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Making Bigger, Better Decisions Even Faster

Carrie Burns September 2007

Some things change; some don't. A 2002 report from Boston-based Celent LLC, stated, at that time, within insurers' IT budgets, expenditures on internal staff consumed the lion's share, roughly 44% on average, with another 11% spent on consultants. Software licensing and support formed the next largest block, with a 20% share, followed by hardware with 15% on average. Connectivity and bandwidth consumed about 8% of budgets five years ago.

What probably did not change in the five years between these findings is that CIOs' decision-making plays a big role in how these numbers come about. INN's first-ever issue in 1997 contained the article, "The New Breed of Insurance CIO," which concluded that more is being requested of the insurance company CIO than ever before. CIOs are not only being asked to have more business savvy, but also to be a communicator to senior management and an agent of technological change for the organization and its information systems.

According to Celent's "Insurance CIO/CTO Pressures, Priorities, Projects, and Plans for 2007: Survey Results," total budgets continue to average about 3% of premium, with the majority of respondents predicting single-digit percentage increases from 2006 to 2007-large P&C insurers being most conservative.

Average breakdown by category is: staff, 42%; hardware, 12%; software, 14%; external consultants and outsourcing, 20%; networks and telecom, 7%; and other areas, 5%.

Insurance executives face just as many decision-making challenges today, if not more, as they did 10, or even five years ago. "It's significantly different today than it was before," says Kim Bailey, director/vice president, IT Shared Business Applications Division for Columbus, Ohio-based State Auto Insurance Companies. "In the insurance marketplace, speed to market and the ability to deliver products quickly is tremendously different than it was five years ago." Bailey points to companies such as Allstate and Progressive as causes for the change. "They started down avenues where you started developing much more extensive pricing points, and they really forced the competition to follow that model."

Bailey believes the biggest challenge executives face when making decisions isn't necessarily that there are more decisions to make. "I think the time you have to make those decisions is much smaller today than it was-in particular with public companies," he says. "You have to be able to forecast your results. You have to be able to step in front of your investors and shareholders and know exactly what's going to happen if you're not able to predict your results well."

Kristine Klinger, assistant vice president of corporate project office at Providence-based Blue Cross & Blue Shield of Rhode Island (BCBSRI), agrees that speed is key. "The market is changing so quickly, and it's very dynamic now for the healthcare industry," she says, referring to the aging population and meeting their needs as well as those of BCBSRI's customers. "We need to be able to make those decisions quickly to compete in the marketplace."

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