Highlights from Novarica’s 2018 Columbus Regional Roundtable

Last week, we hosted our most recent Novarica Regional Roundtable event in Columbus, Ohio. Nearly 30 participants representing a broad coverage of business lines in both the P/C and L/A arenas attended and we had a wide-ranging discussion of the issues and trends impacting the industry today. This session also coincided with the start of 2019 budgeting and planning for many carriers, which added a very immediate and practical dimension to the discussions.

The session highlighted a number of issues that are very much on the mind of senior IT leadership today:

• Innovation is both important and hard to do. Innovation can have both tactical or strategic intentions. The former is about improving existing business practices or models while the latter is about effectively breaking and replacing them. In both cases this creates significant organizational angst because the very expertise for dealing with current systems and processes that created personal rewards, may now be perceived as a “negative” in a changing world. Change management is crucial, as is support from the very top of organizations. We discussed some of the very real challenges that carriers have experienced from the “front lines” when attempting to inject innovation into their operating models, including approaches to investments that can increase the chances of success. Innovation, by its very nature, can trigger backlash responses from a corporate immune system, which led to a broader discussion on how to effectively address this in a rapidly changing world.
• Technology is at the forefront of transformation, but can be inhibited by political, operational, and financial considerations. IT organizations are frequently at the forefront of delivering on new capabilities but are often buffeted by operational and political dynamics they have no control over. Thinking about what a carrier needs to deliver “from the outside looking in” frequently becomes about end-user experiences and product capabilities when compared to a wide array of competitor offerings. Technology, frequently in the form of systems of engagement, is crucial to delivering results. That said, the technology itself may be the easiest of the factors to manage. Those wedded to the ways that “we’ve always done things” can be highly resistant to operational changes. Organizationally, if the value people perceive of themselves is related to the size of the teams they manage, they can be reluctant to fully support the efficiency gains contemplated in business cases. Even a move to Agile as a delivery methodology can cause push back from finance organizations that are highly invested in the predictability of waterfall milestone events, to say nothing of the challenges that can come from trying to switch from a CapEx to an OpEx funding model. IT organizations must manage all these factors to be able to realize the promise of advances in technology in support of broader organizational goals. Carriers cited a range of examples highlighting both the challenges and the opportunities in this arena as they look to orchestrate these—at times competing—dynamics.
• Cloud computing is taking on ever more mission-critical workloads and the countdown on insurance carrier-owned data centers has begun. The march toward the widespread use of cloud-computing capabilities at carriers to carry ever larger, mission critical, workloads is picking up speed. Carriers noted that it is increasingly challenging to buy some capabilities any other way. Nevertheless, the struggle to explain the value and virtue of the model internally continues. For many, security is now understood generally to be better at a top-tier provider than it is when a carrier hosts something itself, but there remain some pockets of resistance. Another concern expressed was about the possibility of being “held hostage” by a cloud provider if there wasn’t some competitive threat built into the operating model. This led to a discussion of the virtues of a 2-vendor solution, which has some interesting but manageable architectural implications that we explored. Finally, several companies expressed a concern about the possibility of “cloud provider proliferation” and the need to limit the number of possible solutions. These concerns meant this group was not pleased by the prospect of vendors insisting on running their applications in their own cloud environment. As a corollary to the cloud-oriented discussions, carriers also discussed the correct hosting and support options for legacy applications. Conversion is not really a practical or appropriate response for many mainframe-based solutions. Leveraging BPO/ITO options thus appears to be the necessary complement to cloud-services that can allow for the gradual winding down of company-specific data centers.
• Talent management is a concern with far-reaching operational and organizational implications. One of the critical challenges facing IT organizations today is the access to the human capital needed to support a complex and diverse portfolio of initiatives. Many now recognize that they need to think about a labor pool that will be more dynamic in the future, with employees in the Millennial generation far less interested in the type of single employer/vertical movement that characterized earlier generations. IT leaders are considering how to prepare for the training, education, and knowledge management that this implies. It is now also key to look at talent earlier, since waiting until after college graduation may unnecessarily restrict an otherwise rich and diverse pool. Several carriers described expansive internship programs that build high-potential talent through a series of summer experiences. One carrier described making job offers as students rise into their senior years in school. If they waited (as the HR department wanted them to), they would have missed out on the best and brightest, who would have assumed the carrier wasn’t interested and accepted other early offers.
• Security remains a high-priority concern that “battles” with other priorities for funding. No discussion with IT leaders today misses the opportunity to discuss security and the implications for planning and future investment. Novarica research studies have shown that approximately 10% of IT budgets are spent on security items, while 50% of board time spent on IT issues is focused on security. This mismatch creates some interesting and hard-to-manage tension for IT leaders. Some decisions, such as a move toward cloud computing, of course help to address certain risks. At the same time, however, evolving regulations like the NY State and South Carolina Cybersecurity requirements are adding operational and financial strain that impacts IT organizations’ ability to deliver. The challenges and potential inconsistencies in the state-based regulations add further strain to the system. To address the environmental issues, IT organizations may well look to simplify their deployments, which may drive the desire, among other things, to avoid the proliferation of cloud-based solutions and focus on a very small number of trusted strategic partners.

The insurance industry faces a wide array of opportunities and challenges as we start to plan for the start of the third decade of the 21st century. By 2020, Millennials will represent half the US labor force, the demise of the corporate data center appears underway, new products will be required for carriers to remain relevant, and old COBOL code still carries a lot of (legacy) baggage. It may indeed be the best of times and the most difficult of times, all at the same time! We are very much looking forward to future events, including Novarica Regional Roundtables in Boston and Des Moines this July, and another iteration of the Silicon Valley Innovation Tour in August. In challenging times, information is a powerful tool.