Insurers are becoming insular with information technology maintenance and investment priorities. Referring to it as internal "housecleaning," Cary, N.C.-based Sapiens International Corp. states that U.S. insurers are shifting gears to emphasize internally-driven IT efficiencies as a better way to control costs.Findings from a recent survey conducted by Sapiens, a global IT solutions provider, reveal that externally focused activities, such as business process outsourcing (BPO), customer relationship management (CRM), and standards implementation-such as ACORD XML, now rank significantly lower on the IT priority scale than internal initiatives.

Such programs are led by the need to upgrade policy administration and consolidate applications (see "Looking Inward," right).

Crucial to survival

Sapiens results were drawn from 180 U.S.-based insurance executives on key technology issues. The feedback was generated at the recent Insurance Application Architecture (IAA) meeting, sponsored by IBM Corp., as well as at the Insurance Accounting and Systems Association (IASA) conference in June.

"Insurers have realized that consolidating and enhancing IT systems and processes is crucial to 21st Century survival," says Judy Johnson, vice president of insurance strategies, Sapiens Americas. "Internal technology-based problems can have significant negative upstream and downstream effects and must be addressed to play a significant role in the insurance industry value chain," she says.

Stating that insurers must strive to have a strong "technology backbone" to adapt quickly to business challenges, Johnson says that the emphasis on internal initiatives has been fueled by inefficiencies connected with aging systems and processes (44%), along with excessive IT operational costs (16%).

Other motivating factors in emphasizing internal programs were the need to extend distribution channels to meet new market demands, improve ineffective underwriting, migrate to new platforms, and improve the ability to quickly enforce rate changes.

Financial concerns

The survey also uncovered current marketplace dynamics influencing the internal focus with 73% of respondents citing "industry financial concerns" (uncertain hard market and shaky investment returns) as a significant factor in their IT investment decisions.

When specifically queried about the top technology factors for their organizations with respect to the external environment (competitive, market, or legislative changes), respondents' top picks were also focused on efficiency, with integrating systems across the enterprise ranking as most important (34%), followed by operating in real-time with agents and brokers (27%).

Other technology success factors ranked as "critical" for the industry included: enabling rapid response to the marketplace (15%); improved underwriting (15%); increasing information visibility and access to agents (7%); and managing closed blocks of business (2%), states Sapiens.

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