As 2003 comes to a close, it's a great opportunity for executives to gauge the current business climate and identify trends that will follow through to the new year. For insurance carriers, the near-term outlook is considerably more upbeat than it was 12 months ago.That was the crux of the message delivered by Frank Coyne, ISO chairman, president and CEO, to attendees at the recent ISOTech conference. Coyne's keynote highlighted significant indicators of the firming insurance market: Premiums rose 11% in the first half of 2003; the industry's annualized return on net worth rose a robust 9.7% during the first six months of the year, a significant improvement over the 1.8% gain in 2001; and, the industry's combined ratio is projected to improve to 101, nearly 15 points higher than 2001's level of 115.9.

I'd also add the strengthening equities market to the list of positive signs that the industry is rebounding from the depths of its recent business slump. The miniscule return on insurers' portfolios curtailed carriers' capital investments, including technology spending. There are signs-including industry research and what insurance executives are telling us-that IT spending will return to its traditional 5%-8% growth rate over the next three to five years.

Where are carriers targeting their IT investments? Check out "Statistically Speaking" on page 12, which highlights recent industry research from Datamonitor indicating several notable shifts in technology budgets. Claims processing technologies, agent/broker integration and outsourcing are areas that will experience the biggest growth in IT spending through 2006. The acceptance of outsourcing options-Datamonitor predicts that insurers will accelerate outsourcing spending at a CAGR of 8.1% through 2006-is a significant shift in IT strategy, one that if done correctly could prove to be beneficial to carriers.

Also check out the results of our Third Annual "Best of the Newest" survey, which also highlights carriers' growing interest in claims administration tools and outsourcing. According to our panel of industry experts, claims administration technologies are having the greatest impact on insurers' operations, while outsourcing's impact score ranked a surprising fifth.

Clearly, carriers are rethinking their IT strategies to best suit their business needs and to address the realities of today's business climate. It's also evident that insurers firmly believe the integration of business and IT strategies is crucial to their success today and into the future.

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