How Smaller Insurers can take on Large Challenges

Tom Benton, VP of Research & Consulting, Novarica

Tom Benton, VP of Research & Consulting, Novarica

CIOs across the insurance industry face similar challenges: keeping up with rapidly changing technology, meeting business needs for faster speed to market, creating engaging customer, and agent digital experiences, and enabling analytics to improve products and operations. In addition, issues such as emerging disruptive technologies, a rapid increase in customer-related data, and more frequent cybersecurity threats are affecting CIOs across all industry segments. As I mentioned in a recent blog post: "while emerging technology keeps CIOs busy during the day creating information, IT security and keeping that information protected keeps them up at night."

"Smaller insurers have many challenges in common, and some have implemented best practices that leverage the advantages of small size to make the challenges not as big"

Same Challenges, Fewer Resources

While CIOs at smaller insurers face the same industry challenges as their peers in larger organizations, they face them with a fraction of the resources. They often focus their staffing and funding on running the business, and must sometimes defer initiatives needed to support business growth. Larger organizations have resources for transformation projects that are needed to provide technology that supports new business initiatives and digital customer demands, but smaller insurers have resources to do little more than ‘keep the lights on.’

However, smaller organizations have some advantages over their larger peers. Organizational transformation risk can be reduced by the ability to engage the entire enterprise and to create fast and efficient governance structures for rapid decision making. Culturally, they tend to be more focused on their mission and product offerings, often enabling simplification of processes and products to reduce customizations, a common source of risk, and cost escalation for core system replacements. Smaller IT organizations can also take advantage of working closer together to avoid silos, communication roadblocks, and other hindrances to projects that can cause organizational inefficiencies that their larger peers often encounter.

Making Big Challenges Smaller

As a CIO at a small life and annuities insurer, I faced the challenge of transforming systems in a business environment of rapid growth and a technology environment of disruptive change. In my current position as an industry analyst with Novarica, I've talked with CIOs at smaller insurers across industry segments and have found that many have these challenges in common, and some have implemented best practices that leverage the advantages of small size to make the challenges not as big. Here are some examples:

Limited staff skill sets – With a small IT shop, value is often placed on being a ‘jack of all trades,’ over having deep knowledge of a particular technical skill set. Also, cross-training tends to be limited, leading to "single points of failure" when an employee leaves. Some CIOs leverage vendor relationships to meet needs for skill gaps and temporary staffing demands, and focus internal staff on support of critical systems and internal customer needs. By strategic use of vendor resources, smaller organizations can better meet staffing needs.

Low level of IT discipline maturity – With staff limitations, smaller IT organizations have less ability to focus on IT disciplines, including project management, vendor/contract management, even user access and security processes. These are essential to making IT efficient and reducing technology risk. IT leaders at smaller organizations find that documenting simple, flexible processes for these disciplines is effective. Documented processes can reduce communication issues, speed up governance and decision making, and in general reduce organizational friction that can all occur when processes are inconsistent—or worse yet—ad hoc.

Long-term vendor dependence – With their lack of depth in IT staff, many smaller IT groups look to vendors for help with particular solutions or for development projects such as website launches and integrations. While they need vendor help during implementation, this often leads to dependence on the vendor for maintenance and upgrades. Long-term dependence can be mitigated by planning for knowledge transfer early in the project, and by ensuring staff is in place for maintenance prior to completing the implementation phase. Good vendor management practices must also be in place to ensure the relationship is a partnership where both sides work toward success rather than compete to win on cost or delivery goals.

Lack of experience with large transformation projects – Small organizations typically do not regularly engage in large transformation projects, so they have little internal expertise in project management for these initiatives. In many cases, individual IT staff manages their own projects without a consistent methodology or dedicated project management resources. Application of a few best practices can help. First, start by clarifying the IT strategy and roadmap to provide context for the long-term focus. Next, establish a project management approach to better enable communication with business peers. By establishing clear, consistent processes for RFIs/RFPs, vendor selections and project management, and using them on current smaller projects, IT can help the entire organization develop the project management ‘muscles’ for taking on larger projects.

Smaller Challenges, Bigger Results

Smaller insurers and other small organizations can use these best practices to leverage the advantages of being small to achieve big results. However, implementing best practices may seem like a delay in ‘getting started’ uncomfortably pushing the timeline for change to later dates than their business peers would like. However, by working with vendors to help with staffing limitations, building IT process maturity, reducing long-term vendor dependence, and developing an effective project management culture, smaller IT organizations will reduce risks and the delays and costs of failed major projects. These best practices can make challenges smaller and enable results to be bigger.

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