Today’s insurance CIOs recognize there is a “New Normal,” and are taking necessary steps to adapt, according to
At the analyst firm’s CIO Summit in New York last Friday, Donald Light, senior analyst, highlighted the results of the survey of 24 P&C insurance CIOs, and eight life/health/annuity CIOs in October and November 2010.
Light defined the “New Normal” as an economic and insurance environment with an extended period of flat, minimal or negative economic growth; persistent high unemployment; very low interest rates; and reluctance by businesses and consumers to make major purchases and investments.
Light concluded that while the economic environment is better than last year, but still not out of recession. “The environment is a lot different than three-plus years ago,” he said. “There’s not a rapid bounce back, but we’re on our way.”
For the survey, CIOs were asked about the ongoing recession impact, IT budgets, emerging technologies and overall technology, infrastructure and vendor strategies.
Light called out some of the report’s common themes, including:
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To invest and grow in 2011, large insurers are planning to change cost structures to match their revenues, while small and midsize insurers plan to enter new product, customer or geographic markets.
IT budgets show moderate year-over-year growth, with much of the budget allocated to core systems and data mastery projects. Large insurers will spend, on average, $19 million on policy admin projects, while midsize insurers will spend $8 million and small insurers $3.3 million.
The intent to get off of AS400 also is there for insurance CIOs, but the reality is there is no indication of it actually happening. According to the report, 60% of small insurers are moving entire application and software infrastructure to a modern architecture: SOA and JEE/.NET, and the percentage of large and midsize insurers doing so is about half of that. Sixty-seven percent of midsize insurers are investing in modern architecture and applications only for new initiatives.
In the report, CIOs said they prefered core systems be built by internal IT staff using best-of-breed solutions. Some reasons, Light recognized, include insurers preferring to take on projects themselves, and that some insurers have already done the work to custom build an SOA framework in prior years, and are now just extending the work.
In outsourcing, life/health/annuity insurers prefer ITO for infrastructure, testing, maintenance and development, while P&C insurers prefer ITO for custom development, package implementation and maintenance. BPO usage is focused on claims, billing and call center functions.
Operational SaaS and limited social networking are emerging technologies most in use by respondents. And, many insurers say they will either investigate or pilot mobile applications and cloud computing in 2011.
Celent also revealed what CIO respondents said were some of the most difficult aspects of their jobs:
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