There is a growing optimism in the insurance industry, which has lead to increased spending on technology this year, according to “2014 Insurance Ecosystem: Insurer Technology Spending, Drivers, and Projects,” a report from Strategy Meets Action, an insurance technology consulting company.
Almost two-thirds of insurers are increasing budgets in 2014, including 11 percent that are planning to increase spending by more than 10 percent, SMA said. On average, IT budgets are increasing by 3 percent, and increases are expected through 2017. Further, the business drivers for technology spending are changing, as are IT budgets and the top initiatives and projects planned for 2014 and the next three years.
According to the research, IT initiatives are having a broader affect on companies than in the past, Strategy Meets Action (SMA) said. And, the number of companies in transformation mode has increased to 32 percent from 13 percent five years ago.
Other highlights from the report:
- The customer and agent experiences are driving significant changes in IT spending.
- The highest priorities for insurers are analytics and mobile.
- The replacement or modernization of core systems is a top strategic initiative and an enabler for other transformation initiatives, SMA said; 36 percent of P&C commercial lines insurers are focused on core systems; 36 percent plan to replace their policy systems in 2014 and another 36 percent planning major enhancements.
Many insurers are continuing to transform core capabilities to better position their businesses for growth, while others are leading with innovation. Some of the most forward thinking organizations are now mapping out a longer-term journey to sharpen their competitive position, to enhance their differentiation, and to win in the marketplace, SMA said.
Personal P&C insurers are more concerned with the customer experience and mobile, SMA said, and commercial lines projects are around policy, underwriting and rating. L&A insurers are heavily investing in upgrading their new business/underwriting capabilities as well as claims and illustrations.
The top five drivers of IT investment are business optimization, customer service, competitive pressures and cost containment. From last year, customer service increased in importance and cost containment is lower on the list, SMA said.
Related content: 5 Areas of Increasing IT Investment
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