Some observers think that we are at the beginning of the end of this financial crisis and its consequences while others believe this is just the end of the beginning. Celent has given its thoughts on the impact of the financial crisis on insurers in a report published in September last year: Bad News on the Street: Insurance IT Strategy and the Financial Crisis.
Since then the crisis has become a global recession and its impacts are affecting the financial industry as a whole. Of course, the insurance sector is also hit and strategists have to respond with appropriate actions. Definitely one of them and certainly one of the most important one has to deal with costs reduction. In a recent article published by Bloomberg, whose title is “Insurers May Be Forced to Reduce Costs, Outsource,” it appears that European insurers of all sizes are starting to implement drastic measures in order to reduce costs.
Personnel and information technology are certainly the most important expense factors in the insurance industry but it seems that insurers have understood that technology can be an enabler to reduce costs and not only an important cost position in their profit and loss account. In a series of quarterly reports focusing on the current recession and how insurers tend to react to the crisis (the first report has been published in May 2009: Handling the Crisis: Update on Q1 Insurance Industry Expectations and Strategies), Celent tries to track how insurers handle the crisis and what particular initiatives they take in order to go through this difficult time and weather the storm the best way they can. In the first report looking at the first quarter of 2009, it seems that insurers understand that IT can help them reduce costs and therefore they don’t necessarily perceive IT only as a cost driver any longer.
What will be interesting in Celent’s approach is how initiatives will evolve in the near future. Therefore I invite all our members to check our next reports. The next one will be reviewing insurers’ initiatives to handle the crisis in the second quarter of 2009.
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