Filed Under:Carrier Innovations, Technology Solutions

Hop on Board: Spending Continues to Rise for Core Systems

We are only a month into the new year, so it’s too early to determine what type of year this will be for information technology professionals working in the insurance industry. One thing is certain, though, insurance carriers are relying on their IT departments more and more each year and that is evidenced by the increase in technology spending that several industry analysts have forecasted for this year.

These increases in IT investment bode well for insurers, particularly among carriers where the business side has come to understand—and embrace—the significance of IT enablement, according to Deb Smallwood, founder of Strategy Meets Action (SMA).

Policy administration system replacement remains a top priority for insurers in 2012, particularly for large and midsize carriers, according to Matt Josefowicz. It is less of a priority for smaller carriers, though.

“That’s partly because small insurers have fewer systems and may not feel like they can afford a newer system,” says Josefowicz, partner and managing director in the insurance practice at Novarica.


Smallwood maintains the most troubling challenge for 2012 involves project management, particularly the need to ensure the project management office has the right mix of business and technical analysts.

But Harris-Ferrante points out what sometimes happens is a vendor acquires a company and decides against making changes to the guts of the system they just bought because that would cause problems for existing users. But if a carrier buys two applications from a single vendor and the products don’t have the same technical foundation or data model, it means the carrier needs to have duplicate skill sets to maintain the products, they have to deal with two architectures, and also will need to make the data models work together.

“It’s not simple,” she says. “There’s no synthesis in the technology foundation with some of these applications. It might be better than dealing with two vendors from a vendor relationship management point of view, but from a technical integration, total-cost-of-ownership, and maintenance point of view, it’s not helping a lot.”


In its report on U.S. insurer IT budgets and projects for 2012, Novarica found many carriers rated their systems as being poor in quality. Josefowicz believes carriers are looking at where they can obtain the greatest improvements in these systems on a short-term basis, such as enhancements. Although such a plan may be considered less expensive, Josefowicz regards it as a risk management issue.


Customer-centric projects will be a major area of focus for some insurers in 2012. The CRM era of the 1990s was universally panned, but Harris-Ferrante points out things have changed since then. To that end, a number of Gartner’s larger clients have begun strategic initiatives around customer experience management, she adds.

“We need to catch up with what is going on in other industries,” she says. “This is the age of the customer and if we want to be competitive we have to manage our resources better than we have in the past and be smarter about it all.”

Many carriers already have business intelligence and predictive analytics in place, but Carney believes they are looking to spread usage broadly across the business.

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