Technology At The Top

Insurance company CEOs need to take a hands-on role in shaping their business-technology strategies

InformationWeek Staff, Contributor

May 22, 2004

3 Min Read

Rowe decided the company's problems stemmed from trying to grow without back-end support to make it profitable. He appointed a CIO, Jane Koppenheffer, with whom he proposed a transformation project to replace legacy policy-processing and claims systems and create a portal as part of a strategy to strengthen ties to independent agents.

First, they had to overcome distrust between IT and operational units. "Operations was never on the same page as far as what the projects were, who had ownership, and who initiated them," Rowe says. IT developed the cost-benefit analysis and presented it to operating units. "We flip-flopped that," he says.

The effort produced the Penn-Connect agent Web site, with claims, billing, and other information available to policyholders. Then the investment carried into the back office with new policy-processing and claims systems and PeopleSoft Inc. financial and accounts-payable systems.

It also allowed a reporting system to track the four-year profitability of each agent. That showed that 25% of agents produced less than 4% of revenue, so Penn terminated them, Koppenheffer says. Stellar results followed: From 1998 to 2003, revenue grew from $408 million to $546.4 million, and net income from $1.6 million to $35 million.

J. Barry Griswell's interest in technology makes him similar to these insurance executives. But two things set him apart from the industry norm. First, the chairman, president, and CEO of the Principal Financial Group only started playing golf a few years ago. Second, his roots are in marketing.

That makes him a bit more growth-oriented than some of his finance-minded peers, Griswell says. "I have a great interest in having technology going beyond efficiency, in ways that are more related to the customer experience," he says.

Under the direction of CIO Gary Scholten, Principal has pursued customer- and contact-management systems and customer-relationship-management systems that help create a common customer experience. For example, several years ago executives had a vision of a group of sales and service counselors who'd do nothing but work with savings-plan participants nearing retirement or changing jobs, hoping they'd keep their money with Principal. "We put a team together that is heavily supported by technology, and last year we retained about 55%" of those customers, says Griswell, up from 30% previously.

As Griswell's responsibilities changed--he became president in 1998, CEO in 2000, and chairman in 2002--so did his role in business technology. "I'm less active in the day-to-day management of technology, but I'm still very involved--more as an influencer," he says.

Businesses need to leverage technology across the company, Griswell says. Compliance issues such as privacy demand it, since they need an enterprisewide approach and benefit from centralized IT management. Likewise, international growth--Principal focuses on emerging markets where retirement savings are mandatory or encouraged by tax policy, such as Chile, Brazil, Hong Kong, and Mexico--lets Principal leverage its U.S. products and supporting technologies.

Growing profitably in this kind of environment takes responsiveness, Griswell says, which means "having this organization prepared for and able to respond to rapid change--and having technology that will enable us to respond."

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