A cross the industry, insurer CIOs are being called upon to deliver ever-increasing sets of business capabilities with budgets that are not shrinking, but also not growing fast enough to meet demand without a leap forward in efficiency. To meet these challenges, CIOs are embracing several key strategies, including blended sourcing, agile development methodologies and modern application infrastructures. While most insurer CIOs are not facing the declining budget situation of the last economic crisis, or even the beginning of the current one, the new rallying cry is to "Do a lot more with a little more."
As the speed of information flow in the regular economy continues to accelerate, the demands on IT in this information business accelerate accordingly. Delays, inefficiencies and lack of data accessibility that might have been tolerable to businesses 10 years ago no longer are. Recent research among the 200-plus members of the Novarica Insurance Technology Research Council shows the situation in which many insurers find themselves, and how each area of their core application infrastructures is faring in this time of increased business demand.
The most important areas are those directly related to stakeholder ease of use and efficient information management.
* Agent portals offering both informational and transactional functions have become a key component of insurers' strategies as they strive to be "easy to do business with" for their distributors. This is a common area of continuing investment across the industry.
* Policy administration is the highest priority area for insurers in 2010, since it is critical to introducing or modifying products, serving customers and distributors, and sourcing data for business intelligence (BI). Scope of policy admin system (PAS) work varies widely, from just core to full suites. Rating, product management and underwriting are most commonly part of a broader PAS project, but some insurers are specifically investing in these areas in 2010. While billing as a stand-alone area is not at the top of many lists for 2010, more than half of the PAS suite projects include billing. As the most common interaction that insurers have with their customers, billing is a service as much as a financials issue.
* BI has become a critical area as both internal and external data volumes are skyrocketing, and analytical tools are rapidly improving. Insurers across the board are investing in BI and predictive analytics to improve underwriting, claims, marketing and even internal operations.
* Claims is a perennial focus area for property/casualty, and claims management systems are on many insurers' priority lists. In life/health, we see some activity among smaller companies, especially in health products, where claims management plays a central role.
Other customer- and distributor-focused areas are also getting attention:
* Customer portals are generally not in most insurers' top three priorities, but life/annuity and personal lines companies continue to slowly invest in building out online sales capabilities, while online self-service is becoming a competitive necessity in these areas, and has received recent investment.
* Distribution management is the focus of some activity, centered on replacing inflexible legacy systems with more modern, configurable solutions to support changes in comp plans and channels.
* Customer relationship management (CRM) is a broad category that includes both contact center management and customer data integration and analysis. Many of the latter initiatives are classed by insurers under BI. CRM for insurers may also include producer (rather than customer) management.
Many of the infrastructure areas that are perceived as being less core to agent, customer and staff experience, or have been previous areas of high investment, are lower priority across the industry.
* Document creation/customer communication management is still the most important element of insurers' communication strategies (even as documents move from paper to electronic). However, most insurers are satisfied with their solutions in this area, and few have included these types of initiatives in their top three.
* Document management/imaging/business process management has largely been addressed by insurers (and has delivered strong results). Few have active projects in their top three for 2010.
* Reinsurance and financials/general ledger, unless they are woefully inadequate, are generally unrelated to improving competitiveness or efficiency, and are not on the list for this year. "Good enough" is the prevailing sentiment.
* Infrastructure and security tends to be an ongoing, low-grade issue rather than an acute issue that jumps into the top-three priorities for most companies. One exception is server virtualization, which is an active priority for companies that haven't already done it.
With business capabilities requirements growing so rapidly, insurers need to focus on the areas of biggest impact and greatest perceived need. There is no "next big thing" for insurance IT in 2010 and 2011.
Despite the hype around social networking/Web 2.0, and many activities and initiatives in that area, U.S. insurer IT budgets and priorities remain focused where they have been for the last few years. What has changed is the recommitment to solve known problems and deploy serious resources to do so.
Matthew Josefowicz is the director of the insurance practice at New York-based research and advisory firm Novarica. This article is based on the findings of research with more than 90 insurer CIOs and IT leaders.
