Insurance CIOs are focusing on IT initiatives this year—which include analytics, core systems modernization, business intelligence, optimization and more—that can help their companies business goals of growth and retention, according to a new report from Celent.

The report, “Property/Casualty Insurance CIO Pressures and Practices 2015: North American Edition,” based on an online survey of 30 CIOs and other senior technology executives, predominantly small and midsize property/casualty insurers, details P&C insurer CIOs 2015 plans, the business priorities they are reacting to, the initiatives they will be funding and what their budgets look like, and more.

“As CIOs look forward to 2015, business leaders are telling CIOs they want IT to support growth and policyholder retention. Resources are generally available and are being used, especially for core systems, analytics, and IT operational excellence,” said Donald Light, research director with Celent’s Insurance practice and author of the report. “All in all, there is a sense among the CIOs of purpose, direction, and realistic optimism.”

The survey found that P&C insurer CIOs across the board CIOs identify the business goal of growth and retention as the most important influence on their IT plans. There is also general agreement that process optimization is the second most important influence. Also, the CIOs of large and mid-sized insurers mutually responded they plan to undertake IT initiatives that focus on operational excellence, analytics, innovation, digital transformation and core system modernization.

 

Small insurers’ CIOs differed in their response to IT initiatives they are planning for this year. Analytics initiatives are underway or scheduled to begin in 2015, according to the study, and core system modernization is almost universally completed, underway, beginning in 2015, or in planning. However, two-fifths of small insurer CIOs are not considering innovation and digital transformation initiatives; and only about one-quarter are not looking at IT operational excellence. According to Celent, limited resources and constant production pressure may be the explanation.

For the largest insurers, initiatives centered around core system activities remain high, and eve higher levels of activity will occur for predictive analytics, master data management, and business intelligence applications. The application priorities of midsize insurer CIOs mirror those of the large insurers, the study found.

There’s good news regarding IT budgets. The report articulates the IT budget as a percentage of direct premium written (DPW), which makes it easier for insurers to benchmark themselves against similar insurers.

YEAR OVER YEAR PERCENTAGE CHANGES IN IT BUDGETS

Figure 11 shows the percentage changes in IT budgets from 2014 to 2015. As usual, small insurers show the greatest variability. The average increases of 4 percent, 6 percent, and 7 percent (for small, midsize, and large insurers) are consistent with the equally healthy range in the 2014 increases over 2013.

Several large insurers had increases of 10 percent or greater — most likely reflecting major core system and analytics initiatives. Several midsize insurers reported numbers around 7 percent to 8 percent. Three small insurers had a negative year over year change, and another three insurers had 0 percent growth.

The survey found that year -over-year percentage increases in IT budgets were 4 percent, 6 percent, and 7 percent, for small, mid-sized and large insurers, respectively. Several large insurers had increases of 10 percent or greater—most likely reflecting major core system and analytics initiatives. 

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