The current mind-set of most P&C insurers in India is to utilize technology as a tool to realize efficiencies and streamline operations at the same time, keeping the focus on growth and reduction in costs, according to a new report from Celent. The sector is expected to invest close to US$1.43 billion in technology by 2014.
The analyst firm also expects a 36% increase in technology spending between 2010 and 2011, and 23% between 2011 and 2012 as businesses in the sector see stronger growth in revenues. Much of this technology spending is going to come from the private sector players as they expand operations and increase their customer base. According to the report, “P&C Insurance Technology Trends in India,” a majority of P&C insurers in India are spending in the range of 8% to 12% of their GWP on technology investments. There has been a healthy growth in technology spending in the P&C space, at the rate of 20% in the past five years.
Much like in the United States, focus of carriers is on underwriting, policy administration systems, claims, agency management, finance, and investment management systems, Celent says. This may stem from the business drivers for technology investments in P&C—growing the business, reducing costs and increasing ease of doing business at the producer end. As compared to the life sector, the P&C sector is more focused on deployment of technology for internal efficiency gains, thereby improving margins in a highly competitive environment.
The majority of investments in technology are routed into new builds (60%) rather than maintenance and support (40%). Application spending is on the higher side in the new build outs (approximately 60% of the development budget) as compared to the hardware, middleware and infrastructure spending, the report states. While the maintenance and support budget for most carriers is relatively low compared to acquisition budgets, the state or public sector carriers have a slight skew, with higher maintenance and support budgets for hardware, middleware, and infrastructure.
Specifically, technology spending for motor insurance (at 38%) dominates the overall spending in the P&C sector. Celent expects the share of technology spending will decrease for the motor segment (28%) and increase for the fire (10%), marine (12%), aviation (8%), liabilities and personal accident (14% each) segments by 2012.
P&C carriers in India are increasingly favoring outsourcing in most areas. Most carriers have outsourced call center, desktop support, agent support, and data center administration. Carriers continue to prefer to develop applications in-house.
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Corrected December 15, 2010 at 11:59AM: yes