Insurers are allocating 3.0 percent to 4.5 percent of its direct premium to its IT budgets in 2013, according to “2013 North America Insurance CIO Survey: Pressures, Priorities and Innovation.”

The report from Celent indicates that the year-over-year increase in insurers’ 2013 IT budgets was 6.3 percent, a robust increase the financial research and consulting firm said is somewhat greater than other surveys have reported. Celent also notes that at the low end of the scale, only about 15 percent of the 24, mostly P&C, CIOs that participated in the survey reported flat or negative year-over-year changes.

Survey results showed policy administration, new business/underwriting/rating, distribution and external portals, and claims initiatives consume just over half of total new project resources. As in prior years, policy administration initiatives take the largest share (21 percent) of new project resources. All of the CIOs surveyed have improvement plans—consolidation of multiple systems, wrap and extend, and/or incremental improvement—for their policy admin system(s) over the next three years.

The other three categories—new business/underwriting/rating, distribution and external portals, and claims—have similar shares each in the 10 percent to 13 percent. Celent is seeing an increasing level of interest in underwriting solutions (despite the scarcity of stand-alone packages). In fact, nearly two-fifths of the CIOs plan to wrap and extend their underwriting system. Celent attributes this to a need for greater flexibility and automation, and is enabled by the increasing use of rules and workflow/BPM systems.

The report also describes how CIOs are dealing with the four levels of Celent's Innovation model: perception; analysis; process, decisions and experience; and results. In the survey Celent saw no real examples of creative disruption in the insurance market, so it focused its report on improvement vs. innovation and the fine line in between, it said.

In 2012 and early 2013, insurers that see innovation as important to their business. "Insurers who view innovation as integral to their business are focused on creating the right organization for identifying and deploying innovative projects," said Chuck Johnston, research director with Celent's Insurance Group and coauthor of the report. "In many cases, these are IT-led initiatives, since technology is seen as an innovation enabler."

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