The New Approach to Cost-Containment

The two major spring insurance technology trade shows - ACORD/LOMA and IASA - give the editors of I&T a great opportunity to feel the pulse of the market, and with the conclusion of the second yesterday, one theme has clearly established itself as a major industry narrative: insurers' approach to cost-control during this economic downturn is radically different than the last time. Whereas the mood of insurers was to slash IT spending in the wake of the dot-com bust, insurers are now looking to leverage IT to attack waste elsewhere.It may be that insurers are smarter about the role of IT today than they were from 2001 to 2003, but other circumstances are different also. For a start, the perception that IT inefficiently used capital was correct. The incidence of project failure was legendary by the time the earlier downturn hit and insurance IT organizations, along with over-ambitious technology start-ups and venture capitalists, were due for a call to discipline. Since then, insurers have begun to apply a great deal more discipline to the financial side of technology investment, and they have made great strides in tightening up project/program management discipline, along with more strategic approaches to configuring the skill profiles of internal versus external IT staff.

Today insurers indeed understand better the importance of technology for both supporting operations and ensuring distributors and end-customers are satisfied. They also understand that IT costs are minor compared to overall operational costs, and that IT is key to reducing operational costs while supporting acquisition and retention initiatives.

Our experience talking not only with vendors, analysts and consultants but also carrier executives continues to confirm this new approach to cost-control in the industry. While spending patterns are changing, carriers continue to spend and most of the vendors we have met with are upbeat and often quite pleasantly surprised.

We encourage you to click through to Kathy Burger's recent conversation with Accenture's Michael Costonis at the ACORD/LOMA Systems Forum for a brief discussion that addresses some of the specifics of how carriers are spending more strategically in these challenging economic times.Today insurers indeed understand better the importance of technology for both supporting operations and ensuring distributors and end-customers are satisfied. They also understand that IT costs are minor compared to overall operational costs, and that IT is key to reducing operational costs while supporting acquisition and retention initiatives.

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