Is it the execs or the IT department?
The workers’ comp, and, for that matter, the entire property and casualty insurance industry, is chronically systems-poor. While other industries view IT as a strategic asset, continually investing billions in IT, WC/P&C considers IT an expense category to be mined for pennies to add to earnings per share.
We all know how much execs HATE unallocated loss adjustment expenses…
Execs at payers are hamstrung by IT departments that can’t/won’t/aren’t able to implement systems changes. In fairness, IT departments are hamstrung by a lack of strategic vision in many C-suites, which in turn is motivated by financial markets or executive comp plans at mutuals. Suffice it to say there is plenty of blame to go around – but the result is insurers’ strategy is often greatly limited by IT.
For example, underwriting and distribution. Yes, Google’s initial foray into insurance was short-lived, but that wasn’t because they weren’t selling insurance. In fact profits were good – but “good” by insurance standards, not by tech standards. Google just couldn’t make the profit levels they are used to.
At some point another tech innovator will figure this out and/or decide a lower profit level is just fine, and then woe betide insurers.
Another example – the medical management world is changing dramatically, and work comp insurers are very hard pressed to adapt. Bundled payments, narrow networks, electronic medical records and vertically integrated delivery systems are here today, and will grow dramatically in importance tomorrow. Flexibility, adaptability, and the ability to move quickly are essential – and equally impossible. Changing vendors requires IT to design, implement, test and monitor new data feeds to multiple systems and stakeholders.
Conversely, some payers have tied themselves to external vendors who act as consolidators or pipes, thereby greatly reducing the carrier’s IT burden. In exchange, a LOT of power is transferred to the pipe vendor. That’s fine if:
- incentives are aligned over the long term, and
- the vendor is able and willing to make changes to providers, processes, and feeds as necessary, and
- there’s transparency.
However, expediency and underinvestment comes at a cost.
CEO T Rex: “Hey, when is that B2B platform scheduled for testing?”
CIO Triceratops: “18 months after I get the money to hire the staff you cut to reduce ULAE…”
The B2B and healthcare delivery market is evolving at a pace akin to that the dinosaurs saw after the meteor hit. So, here’s a couple of questions you may want to ask yourself.
- Does your strategy drive your IT, or does your IT drive your strategy?
- What’s your plan to adapt to the revolutionary changes hitting distribution and medical management?
- Does your IT department, management, vendors, and infrastructure support that plan?
- What happens when – not if, but when – a carrier or new entrant builds the infrastructure and capability you can’t or won’t?