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Proceed with Caution

Demands for ROI and modest budget increases lead to targeted spending on core insurance application areas: claims, policy administration and financial systems.

It's not that insurance companies aren't spending money on technology these days; in fact, they reportedly are spending more than ever. Gartner forecasts the industrywill spend close to $41 billion on IT this year (up from $38 billion in 2001), and expects that number to reach $44.4 billion in 2003. TowerGroup foresees North American insurance IT spending of $41.3 billion in 2003.

The rub, as any solutions provider can tell you, is that insurers are spending that money more slowly, cautiously and deliberately. Under pressure to make prudent tech investments that will show measurable ROI in a relatively short period of time, they are taking longer (even by the industry's historically slow-moving standards) to make buying decisions and have stepped up the due-diligence process. Also, CIOs and other decision-makers have become much more selective in terms of where they'll spend money, especially compared with the "dot-boom" era of just a few years ago.

The systems and projects that are getting the funds are those that improve customer service, increase delivery speeds, and reduce costs. Another priority is consolidating information—whether it is customer information or data about corporate financials—to get a consistent, unified, real-time picture of performance. That's why much of the current IT spending—and activity—is occurring in core systems areas such as policy management/administration, claims, and financial management systems.

Accordingly, I&T's 2002 State of the Industry Report focuses on trends in those three application segments; additionally, we offer analysis from Doculabs as to how insurers can make more effective use of already-stretched IT resources and funds. It may be tough out there, but some organizations are going to succeed; yours might as well be one of them.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio

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