Perhaps reports of the slowly improving economy have bolstered insurers' spirits and helped to green light IT projects that might otherwise have been tabled for next year. According to a joint report issued by Gartner and the Property Casualty Insurers Association of America’s (PCI), P&C insurers are spending more than expected in 2010 on IT projects.

Data from the fifth annual "Information Technology Spending Survey" shows that the planned IT spending increase from 2009 to 2010 is 7.4%. This figure is much higher than 0.2% increase survey respondents had planned for last year, but falls in line with a projected revenue increase of 5.3%. The planned spending increase is a dramatic departure from the 1.6% decrease from 2008 to 2009.

Additionally, the report finds that the planned increase in spending from 2010 to 2011 will only be around 3.4%.

“The 21 PCI member companies that participate in the study averaged $639 million in revenue and 511 employees,” notes Scott Joyner, VP, information technology for PCI.

Insurers indicated that for 2010, 63% of IT spending is dedicated to “lights-on” support, while the remainder of the IT investments are dedicated to support business growth and transformation. That figure is a slight increase from 59% in 2009, which Gartner Research Director Eric Stegman indicated may have been due to delayed maintenance.

“P&C insurers are still struggling with reducing operational costs and justifying the replacement of aging legacy systems," says Kimberly Harris-Ferrante, VP and distinguished analyst with Gartner’s Insurance Industry Advisory Service. "With rising costs of maintenance, it is imperative that companies begin a more aggressive approach to legacy replacement in order to shift IT spending to more strategic projects that will promote business growth and transformation.”

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