As the year draws to a close, it behooves us to take a look back at some of the technology trends that affected our industry in 2011 and where we stand as the New Year arrives.
Insurance, perhaps more than many industries, is a business that thrives on returns from the investments it makes. Since 2008, however, it’s been difficult to find an investment that pays anywhere near the levels we've seen previously, so income is definitely down. Partly as a result of this—and partly because we are as risk-averse as they come—our industry chose to keep its spending within tight limits, even though indications were that IT budgets, at least, might expand somewhat.
The drop in U.S. unemployment overall from over 9 percent to 8.6 percent, according to the Bureau of Labor Statistics, was somewhat encouraging—until you realize that in 2007 it was 4.6 percent. And how much can we trust that BLS figure with its multiple “adjustments”? The U-6 unemployment rate—which more realistically includes people who have given up looking for jobs and part timers who want full time work—stands at a gaudy 15.6 percent for November, versus 8.5 percent for the same month in 2007.
In our own markets, conditions continue to be tight. Many insurers are continuing to put the emphasis on upgrading or replacing core admin systems in order to keep themselves in a good competitive position for the present and foreseeable future. There are some hopeful economic and IT spending predictions on the horizon for 2012, but we should remember that there were also hopeful predictions for 2010 and 2011.
The industry should be applauded for reaching out to technology for operations solutions that will help companies maintain competitive positions. Technology is not magic, however, and the economic facts of life continue to prevail. As the hard-drinking chief engineer of the Starship Enterprise once remarked to his captain (who was demanding a life-saving technology solution): “I cannot change the laws of physics!”
Interestingly, it may be the smaller insurers—those who already leverage technology as a means to make up for their size disadvantage—that will be willing to take more IT investment risks prior to a full-blown economic recovery. Because they are smaller and leaner, they have less to lose by aggressively pursuing technology initiatives, thus they may be more likely to try some new and interesting developments, including the cloud. In the end, however, they are also insurers, and insurers don’t like to take risks.
What will 2012 bring? I delve into that in my next, and final, blog entry.
Ara C. Trembly (www.aratremblytechnology.com) is the founder of Ara Trembly, The Tech Consultant, and a longtime observer of technology in insurance and financial services.
Readers are encouraged to respond to Ara using the “Add Your Comments” box below. He can also be reached at email@example.com.
This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.
The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.
Register or login for access to this item and much more
All Digital Insurance content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access