INFORMATION TECHNOLOGY AND WORKER COMPOSITION - DETERMINANTS OF PRODUCTIVITY IN THE LIFE-INSURANCE INDUSTRY

This paper investigates the impact of IT investments and worker compos ition on the productivity of life insurance companies. The majority of previous IT productivity studies follow a technological imperative, h ypothesizing a direct relationship between higher IT investments and i ncreased productivity. This paper shifts the focus toward the organiza tional imperative, which views returns on IT investments as a result o f the alignment between technology and other critical management choic es. Specifically, the study focuses on the alignment between IT invest ments and worker composition, measured in terms of relative numbers of clerical, managerial, and professional positions to the total number of employees. Hypotheses are tested using a data set compiled over a 1 0-year period for 52 life insurance companies. With respect to prior r esearch, the study is novel in its adoption of a model of productivity that accounts for both separate and combined effects of IT investment s and worker composition. Premium income per employee and total operat ing expense to premium income are used as indicators of productivity. Study findings show that increases in IT expenses are associated with productivity benefits when accompanied by changes in worker compositio n. Life insurance companies that have decreased their proportion of cl ericals and professionals while at the same time investing in IT have experienced productivity improvements. On the other hand, companies de creasing their proportion of managers while investing in IT are found to have reduced productivity.