Getting Closer

Insurance company CEOs might not yet know as much about technology as their technology officers might hope, but they know they need to be informed -- and so do the boards that evaluate their performance.

That business and technology continue to move closer together can be seen in the burgeoning ranks of CEOs across the insurance industry who make public technology-related pronouncements, whether about agent/carrier connectivity, the enablement of consumer-directed health plans, or the technology dimension of mergers and acquisitions. To avoid their companies' or their own extinction, many an old dog has learned new tricks. The distance between the senior business executives and technology leadership has diminished a great deal in just the past five years, but there's still a gap to be closed.

The first step toward recovery is to admit you have a problem, as they say, and happily, many CEOs do. IBM's (Armonk, N.Y.) latest global CEO survey shows that across all industries, 65 percent of CEOs believe their companies will see fundamental change over the next two years. However, only 15 percent described themselves as successful at managing such change. Over 90 percent recognized the importance of integrating business process and technology for innovation, but only 58 percent thought they did a good job of it.

Learning to Collaborate

CEOs have long believed the myth that innovation is too important to involve outsiders, but that is changing, according to Jamie Bisker, global insurance leader, IBM Institute for Business Value. In the business world, more than three-quarters of CEOs recognize the importance of collaboration, and 52 percent say they're actively collaborating. Unfortunately, according to the IBM study, this isn't the case with the insurance industry. Just 60 percent of CEOs affirm the importance of collaboration and only 31 percent report practicing it. As a consequence, Bisker says, "Many insurance organizations are limited in their skills and lack the incentive to collaborate."

But many insurance companies' boards increasingly are seeing their competitive advantage boosted by CEOs who are more conspicuously tech-savvy, according to Catherine Allen, CEO of the Washington, D.C.-based nonprofit financial services consortium BITS Financial Services Roundtable.

Today's insurance CEO has to understand technology's importance for aspects of the business, says Allen, such as delivery of new products and services; management of the Internet as a sales, information, and communications channel for customers and distributors; and analysis of company, customer and market information. Perhaps most importantly, CEOs need sufficient technological insight in order to navigate an increasingly hazardous regulatory compliance regime, Allen argues. For CEOs to meet boards' expectations, she says, "If they weren't savvy before, they're having to become more so now."

An insurance CEO is unlikely to be hired specifically for his or her technology expertise though, because at that level, technology is hard to segregate from other strategic considerations, such as finance and marketing, says Michael Magsig, managing director, financial services market of executive recruiter Korn Ferry International (Los Angeles). Nevertheless, he says, "Boards will apply scrutiny to candidates' past accomplishments and ask what types of resources within their organizations they drew upon to achieve results, and how that might relate to the organization they would be walking into."

Boards are likely to consider how an insurance CEO candidate might deal with legacy systems, based on past performance, according to Magsig. But other questions are also increasingly coming to the fore. "Many of the questions that I'm involved in within the C-suite are centered on how technology can be used to create more knowledge around the customer in order to make the organization more competitive," he says.

In a business where top leadership is surrounded by not only technology experts, but also actuarial, finance and others, Magsig says, it is critical that CEOs "are able to relate to technically oriented people in a way they can understand, embrace and personalize."

In that respect, understanding technology is secondary for an effective insurance CEO, says Paul Glen, Los Angeles-based technology workforce consultant and author of "Leading Geeks." Business and technology need to understand each other within an insurance enterprise, and the CEO plays a crucial role in making that happen. "Bridging that gap, more than anything, is about effective communications in both directions," Glen says.

Lacking communication, business and technology are likely to work at cross purposes. "If the IT people don't understand what the big picture is strategically, they will make small decisions that will lead the company down the wrong path," Glen says.

CEOs, likewise, must be open to advice from IT. "If a CEO decides to buy a particular software package just because he had a good game of golf with the sales guy, he or she loses the respect of the technical people," says Glen. As a result, those experts will simply not bother sharing expertise, since the CEO appears not to value it.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio