by Nathan Conz

There's an old military strategy known as “pivot and hammer.” The pivot is a defensive position that takes less energy to defend. The hammer, on the other hand, is an attacking position. There's more opportunity for gain here, but more energy needs to be expended to support it.

When it comes to technology, insurance companies traditionally have focused on the pivot. Thinking about IT has been of a more defensive sort, dedicated to minimizing cost and minimizing the impact of the IT budget on a company's bottom line. Today the more competitive insurance carriers have begun a more aggressive use of technology in support of competitive differentiation. A few have gone so far as to make IT a profitable enterprise unto itself, turning IT cost centers into IT profit centers by leveraging internal technological resources as external technology vendors.

Included in that list are two of I&T's 2007 Tech Savvy CEOs: Life of the South's Ned Hamil and Medical Mutual of Ohio's Kent Clapp.

Hamil, himself a former Cold War era infantry officer, uses the pivot and hammer terms to describe LOTS' two primary sources of revenue. Right now, LOTS derives its income 50-50 between the risk (such as payment protection) and fee (such as database marketing solutions) sides of its business.

The company will continue to grow those more traditional lines of business, Hamil says, which are very reliable in terms of revenue. Still those revenue streams are not “target rich.” Growth in the area is finite, he says.

The hammer is a different story. For LOTS, the term refers to fee-based business, mostly via LOTSolutions, a wholly owned Life of the South subsidiary that acts as a sort of technology vendor and services provider. Hamil says Life of the South's goal is to derive a great majority of its income from LOTSolutions. “The margins are greater, and you can leverage technology there. The IT leadership of our systems will be the hammer, or our offensive instrument, that we will use to drive our company's revenue for the future,” he says.

At Medical Mutual of Ohio, CEO Kent Clapp doesn't use the same military terminology to describe Antares Management Solutions, a company he helped found in 1997. Nevertheless, the idea behind Antares remains similar. “We had a substantial technology capacity and it opened up new revenue streams in that we do business for other companies,” Clapp says.

A decade after its founding, Antares now has 650 employees and generates approximately $282.5 million in revenue. Most of that revenue comes from business and technical outsourcing, third-party administration and network access services.

Clapp says spinning-off Medical Mutual of Ohio's data processing shop has improved IT service, internally as well as externally. “They've learned to treat us, and their other customers, like customers. Their whole overall service levels have improved dramatically. Not that they were bad before, but I think it became state of the art,” Clapp says.

According to its Web site, LOTSolutions manages more than $100 million annually in monthly billed fees. At any one time, Hamil says, the company may handle processing for as many as 15 to 18 insurance companies while also handling third-party business for many large U.S. financial institutions on behalf of “a very large insurer” in a database marketing environment.

“If we had stayed internalized, just serving the internal needs of our own company, I don't think we would have ever developed the breadth of understanding that we now have of the needs of multiple companies,” Hamil says. “If we had remained attentive only to our own companies, we certainly would not have developed a reputation in the industry as a premier third-party administration.”

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