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Humans Are Important Too

Globalisation does not mean the people at the centre have all the answers - a rule that applies equally to the information technology department, argues Jeff Ward of TriSystems.

It is hard to think of any greater cause of conflict within global insurance and reinsurance companies than the relationship between headquarters and once semi-autonomous local operations.

Whenever a company decides the time has come to behave as a global entity, there is a natural tendency for those at the centre to determine everything from underwriting policy to IT, from marketing to human resources. This can cause friction with the outlying offices, which find their independence restricted by people who, as they see it, do not understand what is happening on the ground.

Some companies have handled this inevitable tension better than others. In quite a few cases, however, it has led to the resignation or dismissal of senior executives, early retirements and the mass defection of staff, to name just some of the consequences.

Information Technology is perceived by many companies to lie outside this debate. I have heard the argument advanced on countless occasions that a PC is a PC, and an application just the same whether you are in London or Latvia. At GlobalReCo, you should apparently be able to walk into a company office anywhere in the world and see exactly the same computer interface with the same data presented in the same way. IT, therefore, is the one area that can self-evidently be driven and managed on a global basis. Or is it?

This thought process may sound compelling in the boardroom, but in practice it is causing global insurance and reinsurance companies a lot of disruption and heartache. International re/insurance operations are complex, diverse entities; they defy such logic. They depend on the willingness and ability of individual human beings to deliver change, and human beings should not be treated like cogs in a machine.

Anyone who advances this type of counter-argument runs the risk of being seen as against change; even worse, of acting to protect their own little empire within the organisation. That is not my intention: part of my job is to help re/insurance companies develop globally consistent approaches towards IT, but that should not mean shoehorning incompatible systems and practices into ill-conceived global models.

International companies are not homogenous units. They are normally the products of multiple mergers. Even when this is not the case, different company departments develop their own practices and end up with a wide range of differing IT systems that, mostly, suit their parochial needs. The practical difficulty of implementing common systems and practices into offices all around the world can then be overwhelming.

Of course, a key point of setting up a global operation is to iron out these variations, so enabling economies of scale, and applying other such classical business theory. But you can only do so by making due allowance for the legacy systems already in place and the variations in individual marketplaces.

The only reason to have IT is to make the jobs of human beings easier, and people in different locations have different needs. Distribution, reporting, administration and product requirements vary from region to region, especially in the London market.

To make this point is not to argue that London should be allowed to cut itself from the rest of the world in IT terms - far from it. Nor would I deny that there is a temptation for some local IT departments to exaggerate the difficulties. The differences are real, nonetheless. Nowhere else has a subscription market like London, nowhere else has the Lloyd's market, Ins-sure or a comparable broker distribution network. The LMP reform process, despite its slow start, is a welcome and increasingly influential factor that makes London unique.

So, one objective of any global insurance or reinsurance company should be to integrate their London IT operation seamlessly, whilst accommodating the factors that make it special. Globalisation must not ignore valid local differences in business process or culture.

A global company must allow diversity to be a source of strength. Yes, a company's headquarters will want to set overall IT standards and objectives, but the people on the ground are the ones who can then make it happen. They have all those years of unique experience, and they understand local market conditions and legacy IT systems. They can almost always do it cheaper and more efficiently than group headquarters can.

This approach may go against the centralising instincts of many global entities, but in my experience it can save a lot of pain.

Jeff Ward is a director of TriSystems, a supplier of IT consultancy and software to international insurers and reinsurers.

-   Insurance Day