Build an FSI Insurance Business-Aligned IT Strategy
Success depends on IT initiatives clearly aligned to business goals, IT excellence, and driving technology innovation.
- According to the Management and Governance Diagnostic (MGD), organizations in finance and insurance rate their IT strategy process as only 64% effective.
- IT does not do a good job of communicating that it understands business goals; thus, 55% of finance and insurance CXOs believe some improvement is necessary and 15% believe significant improvement is necessary.
- IT departments without adequate IT strategies experience issues with alignment, organization, and prioritization.
- It is difficult to maintain enough technical capabilities in new technologies that can retain or build market advantage and position against the backdrop of new-tech disruption that has created a surge of investment in insurtech companies.
Our Advice
Critical Insight
- A CIO has three roles: enable business productivity, run an effective IT shop, and drive technology innovation. Your key initiative plan must reflect these three mandates and how IT strives to fulfill them.
- Don’t project your vision three to five years into the future. Dive deep on next year’s big-ticket items instead.
- Developing an IT strategy is a wasted effort if no mechanisms are put in place to govern the journey.
- If you don’t communicate it, it doesn’t exist; simple, appealing, and inspirational communication is needed.
Impact and Result
- Establish the scope of your IT strategy by defining IT’s mission and vision statements and guiding principles.
- Perform a retrospective of IT’s performance to recognize the current state while highlighting important strategic elements to address going forward.
- Elicit the business context and identify strategic initiatives that are most important to the organization while building a plan to execute it.
- Evaluate the foundational elements of IT’s operational strategy that will be required to successfully execute key initiatives.
- Wrap all strategic information into a highly visual and compelling presentation that enables easy customization and executive-facing content.
Build an FSI Insurance Business-Aligned IT Strategy
Success depends on IT initiatives being clearly aligned to business goals, IT excellence, and driving technology innovation.
Executive Summary
IT strategies are often ineffective.
- According to the Management & Governance Diagnostic (MGD), organizations in Finance & Insurance rate their IT strategy process as only 64% effective.(1)
- IT does not do a good job of communicating that it understands business goals. Thus, 55% of Finance & Insurance CXOs believe some improvement is necessary and 15% believe significant improvement is necessary.(2)
IT departments without adequate IT strategies experience issues with alignment, organization, and prioritization.
Three-quarters of surveyed CEOs value tech leaders with experience fostering operational stability and strategic business alignment,(3) however…
- The CIO is seen by business executives as an order taker. This usually results in the demands on IT far outstripping the IT budget.
- Projects and initiatives are not prioritized around business objectives. Synergies and dependencies are recognized too late. Projects are often late or put on hold because of sudden changes to business requirements.
Follow Info-Tech's approach to developing a strong IT strategy.
- Use Info-Tech's industry-focused approach to discern the business context.
- Clearly communicate to business executives how IT will support the organization's key objectives and initiatives using the IT Strategy Presentation Template.
- Use Info-Tech's Prioritization Tool to help make project decisions in a holistic manner that allows for the selection of the most-valuable initiatives to become part of the IT strategic roadmap.
Info-Tech Insight
A CIO has three roles: enable business productivity, run an effective IT shop, and drive technology innovation. Your IT strategy must reflect these three mandates and how IT strives to fulfill them.
1: Info-Tech, Management & Governance Diagnostic; n=234
2: Info-Tech, CEO-CIO Alignment Diagnostic; n=62
3: CIO Journal, 2020
Executive Summary: Financial Services Industry (FSI) Insurance Business-Aligned IT Strategy
Situation
The insurance industry is facing significant disruption due to the advancement of artificial intelligence (AI) and related technology, and access to large amounts of data, which has opened the door to competition from large technology companies and new insurtech start-ups.
Consumer patterns are moving toward individual usage-based consumption and the leveraging of services online.
Complication
The move to more usage-based consumption is driving a shift toward online execution and individualized services.
Reduced access to capital and advanced digital and data skill sets prevents the adoption of automation and AI for some insurers, impacting their competitiveness.
COVID-19 has accelerated the need to adopt digital technologies and has generated new risk exposures that were not accounted for in existing policies and their premiums, reducing available capital.
Solution
With the shift in the industry and the increased range of competition, insurers need to aggressively leverage technology to stay relevant and retain or expand their market:
- Learn about the fundamentals of your industry including its ecosystem, influences, opportunities, and constraints.
- Conduct SWOT analyses within the context of your industry, with guiding insights from Info-Tech, to understand unique implications for IT.
- Devise a list of initiatives you can integrate into your IT strategic plan to transform the role IT plays in enabling improvement and success in your organization.
The insurance environment
- Emergence of AI and Insurtech
- Customer Experience
- Cost Optimization
Influencing factors
- Emergence of AI and Insurtech: There is an increased focus on accelerating the adoption of modern adjudication technology and practical digital disruption in order to drive market growth and differentiation. This is further driven by the rise of AI and the quick proliferation of insurtech companies in the market and is creating opportunities to partner for quick ROI. Those who do not leverage these technologies effectively will be left behind.
- Customer Experience: Consumer needs have changed, with increased online access driving a need for stronger focus on customer experience. Usage-based and individualized insurance, accelerated by the impact of COVID-19 and the continued emergence of the gig economy, has created the need for more individualized experiences.
- Cost Optimization: Reduced premium costs, additional payouts, and an aging population that will be making more claims against health insurance are driving a need to optimize costs across the industry. This is leading to broader adoption of AI and related technology for automation of the claims process and fraud analysis and in support of risk identification and validation.
Industry facts
- Industry Size and Revenue
- Industry Global Breakdown
- Projected Industry Growth
- Employment
Key industry details
- Industry Size and Revenue: The global insurance market (including providers, brokers, and reinsurers) was $5.94 trillion in 2019 and represents approximately 8.9% of GDP worldwide (Capgemini, 2020).
- Industry Global Breakdown: North America is the largest region in global insurance, representing approximately 34% of the world market. This is followed by Asia Pacific with 30%. The smallest region is currently Eastern Europe (WTO.org, 2019).
- Projected Industry Growth: COVID-19 had a notable impact on short-term growth in the industry, with the duration of its impact still unknown. The market was expected to decline from $5.94 trillion to $5.81 trillion in 2020, with a compound annual growth rate (CAGR) of -2.3. Overall, the industry was expected to recover and reach $6.84 trillion by 2023 with a CAGR of 6% overall (Capgemini, 2020).
- Employment is growing within the medical and health insurance sector due to higher participation in health programs and aging demographics. Employment in non-medical insurance is stagnant or in decline.
Insurance competitive landscape
- Market Size
- AI/Chatbots
- Computer Vision/Drones
IT has become the key differentiator in the insurance industry
Competitive Market Size: The number of insurance companies worldwide continues to grow. There are more than 6,000 insurance companies in the US alone, with strong growth in insurtech startups. Funding for insurtech decelerated in 2020 due to COVID-19, but funding raised was still approximately $912 million globally during Q1 (fintechmagazine, 2020).
AI/Chatbots: Chatbots are at the core of digital transformation in the insurance sector and are integral to creating a customized user experience. The ability to provide a customized experience 24/7 with lower processing time and faster resolution reduces the barrier to entry for new insurers. This was expected to save organizations $8 billion globally by 2022 (Cognizant, 2020).
AI/Computer Vision: Drones with AI-driven computer vision allow for quick damage assessment in remote or dangerous areas, speeding claims handling and underwriting capabilities in the P&C market, especially in insurtech-based organizations.
Critical challenges in insurance IT
Challenges
- Maintaining enough technical capabilities in new technologies that can retain or build market advantage and position against the backdrop of new-tech disruption that has created a surge of investment in insurtech companies.
- Obtaining or developing critical skills in data science and analytics to support the accelerated needs of organizations.
- Creating improved interfaces for customer experience. Adapting to the changes in consumer perspective of the industry and consumer-driven demand patterns that are increasing online engagement at nontraditional times. This challenge has been exacerbated and accelerated due to COVID-19.
- Driving technological improvements with often greatly reduced available capital, an issue amplified by ongoing pandemic costs and costly legal defense.
Critical opportunities in insurance IT
Opportunities
- Identifying practical uses for AI and automation to contain and reduce costs while strongly reducing fraudulent claims that impact profit margins. When implemented properly, automation and AI development will speed up processing, handle higher volumes, and streamline workflows. It will also free resource capacity for other work.
- Explore opportunities to use digital applications and partner with or acquire insurtech companies that can expand your footprint and build capabilities while acquiring skill sets that are gaps in the organization.
- Improve analytics capabilities to:
- Support actuarial work and improve the underwriting of risks by more accurately calculating business and consumer risks.
- Identify use cases that identify a broader base of consumer products and service options.
- Enable predictive analytics to identify and reduce health issues that drive up health insurance costs.
- Understand and forecast behavior.
Info-Tech's approach
Establish the Scope of Your IT Strategy
Establish the scope of your IT strategy by defining IT's mission and vision statements and guiding principles.
Review IT Performance From Last Fiscal Year
A retrospective of IT's performance helps recognize the current state while highlighting important strategic elements to address going forward.
Build Your Key Initiative Plan
Elicit the business context and identify strategic initiatives that are most important to the organization and build a plan to execute on them.
Define IT's Operational Strategy
Evaluate the foundational elements of IT's operational strategy that will be required to successfully execute on key initiatives.
Info-Tech's methodology for IT Strategy
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1. Business Context |
2. Key Initiative Plan |
3. Operational Strategy |
4. Executive Presentation |
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Pre-Workshop Industry-Specific Guided Implementation |
IT Strategy Workshop |
IT Strategy Workshop |
IT Strategy Workshop |
Info-Tech's methodology for IT Strategy
1. Business Context | 2. Key Initiative Plan | 3. Operational Strategy | 4. Executive Presentation | |
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Blueprint deliverables
The IT Strategy Workbook supports each step of this blueprint to help you accomplish your goals:
Goals Cascade Visual
Elicit business context and use the workbook to build your custom goals cascade.
Initiative Prioritization
Use the weighted scorecard approach to evaluate and prioritize your strategic initiatives.
Roadmap/ Gantt Chart
Populate your Gantt chart to visually represent your key initiative plan over the next 12 months.
Key deliverable:
IT Strategy Presentation Template
A highly visual and compelling presentation template that enables easy customization and executive-facing content.
Info-Tech offers various levels of support to best suit your needs
DIY Toolkit
“Our team has already made this critical project a priority, and we have the time and capability, but some guidance along the way would be helpful.”
Guided Implementation
“Our team knows that we need to fix a process, but we need assistance to determine where to focus. Some check-ins along the way would help keep us on track.”
Workshop
“We need to hit the ground running and get this project kicked off immediately. Our team has the ability to take this over once we get a framework and strategy in place.”
Consulting
“Our team does not have the time or the knowledge to take this project on. We need assistance through the entirety of this project.”
Diagnostics and consistent frameworks used throughout all four options
Guided Implementation
What does a typical GI on this topic look like?
| Phase 0 | Phase 1 | Phase 2 | Phase 3 | Phase 4 |
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Call #1: Discuss business context and customize your organization's capability map. |
Call #2: Identify mission and vision statements and guiding principles to discuss strategy scope. |
Call #3: Assess year-in-review data and evaluate performance. |
Call #5: Identify strategic initiatives and required information. |
Call #7: Discuss and identify appropriate operational strategy components. |
A Guided Implementation (GI) is a series of calls with an Info-Tech analyst to help implement our best practices in your organization.
A typical GI is between 8 to 12 calls over the course of 2 to 4 months.
Workshop Agenda
Contact your account representative for more information.
workshops@infotech.com 1-888-670-8889
Workshop Requirements
| Launch Diagnostics |
Business Inputs |
IT Inputs |
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Launch the CIO Business Vision diagnostic. Launch the CEO-CIO Alignment diagnostic. Launch the Management and Governance diagnostic. Gather all historical diagnostic reports (if they exist). |
Gather business strategy documents and find information on:
(If this doesn't exist for your organization, contact your Info-Tech Account Manager to get started.)
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Gather information on last fiscal year's strategy. Particularly information on:
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Contact your Account Manager to get started. |
Download the Business Context Discovery Tool |
About Info-Tech
Info-Tech Research Group is the world’s fastest-growing information technology research and advisory company, proudly serving over 30,000 IT professionals.
We produce unbiased and highly relevant research to help CIOs and IT leaders make strategic, timely, and well-informed decisions. We partner closely with IT teams to provide everything they need, from actionable tools to analyst guidance, ensuring they deliver measurable results for their organizations.
What Is a Blueprint?
A blueprint is designed to be a roadmap, containing a methodology and the tools and templates you need to solve your IT problems.
Each blueprint can be accompanied by a Guided Implementation that provides you access to our world-class analysts to help you get through the project.
Need Extra Help?
Speak With An Analyst
Get the help you need in this 5-phase advisory process. You'll receive 8 touchpoints with our researchers, all included in your membership.
Guided Implementation 1: Prepare Your Capability Map
- Call 1: Discuss business context and customize your organization’s capability map.
Guided Implementation 2: Establish the Scope of Your IT Strategy
- Call 1: Identify mission and vision statements and guiding principles to discuss strategy scope.
Guided Implementation 3: Review Performance From Last Fiscal Year
- Call 1: Assess year-in-review data and evaluate performance.
- Call 2: Discuss diagnostic data results and success stories.
Guided Implementation 4: Build Your Key Initiative Plan
- Call 1: Identify strategic initiatives and required information.
- Call 2: Discuss how to build your roadmap.
Guided Implementation 5: Define Your Operational Strategy
- Call 1: Discuss and identify appropriate operational strategy components.
- Call 2: Summarize results and plan next steps.
Contributors
- Luis Ramón Ramos Espinoza, Chief Information Officer, Suramericana
- Kyle Saverance, Chief Information Officer, Coker College
- Scott Ross, SVP Omni-Channel Technologies, Lowe’s Companies
- Max Min, Director, Waterloo City Centre
- Philip D’Aurelio, Development Solutions Supervisor, City of Hamilton
- Michael Dieckmann, Chief Operating Officer, Florida Virtual Campus
- Joe Evers, Consulting Principal, JcEvers Consulting Corporation
- Ken Piddington, Chief Information Officer, MRE Consulting
- 2 anonymous contributors