Surprise! IT Spending Doesnt Matter

Asked why IT spending doesnt seem to be a factor in overall success, Pieroni observed: "There are some problems money cannot solve. You want to build a state-of-the-art claims system, but does the companys structure and resources allow you to do that?" The key question, he said, revolves around what a company is "able to do" within its resources and structure.

Much of the issue depends on what kind of customers you have, he noted. "Its OK to under spend on technology if youre [a company like] Geico–a price competitor." If a company is catering to high-income individuals with greater expectations, however, it might want to invest in technology such as phone systems that make sure customers dont have to wait too long for service, he said.

"The key is that insurers need to think about how to minimize the total [technology] capability cost as a percent of net written premium," he continued.

Pieroni also observed that, "Insurers dont do IT spending because they dont think they can measure the results." He maintained, however, that such results could be measured through controlled studies.

Who should be spending money on technology? According to Pieroni, carriers who need increased productivity in baseline areas like underwriting and distribution are prime candidates.

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 26, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.