The number of offshore firms with insurance-specific skills and clear success stories has risen dramatically in the past three years. Because of these factors, offshore IT spending by North American insurance carriers will increase from $695 million this year to nearly $1.5 billion by 2006.This prediction comes from Celent Communications Inc., a Boston-based research and advisory firm, which recently published a report titled "Raising the Bar on Offshore IT for Insurance."

Currently, nearly half of the top 200 carriers are using offshore resources in some way, Celent found in its survey. And that number will increase to 75% by 2006. Yet, despite the rapid increase in offshore spending, the insurance industry may be losing billions of dollars in potential savings because of delayed adoption, Celent suggests. Few carriers are maximizing the value of their offshore relationships, for example. Their offshore plans are affected by geopolitical risks, swings in currency exchange and potential negative publicity.

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