Information and Communications Tech Spending Projected to Increase

More than half of insurers, 55 percent, increased their information and communications technology budgets last year, an 18-percent increase compared to 2012, according to a global survey of 118 insurers by Kable Business Intelligence Ltd., a global markets and industrial research and consulting firm.

“Insurers are assigning the greatest importance to the objectives of raising efficiency and increasing customer satisfaction,” said Tim Gower, research director for Kable. “The IT objectives of better demonstrating the value of IT to the business and aligning IT with overall business goals are also playing a significant role in influencing IT investments.”

Large insurers are slightly less likely, 53 percent, to increase information and communications technology (ICT) budgets compared to small and medium-sized insurers, 56 percent. By geography, in the United States, 73 percent said they would increase their ITC budgets, compared to the Middle East, 73 percent; Germany, 70 percent; the UK, 47 percent; France, 50 percent; and Spain, 67 percent.

Recent and expected ICT budget changes among insurers

Trend

2011-12
(Count)

2011-12
(percent)

2012-13 expectation (Count)

2012-13 expectation
(percent)

Decrease 6 percent or more

8

7 percent

13

11 percent

Decrease slightly (1 percent-5 percent)

27

23 percent

13

11 percent

Flat (0 percent)

39

33 percent

27

23 percent

Increase slightly (1-5 percent)

38

32 percent

54

46 percent

Increase significantly (6 percent+)

6

5 percent

11

9 percent

Total

118

100 percent

118

100 percent

Source: Kable                                                                                                                                                                     

Insurers plan to increase spending for ICT product vendors as they look to upgrade current systems and adopt advanced technologies to improve their competitiveness given increasing customer expectations, Kable said.

Major strategic priorities include:

  • Improving security/privacy
  • System simplification
  • Standardizing infrastructure technologies
  • Enhancing collaboration and data management
  • Moving to virtual infrastructure
  • End-to-end business transformation projects
  • Encouraging more IT self service
  • Moving towards a shared services model
  • Business process outsourcing

Insurers are allocating 39 percent of their software budgets to software licenses and buying applications intended to streamline operations and meet customer demand in a difficult global economic environment, Kable said.
“The optimistic picture regarding ICT investments is also indicated by the fact that the percentage of respondents planning to decrease their ICT budgets either slightly or significantly is expected to decline by 8 percent to reach 22 percent in 2013, compared to 30 percent in 2012,” Kable said. “The survey also highlights that the proportion of respondents planning to keep their ICT budgets at the same level in 2013 as in 2012 is expected to decline from 33 percent in 2012 to 23 percent in 2013.”

However, insurers are beginning to shift focus to software as a service, Kable said, and are allocating 22 percent of their software budgets to this category on average in an effort to reduce the costs and effort associated with managing applications.

“Insurers’ investment priorities clearly reveal that demand for cloud computing is set to grow, with 74 percent of respondents anticipating investments in this domain through to the end of 2014,” Kable said.

Kable also said IT investment decisions are primarily influenced by the CIO, followed by the CFO and the CEO. 

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