It's that time of year again. Budgets are being prepared for 2012 and the infighting has begun on which department get the most attention. What we are learning is carriers may focus on different elements in spending, but virtually everything involves the use of technology.

For years, the two words heard most associated with IT budget discussions were “cautious optimism.” This usually translated to small increases in IT spending. We don't have any firm numbers yet, but it appears that “optimism” might be the word for 2012 without its formerly ubiquitous partner “cautious.”

This no doubt is surprising to some, particularly when you consider the state of the U.S. economy.

Ellen Carney is wrapping up her spending report for Forrester and admitted to surprise that the industry is showing a “pre-2008 crash level of optimism.”

The faith insurers have placed in technology seems remarkable considering what many economists believe is a looming recession, the continuing global debt crisis, and what Carney describes as “the worst cat year ever.”

Novarica's Matt Josefowicz was the first out of the box with a spending forecast. He writes on his blog: “Despite the recession, insurer IT spending will not slow in 2012. Insurers continue to focus on delivering badly-needed business capabilities to support growth, increase competitive parity, and improve operational effectiveness.”

Carney points out an incredible statistic. When asked by Forrester how they view the role of technology in insurance today, 97 percent of carriers expressed the belief that technology is “critical” to serve and support their customers.

“That's an interesting turn of events in terms of how technology is being positioned,” says Carney.

Josefowicz points out CIOs are less than satisfied with the state of their systems and the executive leadership appears to be heeding the warnings. Most of the CIOs interviewed by Novarica rate nearly half of their systems below acceptable.

“It's the need to improve these capabilities rather than external factors like the economic recession and compliance pressures that are the primary drivers for most insurers' IT budgets and plans,” writes Josefowicz.

Josefowicz notes another significant trend: More than one-third of insurers are either in the middle of a core policy administration system replacement or are planning one for 2012.

Considering policy systems are among the largest technology investments an insurer can make, Carney's views have to be ringing in the ears of IT departments and insurance software vendors alike:

“It's a good thing now to be part of IT and insurance,” she says. “You're not a cost to the business anymore, you are the business.”

Special Reports /

Insurance IT Spending: Throw Out the Caution?

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