In the economic crisis that began the last decade, many insurers looked at IT as part of the problem. In the most recent economic crisis, IT has been viewed as part of the solution. As insurers position themselves to take advantage of the recovery, they acknowledge the mature markets are unlikely to grow significantly and any significant growth will come from outperforming their peers. They remain committed to making continued technology investments improve customer and distributor service, achieve faster time to market, and use enterprise data to make better decisions in marketing, product design, risk management, and operations.
For 2010, most insurers' top projects are similar to those in 2009--policy administration systems, agent portals, and business intelligence. There is some increased prevalence of claims projects among larger property/casualty insurers and of policy administration among life/annuity/health insurers compared with 2009.
Insurers continue to focus on information technology investments that will support growth strategies, reduce operational expenses, and increase operational effectiveness. Strong information technology capabilities continue to be a critical success factor in this information industry. Insurers count on IT to help them provide:
- Better distributor service (e.g., agent portal and policy administration projects).
- Better customer service (e.g., customer portal and CRM projects).
- More rapid product introduction (e.g., policy administration system projects).
- Better insights based on data analysis (e.g., business intelligence and policy administration projects).
- More efficient workflows (e.g., projects in claims, underwriting, and BPM).
- Acceptable compliance and security (e.g., business intelligence projects).
Along with this recommitment, the tide seems to have shifted for insurers' IT budgets, albeit only slightly. After years of being asked to "do more with less," insurer CIOs have a new and slightly more realistic mandate: "Do a lot more with a little more."
Insurance IT budgets average two percent to four percent of total premium, with P&C insurers spending more on average. Insurers spend on average about 45 percent of their IT budgets on new projects, managing three to five significant new projects per year.
Agent portals offering both informational and transactional functions have become a key component of insurers' strategy as they strive to be "easy to do business with" for their distributors. This is a common area of continuing investment across the industry.
Policy administration is the highest priority area for insurers in 2010, since it is critical to introducing or modifying products, serving customers and distributors, and sourcing data for business intelligence (BI). Scopes of policy admin system (PAS) work vary widely from just core to full suites. Rating, product management, and underwriting are most commonly part of a broader PAS project, but some insurers are investing in these areas specifically in 2010.
BI has become a critical area as both internal and external data volumes are skyrocketing and analytical tools are improving rapidly. Insurers across the board are investing in BI and predictive analytics to improve underwriting, claims, marketing, and even internal operations.
There is no "next big thing" for insurance IT in 2010. Despite the hype around social networking/Web 2.0, and many activities and initiatives in that area, U.S. insurer IT budgets and priorities remain focused where they have been for the last few years. What has changed is the recommitment to solve known problems and deploy serious resources to do so.
Matthew Josefowicz is the director of Novarica and head of the insurance practice.
To learn more about "2010: The Road to Recovery" and to hear Matthew Josefowicz expand on how to position IT for the coming business push, register for the Web seminar sponsored by Tech Decisions. Click here for more information: http://www.tech-decisions.com/webSeminars/2010RoadtoRecovery/Pages/default.aspx?pc=TDseriesSite
