Insurance companies will spend most of their IT dollars in the next year to enhance performance/predictive analytics and purchase systems to improve management of business processes, according to a recent study. The survey, conducted by TowerGroup (Needham, Mass) with support from Insurance & Technology, interviewed corporate-level executives from property and casualty, and life and annuity insurers.
"Insurers want to improve the ease of doing business, the quality of service provided and the speed of services for their distributors," says Cynthia Saccocia, TowerGroup director and author of the report. "The key to all of this is that ... it's a competitive advantage to retain distributors," or agents, who want to work for companies that provide them with the best tools to service clients so that they can earn more commissions, Saccocia explains.
"Offering first-class services is critical because it is easy for customers and distributors to defect to the competition," Saccocia continues. This is particularly true for life and annuity insurers, which face additional competition from banks and brokerages, she adds.
Predictive analytics and better data management also will be among the top areas of IT spending because they provide economies of scale and interoperability throughout the enterprise, Saccocia forecasts. Property and casualty insurers can use technology to automate and streamline the underwriting and rating process, she explains. "Straight-through processing, predictive modeling, risk segmentation and product management are cornerstones of underwriting," Saccocia says.
Better Planning Needed
Insurers, however, can't just indiscriminately invest in technology, Saccocia stresses. "The most pressing issues that insurance companies face today are firmly rooted in the ongoing disconnect between business units and" IT, she asserts.
IT executives don't actively participate in setting the overall strategic direction for their companies, resulting in less-than-optimal returns on IT investments, Saccocia contends. Setting business priorities can help insurers see where technology investments will provide the best values.
Once companies close the gap between business and technology, they move from a focus on cost containment to differentiation and growth, Saccocia notes. "To succeed, insurers must identify their core competencies and capitalize on them by improving their operational effectiveness," she says.