A Cure for Panic Attacks

By Sharon S. Schwartzman

What should insurance IT leadership do when the financial markets commonly are described as being a devastating bloodbath, hit by a train or in a terrifying plummet, a spectacular free-fall, or a stomach-crunching meltdown? Alternately greed and fear have been driving the market. And now, at press time, the stock market has hit a five-year low with unprecedented slides, and despite some rallies, there is nowhere left to hide. Every corner of the planet has been negatively affected to varying degrees. So, besides going somewhere secluded and letting out a cathartic primal scream, what's next?

First, let's take the emotion out of it and examine the landscape. Toss those old revenue projections out the window–those days are gone. With layoffs, there are fewer employees to insure; with money tight, companies and individuals will be buying fewer big-ticket items that normally would be insured; and life policies may be viewed as a non-necessity until times get better. On the other side of the mess, insurers invested in instruments that have taken a serious hit have begun to wobble, with the unsurprising likely result of agent desertion. Lowered investment income is probable for the foreseeable future. And all this taking place alongside the normal but potentially devastating risks of hurricanes and other natural, unavoidable disasters.

While no one, including the government, has the answer, there are good business practices to employ, all of which rely on common sense; rigorous, pragmatic disciplines–and the technology backbone that enables intelligent business practices.

We also must expect more moves such as those taken by Allianz to buy into The Hartford–with the accompanying challenges and a drive for efficiencies. Infrastructure, SOA, and similar projects that facilitate initiatives are more important than ever.

According to analyst firm Celent, "there will be downward pressure on IT budgets for at least the next 12 to 24 months. But Celent believes that the result will be a flat IT 2009 budget vs. 2008, as opposed to modest growth of two to three percent we predicted earlier this year." So, no growth in spending but no calamitous hemorrhaging, either–I think we'd all be happy if that were the case in our 401(k) portfolios.

I can only hope when you read this, the roller-coaster financial movements no longer beg for a heavy dose of motion sickness meds. Recovery may take time, and probably no one will exit unscathed. But not panicking and taking some logical defensive actions really are the best we can do. Competitive issues notwithstanding, if anyone has any other advice to offer, please contact me so we can share our collective experience and overcome these hurdles together.