The shortage of skilled IT staff with industry knowledge
is worse in insurance than almost any other sector, as
many turn to the more `glamorous' areas of telecomms
and e-commerce. Kathryn McCarthy investigates how
the industry can combat this problem - and how to
make insurance sexy.
With a global shortage of skilled IT staff across all disciplines, the insurance sector is suffering from the added burden of being one of the less dynamic of fields for the IT workforce.
This isn't a startling revelation as insurance has always been judged the poor relation to banking and, likewise, financial services positions are less desirable than the more fashionable telecomms and e-commerce roles.
The dotcom bubble may have burst in economic terms and in the eyes of the mainstream press, but the staff fallout is having little effect on the ability to recruit skilled IT staff who understand the business of insurance.
The shortage of IT skills is worse in the insurance industry than almost any other sector, believes Stephen Asher, founder and head of product design at Ultraviolet Technology Group.
"The reasons are complex and endemic," he says. "First, there is a shortage of IT skills, period. Second, the industry suffers from an overly high proportion of contractors. Contractors are very useful in certain circumstances but, when an IT market becomes contractor-centric, the pool of available permanent IT staff dries up and quality falls."
Another problem, he adds, is that the banks "pay more, often much more, develop more systems, fail less often, recruit more effectively and generally offer a more glamorous package".
Skill shortages have been apparent in the insurance IT field for some years and employers have had to compromise their baseline requirements in order to fill vacant posts. Unless a position is at senior management, business analyst or project manager level, most companies now place insurance experience as preferable rather than necessary - those with an insurance background inevitably get snapped up fast.
The result is that many in the insurance IT workforce have no knowledge or interest in the wider business. And few IT staff actually receive insurance training, so opportunities to broaden their knowledge are limited.
"In my experience, IT people don't get offered insurance courses - they get training in their own field," says John Fisher, project manager for QBE International Insurance.
He believes this is short-sightedness on the part of many employers. "People who come into an insurance company should be encouraged to learn about insurance, but this doesn't happen. It's not enough to have this experience at a high level - staff on the ground need a better understanding of the business.
"For maximum business success, a know-ledge integration of both IT and insurance skills is the ideal position to aim for."
Training IT staff in the fundamentals of insurance presents a challenge for employers, as the IT workforce is notoriously transient and tends to change company - and industry - regularly.
Transportable skills and the overall shortage of quality staff sustain this position, and many employers are reluctant to invest in developing business skills for individuals who may quickly move on to keep up with the latest IT trends.
"Shortages in particular areas are cyclical and depend on the current technology flavour of the month," says Tony Barker, head of general insurance marketing for CSC Financial Services.
"If you're good, your skills are portable, but there is an inevitable learning curve in understanding the business."
Until recently, CSC had a policy of training its business analysts in the basics of insurance, through the Chartered Insurance Institute's proficiency exam.
"The insurance training helped our people understand the language and terminology much quicker than would have been the case," Barker says. "We have moved away from this now because we have many experienced people and we are lucky that our staff turnover is low."
Understand the issues
Barker believes it is important for technology suppliers like CSC to demonstrate an understanding of the business sector in which they are engaged.
"One of the things we have to do, particularly on bigger propositions, is to show we understand the business issues and can tackle them effectively. At the bottom end, programmers don't necessarily need an insurance background, provided they are working to a good specification. And in some cases, this can help, because they may question certain processes, which can lead to improvements."
IT recruitment companies agree most employers are forced to view insurance experience as a preference rather than a prerequisite for most lower level IT jobs.
Rob Fanshaw, consultant for Information Technology Services, says: "Employers still require insurance backgrounds for business analysts, project managers and senior positions, but they can't demand this experience in other roles, as there aren't many who have the skills."
In today's market, two to three years in the insurance sector would count as sufficient background for senior positions. "Specific insurance qualifications aren't demanded - it's the sector experience that counts. A year or so in insurance, plus a history in financial services, would count as relevant for managerial roles," says Fanshaw.
With regard to the particular problem of the insurance sector's un-sexy image, Fanshaw observes that: "Telecomms and e-commerce are the places for IT people to be. This is good news in some respects, as e-commerce roles are taken for their development opportunity and the industry is often irrelevant. We're still seeing a varied amount of insurance e-commerce positions coming through, right through to the senior level."
The importance of IT
Information technology has become fundamental in insurance today and there are signs that more people from within the business are trying to understand the new technology. But not enough have this approach.
"IT is becoming more important than the business," says Fisher. "It's a simple fact that some businesses are now totally dependent on IT, and technology has overtaken what the original business was."
He believes that IT directors are gaining more power within the business.
"Things have started to get a little more sensible as the business understands more about IT, but there's arrogance from some IT people who believe they are very powerful. This is helped by the general lack of understanding of the IT sector."
Most, if not all, insurance IT managers are well acquainted with the difficulties facing their recruitment strategies. The trend for outsourcing projects to IT suppliers may be cost-effective in the short term, but ultimately results in a reduced base of home-grown talent who understand the business.
If this is the way forward for the future, the end of the all-powerful IT department could well be around the corner, making way for smaller, leaner teams of in-house IT specialists, supported by external suppliers. In this scenario, the impetus to provide technical staff with business knowledge will fall on to the suppliers, in order to meet the demands of the increasingly powerful insurance companies.
The solution to the IT drought? Go external
With insurers placing technology at the forefront of much of their strategy, the continuing IT staff shortage means that many skilled workers are pulled in from other areas. But where is the real expertise coming from?
Stephen Asher, of Ultraviolet Technology Group, says that, without exception, IT expertise comes from consultancies and specialist technology suppliers. "Businesses, especially in the City, are simply not equipped to build strong in-house IT," he says.
The business of insurance remains at the mercy of trends in technology and the problems of staff supply and demand. Total reliance on technology as a cost saver and driver of strategy is being compromised by the lack of business experience in the IT workforce. As new generations come into the workforce, they will be better equipped with the basics in computer technology, helping to bridge the gap.
But there is a conflicting message coming from both sectors. Those from the business sector believe they need to employ more IT staff with insurance experience, but they are finding this expectation is not in line with the reality of the market.
Asher says the insurance sector overestimates the uniqueness of its needs when it comes to recruiting. "Certainly, at the business analysis end of things, there need to be specialists, but for technical and managerial roles the industry should recruit from further afield, if only to counter the increasing skills shortfall in insurance," he says.
"The bottom line is this: IT staff recruited from outside of insurance and finance are usually better, always cheaper and generally much more likely to work hard to make the most of the opportunity."
Asher believes employers must identify the roles which require the most skill and experience, and focus on preserving them. "The message is, build and keep that hard business analysis expertise, as it is the most vital skill of all."