Insurance & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Data & Analytics

04:20 PM
Connect Directly
Facebook
Google+
Twitter
RSS
E-Mail
50%
50%

IT Investment to the Rescue

Continuing economic uncertainty has spurred rather than hobbled technology investment, as insurance IT organizations seek to support competitive distinction through superior underwriting, pricing and customer-facing capabilities.

I&T Insurance Technology Outlook 2010IT Investment to the RescueChallenging Climate Forces Insurers to Break New Ground4 Technology Solutions That SizzleRegulatory Outlook: The Truth About Unintended Consequences10 in 2010: What to Watch in The Year Ahead
In the face of economic uncertainty it may be tempting to follow a tentative plan of technology investment. Insurance IT budgets in 2010, however, are more likely to reflect a definite and resolute strategy. As a lasting impact of the recent economic crisis, insurance carriers must prepare for a more intensely competitive business environment, and IT investment will be one of their key avenues for doing so, according to experts.

"Rates are not growing, [and] the market is shrinking due to poor performance across the economy," observes Matthew Josefowicz, head of Novarica's (New York) insurance practice. "Carriers will have to 'steal' market share from others by providing better pricing or service, and IT is at the bottom of that."

The competitive realities of economically challenging times are not new, but this time around other factors are intensifying the need to react, suggests Josefowicz. While "flexibility" and "agility" have long been buzzwords in the insurance technology marketing lexicon, for example, the velocity at which the economy plunged during the crisis showed just how important these qualities are to the insurance enterprise. Even now, Josefowicz comments, "Few insurers' infrastructures are optimized to support rapid shifts in business strategy."

Carriers similarly find themselves challenged to keep up with customer expectations when it comes to technology. Today's personal technology has outstripped business technology, with enormous consequences for both consumer-facing technology and the internal work environment. "It's easier for people to find information and conduct transactions in their personal lives than through enterprise technology," Josefowicz notes. "That's a major change."

To a great extent, surveys of insurance IT spending have shown insurers' continuing intentions not to cut their technology budgets in the face of economic challenges. In fact many are spending more than before, stresses Kimberly Harris-Ferrante, distinguished analyst, Gartner (Stamford, Conn.). According to Gartner research conducted in the second half of 2009, insurance strategists who assume their competitors are pulling back are making a mistake.

"Twenty-eight percent of P&C companies and 19 percent of life insurers invested more in IT in 2009 [than in 2008]," Harris-Ferrante explains. "Therefore there's a very good possibility that they have invested in strategic projects that will put them at an advantage relative to their peers."

Growing the Business

Gartner's research shows that P&C companies will be more focused on initiatives aimed at growing the business, while life insurers will take on more transformational projects, according to Harris-Ferrante. "Life insurers are more focused on data warehouse and business intelligence, while P&C firms were increasingly looking at predictive modeling and projects around product innovation," she relates.

Michael Costonis, executive director of Accenture's insurance practice for North America, sees P&C insurers' investment in underwriting sophistication in general and analytics in particular as reflective of a drive to grow top-line revenue. Carriers will continue to drive major initiatives in perennial areas of focus, such as legacy rationalization and general systems simplification, but in many respects their thinking is, " 'We've already done the easy things,' " says Costonis. "In 2010 they will focus on customer analytics, Web servicing, and more-sophisticated underwriting and risk segmentation."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio

Previous
1 of 2
Next
Register for Insurance & Technology Newsletters
Slideshows
Video