Insurers’ IT spending globally is expected to reach $140 billion in 2012, indicating a growth in premiums, according to a new report.
“IT spending is a function of company revenue,” said Catherine Stagg-Macey, Celent SVP and co-author of the report, “Global Perspective on IT Spending in Insurance.” “As premiums grow in a region, IT spending increases, which reflects rising costs such as labor and the reduced costs of hardware. IT can help reduce duplication of effort and costs. The smart application of technology allows a company to do the same things in a smarter way more quickly.”
The study found that insurers in Europe account for 40 percent of IT spending compared to 35 percent for North American insurers.
“European insurers spend about 10 percent more on external services than North American insurers,” Stagg-Macey told Insurance Networking News. “This category covers use of consultancies and other third parties who provide ad hoc or long term contractual support for the insurer in areas from application development to infrastructure maintenance. European GDP is slow and those countries with large exposure to Greece, such as France, are finding themselves in trouble but most European insurers are reporting record premium growth figures.
IT spending in North America is expected to climb to $58 billion by 2014. IT spending that impacts the public tends to fall in the areas of pricing, customer experience, portals, mobile technology and social media. “Overall, Europe as a region has more premium income than North American insurers and so the regional spend on IT is higher,” Stagg-Macey.
Insurers in Asia-Pacific account for 19 percent, Latin America 3 percent and the rest of the world accounts for the remaining 3 percent of global IT spending.
“Our findings indicate that IT remains an important part of the insurer business,” said Stagg-Macey. “IT is not a cost center but an important contribution to the running of an efficient and effective organization.”
According to the survey, the fastest growth will be seen in insurers in Latin America with IT spending increasing by 22 percent in 2012.
“Growth allows for new investment, which is being targeted to replace old core insurance systems that are inhibitors to the company growth imperatives,” said Stagg-Macey.
Spending in the Asia Pacific region will grow to $29 billion by 2014. Although growth in absolute figures looks modest in Asia-Pacific, there is buying parity.
“Buying parity is quite different in this region,” said Stagg-Macey. “They can buy more for the dollar than other regions.”
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