the right people doing the right things the right way you get the right results," he said.

Much of the CEOs' excitement stems from technology's role in serving the customer. Securian plans to continue moving service on an interactive basis farther down the chain and outside the building into intermediaries' and customers' hands, said Senkler. "Whoever energizes and uses the tens of millions of personal computing devices that people are familiar with will increase customer satisfaction if you interact with them on a very effective basis. That's a race we're in to win," Senkler said. He said he's happy with the early returns, but it remains a battle as the company pushes consumer- and intermediary-friendly services, along with better service at a lower cost.

Business Partners

CEOs said they're excited about technology moving into a new realm: A growing number of companies are now seating IT at the business table.

"That's a given in today's competitive environment," said Assurant Health's Hamm. "IT has to be fully integrated with the organization." It's important that companies remember IT doesn't drive the business, but rather the business should be driving IT, said ING Reinsurance's Emerson. "I believe we all need to meet in the middle for there to be a successful partnership. The business side needs to better understand how IT works, and IT needs to be more fluent in business" he said.

When ING Reinsurance was developing Raptor, its core administrative system, business people played a key part in its success. The company pulled many of its best people out of the business units and dedicated them to the project. "They knew our business needs, how the system should operate and could communicate that to the IT team during the build and design phase," Emerson said. "We ensured there was senior level accountability to get the project completed and instituted a Raptor Board that met with developers to make sure things were progressing, priorities were appropriately altered and the tough decisions were made about allocation of resources."

Securian constantly strives to centralize technology so each business unit doesn't choose its own technology or manage what Senkler calls the overhead of technology. "But online applications and online programmers are embedded in the business units. The IT infrastructure, career path and training are all centralized, but the business units get trained programmers who can develop the customized applications the business needs to compete. So although our IT infrastructure is centralized, the business units have the freedom to customize on top of that platform. This has been our approach for several decades" he said.

Companies also need to ensure they have an overall structure of technology that works for all business units, said Senkler. "You can't afford to have seven e-mail systems. An integrated technology approach continues to be a challenge. Balancing business-unit needs while putting them on a common platform results in the delivery of world-class service,' he said.

The Changing CIO 

As IT's role continues to evolve, so does that of those overseeing it.

CEOs said companies' alignment of IT and business is bringing some changes to the role of company chief information officers. "Technology's partnership with business is absolutely critical, and having the CIO recognize that is crucial," said Harleysville Insurance's Browne. He said the company's CIO not only has a deep understanding of property and casualty insurance, but he's also very business focused. "We make sure all IT initiatives are totally aligned with business priorities, so anytime we are considering an IT initiative we talk with our CIO and senior leadership team. We make sure everyone is on board and that we have the appropriate senior business leader as the ultimate sponsor of the project. The whole point of technology is not for technology's sake, but to drive your business model," he said.

"Our CIO is very connected with where the business is going," said Assurant Health's Hamm. "He views his role as serving the needs of the business and to deliver functionality [to meet] business needs to succeed. He's connected all the way from the beginning to the end, which is the only way to do business." He said it takes a tremendous amount of work, communication and alignment and having the right people with the right mindsets, and the CIO and his team work hard to make that happen.

CIOs are also responsible for building solid IT teams. Hamm said one of Assurant's CIO's recent accomplishments was his involvement in creating the role of a relationship manager for the company. The managers are senior level IT executives who team up with key parts of the organization. "They sit in staff meetings, maintain a current list of projects and make sure we're connected" he said.

CEOs also see CIOs as important decision makers. For instance, they're a key part of the decision-making process around whether companies can afford to skip a generation of technology or should become an early implementer of a system or technology, said Senkler. "It's an important decision. If you implement everything that comes along and you don't choose wisely, you go broke. Sometimes you can skip three or four generations of technology. Other times, it's critical to be an early entrant and industry leader because it provides a sustained competitive advantage." Making the choice between skipping generations of technology or being an early adopter often defines who the winners and losers are, he said.

Overcoming Obstacles

While CEOs agree that technology is providing greater efficiency and cost savings, along with a competitive advantage, the road to that success often comes with challenges.

Emerson said one of the biggest technology challenges ING Reinsurance faces involves management of data. The group reinsurance business has seen some significant changes since the events of Sept. 11, and the old data requirements for properly analyzing information and underwriting risk are no longer sufficient for the industry to conduct business, he said. "Now, a significant part of our IT investment is focused on data accumulation and tracking systems, and these tools need to be able to recognize when exposures are stacked on top of one another."

Companies also need to ensure both business and IT communities can effectively communicate with one another--or at least have a good translator between the two sectors, said Emerson. "Often, both areas can misinterpret what the other one is saying. We found that by pulling some business people out of their normal duties in order to work with the IT developers we minimized the chance of miscommunication"

CEOs are also challenged by appropriately sizing commitments to their company's budgets, said Emerson. "Often, we're making tough decisions and squeezing as much as we can out of our technology dollars," he said. "But building a strong core system that can be enhanced incrementally as needed is ultimately a better use of our resources than creating work-arounds for a system that no longer does what you need it to do"

Harleysville Insurance's Browne said one of the biggest challenges in technology for the company and the industry is successful execution of complex projects. "Many times companies begin a project but abandon it because it doesn't work. We don't want to be in that position." Implementation is everything, he said, and it's essential to have everyone on the same page with good communication.

Fitting things into limited resources is another daunting task. "There's only so much money and so much opportunity an organization has, and there's always tension between new emerging technologies and the effectiveness of proven ones," said Assurant Health's Hamm. "We try to be intelligent on how we deploy technology, making sure it's proven and that the business needs drive technology-not vice versa."

As technology continues to evolve, CEOs said their companies are up to the challenge.

However, it's important to keep up with those changes. "Sometimes companies like to boast that they have achieved a sustained advantage from technology," said Harleysville Insurance's Browne. "But I don't believe that. You always have to keep upgrading your technology."

Key Points

* CEOs say technology is critical to success in such areas as customer relationships, agent interactions and business administration.

* CEOs believe the role of chief information officers is changing to include a deeper appreciation for and understanding of the business.

* Companies need to ensure business and IT communities can communicate with one another effectively.

"Whoever energizes and uses the tens of millions of personal computing devices that people are familiar with will increase customer satisfaction ... That's a race we're in to win."

Robert Senkler, CEO, Securian Financial Group

Nearly 60% of Assurant Health's business is now issued without an individual ever having to speak with an underwriter. "This is a breakthrough and a good example of using technology to support the business."

Don Hamm, President & CEO, Assurant Health

"I believe we all need to meet in the middle for there to be a successful partnership. The business side needs to better understand how IT works, and IT needs to be more fluent in business."

Mike Emerson, CEO, ING Reinsurance

"This is very competitive business. Being efficient and making it easy to do business with careers is important. Technology helps us accomplish that."

Michael Browne, CEO, Harleysville Insurance

Learn More

Assurant

A.M. Best Company # 70135 Distribution: Agents

Harleysville Insurance A.M, Best Company # 03916 Distribution: Independent agents

ING Reinsurance A.M, Best Company # 06846 (ReliaStar Life Insurance Co.) Distribution: Direct, brokers

Securian Financial Group A.M. Best Company # 06724 (Minnesota Life Insurance Co.)

Distribution: Career agents, consultants, independent brokers

For ratings and other financial strength information about these companies, visit www.ambest.com.

IT Spending of the U.S. Financial Services Industry
By Sector, 2004-2008 ($ billions)

2004

Banking                         $47.6
Insurance                       $35.3
Securities & investments        $30.1

2005

Banking                         $50.2
Insurance                       $36.4
Securities & investments        $31.1

2008

Banking                         $59.0
Insurance                       $42.2
Securities & investments        $34.2

1. Projected

Source: Insurance Information Institute, TowerGroup