Economic challenges continue to plague insurers, affecting their day-to-day decisions, their corporate objectives and even as their budget projections for 2010 and beyond. With IT budgets are flat or slightly up, this leaves CIOs with even more important decisions to make and policies to set. CIOs, tech vendors and industry experts gathered at IASA’s annual EDGE conference mid-September to share their thoughts about these issues.  At one of the IASA EDGE Executive Discussion Breakout Sessions, Steven Boyd, CIO of Arrowhead General Insurance Agency, led a candid discussion among a group of insurance technology professionals trying to tackle economic and business challenges affecting IT spend. While the majority of the industry experts who attended the conference expect 2011 budgets to go up, they confirmed that 2010 budgets will remain the same, and where they spend that limited amount of money will vary. Matthew Josefowicz, director of insurance at Novarica, said IT is taking on projects that have quick return, and is heavily evaluating systems and processes right now. 

One area in which insurers are investing is virtualization, Josefowicz said. “There is a lot of server virtualization going on,” he says. “Many people are turning their mainframes to Linux.”  One such company investigating virtualization is Princeton Insurance. “We are in the planning stages—we are looking at which servers are best to virtualize,” said Darby O’Neill, the insurer’s CIO. “The company we hired has to show cost savings and results.” Cost savings is important to Tower Hill Insurance Group, which has a large VM farm, said Brian Elsmore, CIO. However, he warned, “If you are not careful, it’s cheap on the front end, but it can become very expensive on the back end.”  The discussion about virtualization naturally progressed into talk about cloud computing, which ISCS Inc. president Andy Scurto claimed will be the next “dot-com.” “Insurers will embrace [cloud computing] and it’s safe to say they are not that crazy.” O’Neill, who said her No. 1 priority is data quality and integration, is not quite ready to embrace it. “There is no way I am putting my data out there,” she said, which was accompanied by a few nods of agreement from other CIOs in the room.  Boyd, however, sees some value in it. “This model is good for small to mid-sized companies versus an on-premise solution,” he said. Novarica’s Josefowicz echoed the thought. “Comparatively, the power of the on-demand model has a lot of appeal, especially when you are doing multi-year loss runs,” he said. “You can ship data out and get it back. Larger cloud W.2.0—where you ship some here and some there—is not being embraced by insurance companies, and I don’t expect it to be.”

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