An electronic poll conducted during the ACORD LOMA Insurance Systems Forum held here last month revealed that insurers’ information technology executives are facing numerous problems at work, including the ignorance of non-IT officers regarding data standards and inadequate funding for regulatory-compliance projects.
The survey was conducted during a CIO panel session titled “Confidently Meeting An Uncertain Future” and was based on responses from more than 400 insurance IT executives using electronic audience-response devices.
Some of the survey responses displayed in real time at the packed conference hall elicited much head-shaking and laughter. The survey showed that nearly 80% of IT executives are undertaking more regulatory-compliance initiatives but that 62% are getting no extra funding for them. Regarding legacy systems, nearly 50% of IT executives said such systems continue to pose big or somewhat big problems.
The IT executives also indicated that their chief information officers and chief executive officers often don’t see eye-to-eye. Half of the respondents in the survey said they were only moderately confident about aligning their companies’ IT and business goals for growth.
The survey also showed that many insurers lack multi-year IT strategies. While the majority of respondents said their companies have a one- or two-year plan for prioritizing IT investments, half said they don’t have plans beyond that time frame.
The poll also revealed that ACORD still has a tough road ahead in developing and marketing insurance data standards. When asked whether non-IT executives at their company understand the role of ACORD standards, 55% of IT executives said “seldom,” while less than 30% said “sometimes.” And more than half said they don’t have a corporate industry standards compliance strategy in place.
Charles McCaig, CIO at the Chubb Group of Insurance Companies, commented during the panel discussion that problems revealed in the poll are all too common for insurance IT executives–challenges coming from being asked to do more with less.
“CEOs tend to view bottom-line results and take costs out, so there is an awful lot of pressure on corporate CIOs to run more efficient IT operations and take costs out,” McCaig said. He noted that Chubb’s IT spending would be flat until the end of 2006, but with employees’ salary raises and rising vendor licenses, that effectively translates into a shrinking budget, he added.
Regarding regulatory compliance, McCaig said the Sarbanes-Oxley corporate governance regulation and the ongoing scrutiny of the insurance sector continue to have a huge impact on insurers’ IT.
“We needed to refurbish systems to do a better job on transparency and produce data needed for compliance,” McCaig said. “I feel that we were asked to take on an enormous effort and make many changes with a deadline imposed. We didn’t get additional funding, so this caused us to push aside other strategic initiatives. It was an enormous effort, and it’s not over.”
McCaig acknowledged that in the course of its regulatory-compliance effort, Chubb’s IT has embraced some standards, simplified processes and consolidated some systems, which left Chubb in better shape. “It will give us more transparency. It’s just that it was a rough way to get there.”
Prudential Financial CIO Barbara Koster echoed McCaig’s sentiments. “Insurers’ IT budgets are still flat to down from what I hear. Prudential’s IT budget is flat, which means we have to take dollars from somewhere else to handle Sarbanes-Oxley, Gramm-Leach-Bliley and HIPAA privacy rules,” she said. “We have to find better, cheaper, faster ways to implement compliance activities, because we are not getting the money for it.”
Michael Ha is an assistant editor of NU’s Property & Casualty edition.
Conference participants say they’re asked to do more with less