A survey of 80 insurer CIO and senior-level executives confirms the established goals and direction of the industry: judicious steam ahead.

Conducted by New York-based Novarica, the survey results note that IT budget allocation is a critical requirement for both growth initiatives and reduction of overall operating expenses.

Members of Novarica’s Insurance Technology Research Council revealed that as 2010 progresses, budgets are “steady and increasing slightly,” with policy administration projects widespread across all lines of business.

“Checking in after the first quarter, most of the budget projections from our last poll in November 2009 continue to hold, or have proven themselves even a little conservative,” notes Matthew Josefowicz, director of the insurance practice at Novarica, in the report.

Josefowicz reports that large property/casualty insurers foresaw mostly level or slightly higher budgets late in 2009, while the current survey respondents seem tilted a little more toward increases. This is the first Novarica poll in which economic downturn emerged as a significant issue for large property/casualty insurers, most notably, that many large P/C insurers are having trouble maintaining their premium income levels.

Midsize property/casualty companies, which saw slightly greater increases for 2009, have turned slightly more conservative as a group as projected.

Life/annuity/health budgets continue to be split, with most having budgeted an increase in IT spend in 2010, and others are projecting continued cuts.

Overall, fewer than 25% of insurers in any category are actually reporting budget cuts in 2010 as compared with last year.

“Projections for 2011 are even more optimistic, with very few firms projecting shrinking budgets at all,” notes Josefowicz.

The survey results confirm that the top business drivers on average continue to be supporting growth strategies and increasing operational effectiveness, as well as reducing organization-wide expenses. The report points to large life/annuity/health insurers as a group worth watching, as this sector’s focus on dealing with the economic downturn remains a top-of-mind issue, largely attributable to the economy eroding not only investment returns, but demand for discretionary protection and wealth products in general.

The top three business capabilities that business executives want IT to improve in order make the company successful in 2010-2011.

* Speed to market for true-new products (large and midsize life/annuity/health)

* Speed to market for product changes (large property/casualty and life/annuity/health)

* Distributor ease of doing business (midsize property/casualty).

The poll results added few surprises in terms of where IT dollars will be spent (policy administration, claims and business intelligence) for 2010. However, the latest survey results indicate a prevalence of claims projects increasing somewhat among larger property/casualty insurers, and policy administration more likely for life/annuity/health insurers.

The same priorities are projected for 2011, with one exception--the projected growth of GL/ERP among larger companies for next year, and a growth in product modeling and management (although both of those are heavily influenced by the small sample group here for large life/annuity/health firms).

“Insurance IT seems to have escaped the “do more with less” trap of recent years and has now firmly moved into the “do a lot more with a little more” camp,” notes Josefowicz. “As 2010 progresses, we see a continuation of the trends we predicted at the end of last year, i.e., growth in investments in core systems to deliver these business capabilities.”





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