In insurance technology, it often seems that the more things change, the more they stay the same. Despite the rapid changes in technology across the economy, the main story of 2014 when it comes to insurer IT budgets and project priorities is one of continuity. However, the rapid changes in the context in which insurers are operating are having an effect on strategies and priorities as well.

For more than half of respondents in Novarica's annual study of budgets and projects for the coming year, the top two highest priority projects for 2014 were the exact same as for 2013. Not surprisingly, long-term project priorities don't change abruptly just because we move from December to January. Enabling insurance business operations through technology presents a complex set of well-known problems. Most insurers have a long list of business capability needs, much longer than can be addressed in a single calendar year.

The most common top priority projects for 2014 are to be policy administration systems, business intelligence and analytics, portals and, for P&C insurers, claims. Compared to 2013, there are slightly more customer relationship management (CRM) and slightly more general ledger/financials projects in insurers' top-three priorities.

Despite this trend, some insurers are turning attention to newer areas, with slight growths in deployment and pilots in mobile and social. Most notably, the percentage of large P&C insurers that are investing in or piloting the infrastructure for big data was double that of last year's survey.

Business intelligence/data analytics was the most commonly cited area that insurer CIOs said business executive partners want them to improve, and this is driving investment across all areas, from core systems to CRM and financials as well as direct investment in data infrastructures, reporting tools and predictive modeling.

But while the growing need to leverage data more effectively through better analytics is driving IT priorities, it is not necessarily the largest area of spend. Most insurers have been making data infrastructure and reporting investments for the past several years, and predictive modeling is less a matter of implementing data systems than it is of developing models and embedding them into production systems from product design to rating, and underwriting to service and claims.

The increasing realization of the importance of analytics is part of the changed context that insurers are facing in 2014. Across all sectors of the industry, there's a growing understanding of the value of analytics in customer strategy, product design, distribution optimization and other areas, as well as the core areas of risk analysis, pricing and loss minimization.

The ubiquity of available data and the power of modern analytics also are enabling insurers to rethink what's possible in delivering value to customers, whether it's streamlining applications through greater use of third-party data or even exploring direct distribution in new lines of business, such as small commercial P&C.

Of course, it's not just data and analytics that are changing the context in which insurers operate. Tablets are becoming a critical platform for distributors, policyholders and internal stakeholders. User experience expectations continue to rise exponentially, driven by companies, such as Amazon, Google and Apple. Even the federal government needs to consider user experience, as this fall's disastrous launch of showed all too well.

Like analytics and mobile, formerly stand-alone topics like social and cloud also are being assimilated into discussions about the multi-screen reality, customer and distributor communication strategies, optimizing IT infrastructure and changing business practices across product, marketing, distribution, service and claims.

This is parallel to the assimilation of e-business over the past decade into the standard operating model of every insurer. New information technology capabilities will continue to affect the operating model of the industry, and CIOs will continue to have a key dual role: managing the delivery of incremental new capabilities and educating fellow CXOs on the transformational potential of strategic initiatives.

Changes in technology capabilities are also affecting how CIOs run their own organizations. Many are knee-deep in the challenge of turning waterfall-based, order-taking, support organizations into more nimble and agile capability-enabling partner organizations. This shift is challenging both inside IT, where it requires new skills and new thinking, and organizationally, where static budget and governance processes inhibit agility and innovation.

Of course, CIOs have faced these challenges for the last several years and will face them into 2015 and beyond. Only the sense of urgency will change, as the changes in context accelerate the necessity for changes in capabilities. INNSight is exclusive commentary from Novarica.

Matthew Josefowicz is managing director of Novarica, a research and advisory firm focused on business and technology strategy for insurers.

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