Sapiens International Corp.has announced results of its survey of U.S.-based senior insurance executives on industry IT trends conducted at the ISOTech tradeshow in Anaheim, California, in late 2003. The survey uncovered an industry inclination toward short-term solutions and quick fixes that could harm companies downstream.

According to the survey, a flat or reduced IT budget ranked high on insurance executives list of short-term market impacts through 2004 and less than half of respondents predicted IT budget increases through 2006.

Asked to rank the greatest market impact on corporate strategy in the short-term, 22 percent pointed to focus on internal IT efficiency and cost containment, 17 percent internal infrastructure focus versus external and 12 percent legacy systems modernization. The short-term strategies are paving the way for anticipated medium-term activities through 2006, including extending distribution channels to meet new demand (15%), rationalizing supported platforms (14%), and moving to data and development standards (14%).

Survey participants also identified the need for agile systems to support changing business conditions (17%) as the most significant automation driver in the near-term in order to meet complex market challenges and the need to control operational costs. Needs driving automation were:

  • Agile Systems To Support Changing Business Conditions 17%
  • Minimize Time/Cost To Maintain Legacy Environments 13%
  • Better Information And Service To/From Distribution Channels 11%
  • Automate Manual Or Partially Automate Processes 11%
  • Better Information To Support Customer & Business Exposure Management 11%
  • Achieve ROI For The Business Or Line Of Business 9%
  • Standardize Development Environments And In-House Skill Requirements 8%
  • Integrated Systems And Services For Quicker Regulatory Compliance 8%
  • Better Business Contingency And Recovery Support 7%
  • Separate, Document And Validate Core Business Logic 5%

Integrity issues such as managing IT-based risks and increased traceability of business transactions received lower weight as critical, short-term IT success factors, 4 percent and 6 percent respectively.
To help insurers achieve internal efficiency goals and keep costs in line, IT outsourcing is either underway (36%) or under consideration (20%) in more than half the respondents organizations, and business process outsourcing (BPO) is rated as a key consideration through 2004.

Despite continued interest in IT outsourcing and cost containment, 50 percent of respondents indicated their organizations plan to build new applications through 2004 and an additional 32 percent stated they would build with a vendor. A significant decrease in pure in-house development to 26 percent is predicted by 2006, but is slightly offset by an increase in respondents planning to build with a vendor (from 32% to 45%). An increased number of insurers also anticipate purchasing packaged applications during the next three years (from 14% to 23%), while planned use of outsourced options remains largely constant.  

"Clearly, a tactical business focus continues to drive insurance organizations," said Judy Johnson, Vice President of Insurance Strategies for Sapiens Americas. "However, a short-term focus could mean duplication of legacy issues in newer systems. Insurers cannot obtain the medium-term results they desire without changing the way they manage IT. A short-term focus that fails to account for escalating business and IT integrity issues could find insurers facing the same health and reputation challenges as some former household name organizations."

Source: Sapiens International Corp.


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