While the raw cost of technology decreases every year, insurer IT budgets have not declined; they have remained stubbornly in the 2-5 percent-of-premium range for more than a decade, prompting execs to ask why.
The answer is that while the raw cost of deploying the same IT capability decreases slightly each year, the demand for new capabilities increases dramatically. In other words, the cost of a "unit" of IT may be declining, but exactly what a "unit" consists of has expanded dramatically. This expansion also creates additional complexity, which adds additional cost.
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