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Few and Far Between: Top insurance executives with technology expertise are hard to come by in an industry struggling to break free of its legacy systems.

As more large insurance companies begin riding the wave of new technology, many of their midsize and small counterparts are still looking for guidance. They would like to reel in senior-level executives who have a solid background in insurance and are technologically savvy, but that winning combination is hard to find, industry experts say.

The dearth of this multifaceted talent exists because insurance companies, which were at the forefront of automation in the 1960s and 1970s, found it extremely difficult to break free of their antiquated legacy systems by the 1990s, when new vended solutions appeared on the market and Internet usage began to take off, said Fran Lattanzio, a partner of Heidrick & Struggles' Financial Services Practice, NewYork.

"The view is that the insurance industry is backward, but I think the industry is saddled," Lattanzio said. "They got caught up in legacy systems that required huge amounts of maintenance. They would love to get out from under these systems, but it's not easy." This helps explain why this industry has not been a breeding ground for top executives with technology expertise, Lattanzio said.

Erin M. Hamrick, a partner at Heidrick & Struggles' Insurance Technology Practice, New York, agreed with her colleague. "It's very, very rare to see an insurance organization that is composed of individuals who have a diverse background or skill set other than sitting there and taking care of their legacy system," she said. Insurers would benefit by the example set in investment banking and other broad-based financial-services firms, which typically rotate employees in and out of technology and business functions to create a cross-pollinated work force that has industry-specific knowledge and technology expertise in every department she said.

Looking for Leaders

All this means that when it comes down to hiring someone to formulate and carry out an insurer's e-business strategy, the choice can be limited.

"One of our clients has asked us to look outside the insurance industry" for a senior-level technology position, said Gail Audibert, a partner in Audibert Jones Associates, a Farmington, Conn.-based executive-recruiting firm, and past president of Insurance National Search Inc. "They would prefer insurance experience, but they are willing to look beyond that kind of skill-based set of experiences. They're looking for competencies vs. job history". She said she is focusing this particular search on the financial-services and manufacturing industries.

The need to find this kind of executive cropped up in a recent survey conducted by PricewaterhouseCoopers and the Economist Intelligence Unit. In the May 2001 survey--conducted months before the devastating terrorist attacks of Sept. 11--more than 150 leading insurers around the world said they expected to increase their e-business technology spending by 89% over the next three years. Yet the survey also highlighted a significant deficit: Two-thirds of those responding said their companies lacked sufficient e-business leadership capabilities.

"Companies had a concern about their ability to formulate and execute e-business strategies," said Charles Brinkley, strategy partner at PricewaterhouseCoopers. "The concern was stronger among the small and midsize carriers. It was not as strong, at least from a strategy-formulation standpoint, on the part of larger carriers."

That's because "the average insurance company out there actually can't afford them," said Mark R. Anderson, Healthcare IT Futurist, Anderson Consulting Group Inc., Spring, Texas. "People who can get e-business plans up and running are in high demand. The best ones end up going to work for major vendors or big companies like Aetna and Cigna."

Allstate and Anthem also fall into that category. Allstate, the nation's second-largest personal lines insurer, brought over Jeff Lewis from USAA in August 1999. Lewis is spearheading Allstate's new multiaccess plan, which combines use of the Internet and a toll-free number service with Allstate's agent force. The company is in the midst of creating a new business model, which includes moving from a mainframe environment to a Web-based personal-computer network.

Health insurer Anthem Inc. announced in February that it had named Mark L. Boxer as its senior vice president for e-business. His responsibilities include refining the strategic direction of e-business for the company and managing the convergence of business strategy, marketing and operations with electronic and network technologies. Boxer came to Anthem from Cigna HealthCare, Bloomfield, Conn., where he was senior vice president of e-commerce and information technology. Before that, he spent 10 years at Digital Equipment Corp. in a variety of senior management roles in information technology, management consulting and outsourcing services.

Bench Strength vs. Consultants

The survey also found that many traditional insurance providers--35% of respondents--plan to develop e-business leadership capabilities from within their own ranks, while 20% said they wanted to recruit new talent.

The major companies, which boast a lot of bench strength and value their brands, want an executive who understands their operations and the power of those brands, Brinkley said. They are apt to seek an industry insider to lead their e-business efforts. "They go out looking for someone with a very deep, operational background in insurance to help them," Brinkley said. "Then this person assembles a team, and his team is drawn from a variety of disciplines."

Small insurers, on the other hand, have turned to outsiders, mainly consultants, for help, Brinkley said. Midsize carriers have blended the two approaches, he noted. At these levels, he said, "the notion that it's always an IT person that leads the e-business effort is typically not true. There is an IT person who leads the design of the technical architecture, that leads the implementation efforts of the interfacing of the Web site with the internal administrative systems, but more often than not, what you see leading the effort is someone who's got a business focus," Brinkley said.

The survey also found that "a surprising number" of companies were open to outsourcing to fill their e-business needs, he said. "Of those respondents relying on third parties, most are seeking Web-site development and maintenance," the report stated.

The drive to outsource was motivated by recognition on the companies' parts that they lacked this capability internally and by their concern that spending large amounts of money to build a new organization might turn out to be a bad bet, Brinkley said. "Over the past two and a half years, industry leadership has really been waiting to see if the Internet was going to become real--see who was going to move on this and what they should do about it," he said. The other part of the uncertainty, especially for midsize and small carriers, flows from the discomfort of not being able to afford to act, he added.

Even after a large carrier snags one of the rare insurance-technology experts, the battle isn't over, because the new hire is likely to face significant challenges in developing effective e-commerce programs, Brinkley said. While a smaller company tends to focus on a small number of customer-product segments, a larger company tends to be multiline, serve multiple segments and reach customers through a variety of distribution channels.

Enterprise Strategy

"Large companies need to find ways to develop a strategy that effectively leverages the brand of the company across all the business units," Brinkley said. A new executive trying to map an e-business plan may soon discover that what someone is doing for personal lines, someone else is doing for commercial lines, or for life, annuities, pensions or health care. This could result in a major company having two to three Web sites or being linked to two to three Web sites from a single site, he said.

"As you go to each site, they look different, they feel different and the way you interact with them is different," Brinkley said. "So, one of the challenges for the person in that job is to know how to effectively bridge the various business units. That's why in recruiting, you need to find someone who really has an understanding of more than just single product lines."

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RELATED ARTICLE: Agent Recruiting Efforts Pay Off for Insurers

Employment in the insurance industry has managed to keep a pace ahead of the general labor market for 2001, with job growth somewhat stronger in the property/casualty sector than in life/health. (See "Insurance Carrier Employment--L/H and P/C," page 48.)

At the end of October, year-to-year growth in insurance industry employment rose 0.9%, down slightly from the prior year's growth of 1.1%, the Bureau of Labor Statistics reported.

"Generally, what we've seen has been a countertrend to the weakness in the overall labor market," said W. John Williams, a member of the Global Financial Services team of A.M. Best Co.

October employment was unchanged among insurance carriers, but down 2,000 for agents, brokers and service companies, against a 415,000-job plunge for national nonfarm payrolls--the largest monthly decline in 20 years and the first full employment accounting since the terrorist attacks of Sept. 11.

The biggest growth sector in property/casualty this year has been in title insurance jobs, a direct result of the strong housing market, the drop in mortgage rates and refinancings. (See "Title Insurance Employment," page 48.) But the housing market began to falter after the Sept. 11 terror attacks, a development that could translate into slower growth in title insurance jobs in the months ahead, Williams said.

The tragedy also has spawned increased employment in the claims sector, with a greater demand for adjusters. With new capacity coming into the market, new underwriters also are needed. And indications are that life insurance sales will surge, which may translate into more jobs in that sector as well, Williams said.

In the mix of all these numbers, at least one company is reporting giant strides in bolstering its agent force. New England Financial, a Boston-based affiliate of MetLife, reports nearly a 33% gain in agents since it launched an aggressive recruiting campaign in 1997.

Bill Cuff, vice president of recruiting, training and management development for New England Financial, said the company had 2,360 producers at the end of 1996. "We finished with over 3,000 last year, and we expect by the end of this year we'll be at 3,200," Cuff said.

New England Financial is a general agency system and does not employ these producers directly. The agencies are operated by what the company calls managing partners, who receive resources from New England Financial to conduct the recruiting effort, Cuff said.

Before New England Financial merged with MetLife in September 1996, its net agency force, like much of the industry, had been declining. "We were like that for a 10-year period," Cuff said. But the new relationship with MetLife presented an opportunity for New England Financial to build strength in the special fields of advance sales, business owners and wealth accumulation. "We saw that affiliation with MetLife could really take us to the next level," Cuff said. "So we put a focus on recruiting."

For the past five years, the company has put more effort into recruiting and, as a result, has bucked an industry trend of agent turnovers. Cuff said the company's agent-retention rate grew from 17% in 1996 to more than 27% last year, while the industry average is about 13%. New England Financial now is in the third year of a 10-year growth plan, with the goal of more than doubling its sales force from 2,400 in 1998 to 5,000 by 2008.

"Everybody's looking for the magic bullet--what's the easy way to get recruits? There is no magic bullet," Cuff said. "You've got to have strong leadership and an organization that is focused."

New England Financial recorded a 10% increase in recruiting in 2000 over 1999, but the surge really occurred in the last six months of 2000. That was because the first half of that year featured a very strong economy and low unemployment rate. "It was frustrating--we were recruiting, but we weren't having the success that we'd had in prior years," Cuff said. "It's harder to hire people to a sales position that's commission-driven when unemployment is low."

He credits the multiple but traditional recruiting steps the company undertakes--including interviews, Internet job postings, an advertising campaign and agent referrals--for turning the 2000 numbers around. One particular tool, an online career quiz developed by Limra, draws up to 400 hits each month, Cuff said. Every year, he added, the Internet has become a more effective recruiting tool, with New England Financial reporting a 60% increase in Internet recruiting in the past year.

New England Financial's marketing strategy involves building an agency team with a cadre of specialists to work a targeted industry, an approach that was patterned after a successful program in the company's leading agency in Philadelphia, the Creative Financial Group, Cuff said. Each agency team has experts in different product lines and specialists in estate planning, retirement, wealth accumulation and investments.

"It's something that's much easier to recruit to," Cuff said, especially among experienced agents. About 40% of New England Financial's recruiting in 2001 has been with producers at other firms.

Cuff said the biggest challenge in recruiting agents these days is getting them up to speed on all product lines. When he entered the industry 26 years ago, he had to pass a life and health exam and learn about the life and health products.

Today, many of the company's producers are Series 7 securities licensed, life and health licensed, property and casualty licensed. They also have to know about variable annuities and an array of life products, such as ordinary term, universal and variable universal, Cuff said.

That formidable prospect is why the company swears by its marketing firm approach. "If you have the specialist there and you put a new producer in as part of a selling team, he doesn't have to have all that product knowledge," he said. For the first six months, the new producer learns the industry and the products, while acting as the contact person for a senior producer who analyzes clients' portfolios and makes recommendations. "As part of high-performance team selling, junior producers have the opportunity to help senior producers expand their business, as well as their own, right from the start," Cuff said.

Industrywide, the Independent Insurance Agents of America has been offering a helping hand to new agents for more than 25 years. Its Young Agents Program prepares agents age 40 years or younger and those with fewer than five years in the business to assume leadership in their agencies as well as in the association. The programs, which exist in 38 states, have more than 15,000 active members. Membership in the state association confers automatic membership in the national association.

One of the benefits of state membership is the opportunity to network with peers and insurance company officials at conferences, said Leslie Mularski, manager of the IIAA's National Young Agents Program.

"The company people are really hungry to meet the young agents, because they realize that they're the ones that are going to be taking their companies and the independent agency system into the future," she said. "The' young agents are very energetic, very technologically savvy. They've got all the right things that companies are looking for in giving people employment."

Since it's difficult for young agents to obtain a company appointment because of volume and other requirements, one of the larger companies has been instrumental in getting these agents appointments with personal lines, Mularski said.

She acknowledges that recruiting new producers these days can sometimes prove difficult. A career in insurance often doesn't appeal to graduates fresh out of high school and college, Mularski said. "But through the independent agents and the Young Agents Program and the kinds of things that the states and the national organization do, it puts a different spin on being an independent agent," she said.

In fact, her biggest challenge is getting agencies to report who their eligible agents are and then persuading the agencies that the Young Agents Program, with its sales training and other benefits, is the best way to turn these employees into better producers.

The main goal of the national Young Agents Program is to encourage states that lack this program to start one. "We've got a lot of independent agencies that are looking for people to take over the business eventually," Mularski said. "We are trying to get enough people active, get the networking going, so that these agencies can find those people."
COPYRIGHT 2001 A.M. Best Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2001, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Comment:Few and Far Between: Top insurance executives with technology expertise are hard to come by in an industry struggling to break free of its legacy systems.
Author:Bowers, Barbara
Publication:Best's Review
Geographic Code:1USA
Date:Dec 1, 2001
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