Insurers speak loudly these days about embracing information technology as a tool to help grow their businesses. It turns out, however, that there is a disconnect: Their boards of directors are often wary to support tech improvements and rarely understand why IT matters on a corporate level, Novarica asserted in a new report.
Importantly, that disconnect between corporate policy and understanding and support from insurance industry boards of directors can have ominous implications for future growth, the research and advisory firm said in its executive brief on technology and corporate governance in insurance.
“Without an understanding of the opportunities that technology presents, boards tend to focus on what they do understand: risk and cost,” Novarica President and CEO Matthew Josefowicz and study co-author said in prepared remarks. “This may be leading insurers to underinvest in transforming their technology-enabled capabilities.”
Among Novarica’s findings: 93 percent of insurer boards of directors have no tech experience among their board members, 71 percent of boards don’t appreciate the importance of technology, and 89 percent of boards don’t know what questions to ask about the issue.
This disconnect has led to “a board governance structure that manages technology as if it were a risk, rather than a potential competitive advantage,” Novarica said in its report.” That quality needs to be reversed, Novarica said, recommending that insurers add technology experience to their boards and create board-level technology committees to increase the use of information technology and promote better understanding at the board level of how it benefits corporate competitiveness.
Here are some of the major findings of the Novarica study:
- Nearly 90 percent of chief information officers say board members don’t know what questions to ask about technology. This leaves them keeping a narrow focus on tech, with discussions limited to expense and cybersecurity.
- Nearly 1 in 5 CIOs don’t attend board meetings, and CIOs generally don’t have personal relationships with other board members.
- Most insurer CIOs attend up to four regularly scheduled meetings per year, and 82 percent regularly attend board meetings.
- Just 17 percent of CIOs hold separate educational sessions for board members.
- About 3 percent of companies have board-level technology committees in place.
- A small number of CIOs say they participate in substantive meetings with their boards involving overall strategic planning for the company, including M&A, new market and new business opportunity discussions.
Novarica said it will address this issue further during a March 28 webinar.