Insurers plan to invest in IT in the coming years and that spend will be on core systems, according to a new report from research and consulting firm Strategy Meets Action (SMA). The report, “Insurance Ecosystem: Positioning for Growth”—based on SMA’s analysts’ considerations, opinions and insights—indicates that the increase is steady and sticking around. SMA estimates that 57 percent of insurers plan to increase IT spend, compared to 40 percent in 2010. While on average, budgets will increase by 4 percent in 2012, 2013 and 2014, 10 percent of all insurers plan to increase budgets by more than 10 percent for the three-year period, according to SMA.
Organic growth, along with cost containment and expense reduction and customer service, is driving the investment increase. Looking at past years and the fact that this is the first year customer service has made it into the top five drivers, SMA says there is a significant shift in how insurers view the importance of customer service.
Much of the spend will be dedicated to front- and middle-office, growth-driving projects, such as portals, business intelligence, business process management (BPM) and data management. However, new business/underwriting is the number one area for increased IT investment for 2012, according to SMA. “Insurers are increasing investments in new business and underwriting applications that will support growth objectives, help them optimize the efficiency of the business, and improve customer service,” the report states.
Deb Smallwood, founder of SMA, told INN that “retaining customers—policyholders, claimants, and even agents and brokers—and acquiring new ones are absolutely key in any growth strategy. Insurers are becoming more customer-centric once again,” she said.
There is still focus on the core systems. “Not surprisingly, over half of insurers say that they will increase spending on policy administration systems,” the report states. “The policy, billing, and claims core systems have long been regarded as the heart of the business. As customers take more control of how, where, and when they interact with the insurer and its partners, and have increased levels of expectation from those interactions, it is these core systems that must be able to step it up a notch and offer more.”
With so many projects at hand, CIOs have a lot to evaluate. SMA concludes that “organizations that are continuing to look at their IT roadmap with a project-by-project view should be doing some serious rethinking. Roadmaps made up of siloed projects won’t provide the full opportunity to capitalize on IT investments. It’s time to lay out an integrated roadmap and begin the move to a ‘conjoinment’ approach,” meaning, insurers need to take a mature approach to executing the IT roadmap by conjoining business applications and technologies, recognizing the synergies of key technology areas and specific business project initiatives.
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