Most U.S. insurance boards of directors don’t know questions to ask about IT: Novarica study

Eighty-nine per cent of insurers in the United States polled for a recent Novarica, Inc. study have said that their board of directors doesn’t know the right questions to ask about IT, presenting a risk to the industry.

“Due to a general lack of understanding technology, insurance boards of directors govern IT as if it were simply a risk, primarily focusing on expense and cybersecurity,” said the report, titled Technology and Corporate Governance in Insurance and released on Wednesday. “Most insurance CEOs acknowledge the key role of IT, but most board govern IT as if it were a risk, focusing on security and cost, not opportunities. Boards must change perspective to see IT as an enabler rather than a challenge.” [click image below to enlarge]

The report surveyed 28 insurer chief information officers (CIOs) in the United States, including a broad range of insurers across life and property/casualty lines.

Frank Petersmark, associate vice president of research and consulting at Novarica and co-author of the report, said in a release that few insurers have any technology expertise on their boards of directors at all, and even fewer have a formal committee to oversee technology strategy and investments.

“Without an understanding of the opportunities that technology presents, boards tend to focus on what they do understand – risk and cost,” added co-author Matthew Josefowicz, president and CEO of Novarica. “This may be leading insurers to underinvest in transforming their technology-enabled capabilities.”

Among the report’s key findings are:

• 82% of CIOs regularly attend board meetings, and most said their contributions were limited to status updates;

• Only one insurer said they had a board-level committee focused on technology;

• 93% no tech experience among board members;

• 71% said that the board doesn’t appreciate the importance of technology;

• Nearly one in five insurer CIOs don’t even attend board meetings.

“While many leading insurers may have adopted the practice of referring to themselves as ‘technology companies that sell insurance,’ few insurers’ corporate boards have the expertise or structure to ensure that technology is being managed strategically,” the report said. “This had led to a board governance structure that manages technology as if it were a risk, rather than a potential competitive advantage. Insurers need to consider adding technology experience to their boards and establishing board level technology committees.”