From cloud computing to legacy systems, carrier CIOs discuss areas affecting
their careers and ability to perform. By Carrie Burns and Pat Speer
ECONOMIC CHALLENGES CONTINUE to plague insurers, affecting their day-to-day decisions, their corporate objectives and even their budget projections for 2010 and
beyond. CIOs, tech vendors and industry experts
gathered at IASA’s annual EDGE conference held in
Dallas in mid-September to share their thoughts
about these issues.
At one of the breakout sessions, Steven Boyd, CIO
of San Diego-based Arrowhead General Insurance
Agency, led a discussion among insurance technology
professionals trying to tackle economic and business
challenges affecting IT spend.
While the majority of the industry experts present
expected 2011 budgets to go up, they confirmed that
2010 budgets will remain the same. Where they
spend that limited amount of money will vary.
Matthew Josefowicz, director of insurance at New
York-based Novarica, said IT is taking on projects that
have quick return, and is heavily evaluating systems
and processes right now.
One area in which insurers are investing is virtualization, Josefowicz said. “There is a lot of server virtualization going on,” he says. “Many people are turning their mainframes to Linux.”
One such company investigating virtualization is
Princeton, N.J.-based Princeton Insurance. “We are in
the planning stages—we are looking at which servers
are best to virtualize,” said Darby O’Neill, the insurer’s
CIO. “The company we hired has to show cost savings
Cost savings is important to Gainesville, Fla.-based
Tower Hill Insurance Group, which has a large VM
farm, said Brian Elsmore, CIO. However, he warned,
“If you are not careful, it’s cheap on the front end, but
it can become very expensive on the back end.”
The discussion about virtualization naturally progressed into talk about cloud computing, which Andy
Scurto, president of San Jose, Calif.-based ISCS Inc.,
claimed will be the next “dot-com.”
O’Neill maintained that because her No. 1 priority is data quality and integration, she was not quite
ready to embrace cloud computing. “There is no way
I am putting my data out there,” she said, which was
accompanied by a few nods of agreement from other
CIOs in the room.
Boyd, however, said he sees some value in it. “This
model is good for small to mid-sized companies versus an on-premise solution,” he said.
Novarica’s Josefowicz echoed the thought.
“Comparatively, the power of the on-demand model
has appeal, especially when you are doing multi-year
loss runs,” he said. “You can ship data out and get it
back. Larger cloud Web 2.0—where you ship some
here and some there—is not being embraced by
insurance companies, and I don’t expect it to be.”
system replacement. “Since we started three years ago,
we keep close tabs on it,” said Jane Bracken, SVP for
business unit enablement at the insurer. “You have to
manage expectations—that’s one of the top three
The use of Open Source for development was also discussed. Tower Hill’s Elsmore said much of its development is being done using Open Source.
“Open Source has the reputation of appealing to
the yogurt-and-nut-loving, tree-hugging crowd,” said
Phil Hargrove, insurance technology adviser at
Vertafore Inc., Bothel, Wash. “Yet, all the brilliant
shops are contributing to this. IBM is even embracing
it. The fact is that it is well-tested software.”
Craig Lowenthal, EVP and CIO at New York Marine
and General Insurance Co., said his comfort level was
challenged by Open Source. Hargrove suggested that IT
execs should institute a policy as to how they will use
it (i.e. governance). “There are also copyright laws
coming out, so you need to control how it’s implemented,” he said. “Know what you’re getting into.”
Arrowhead’s Boyd questioned whether insurers
currently are replacing or maintaining those systems.
The consensus among session attendees was that they
are working with what they have.
On the other side, Great American Insurance Co.,
Cincinnati, is currently involved with a major legacy
CIOs in the session agreed that another challenge facing the industry is social networking, and how to—or
even whether to—leverage it.
“You need to look at it as part of a distributed strategy,” Lowenthal said. “If you want to attract agents
and do business in different ways, it’s important to
think about it.”
Liberty International Underwriters, New York, is
starting to use Twitter and Facebook, said a cautious
Carlos Correa, AVP, U.S. technology manager. “We’ll
see how it goes.”
Other challenges and concerns include productivity issues among employees spending too much work
time on social networking sites, and the need for strict
oversight of how and what employees communicate
about company business. INN
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