"Slightly" is the budget word for 2013, just as it was in 2012. In Novarica's latest survey on U.S. insurer IT budgets and projects for 2013, one of the key findings is that most insurers expect to increase budgets for next year only slightly, according to Matt Josefowicz, Novarica's partner and managing director.

"The priorities appear to be are fairly consistent year to year," says Josefowicz of the 2012 and 2013 budget surveys. "There's some shift in terms of mindset and areas getting the most interest, but in terms of where the dollars are being spent it looks a lot like 2012."

The survey also showed that insurers are critical of their own technology-enabled capabilities, according to Josefowicz.

"A lot of that has to do with user experience," he says. "The culture of insurance IT for the last couple of decades has been very much a closed system. Over the last 10 years there's been more openness in terms of opening systems to agents and starting to open some systems to customers."

Over that time, technology has become more pervasive in everyone's life away from the workplace, so the level of expectation for technology applications by employees and executives has grown dramatically.

"Insurance IT used to be a fairly insular culture and was all about record keeping and the transaction process, now it is more focused on empowering knowledge workers to do their job," says Josefowicz. "The areas where companies rate themselves as unacceptable are things like agent portals, customer portals, CRM, underwriter work benches, and BI capabilities. Those areas have to do with providing information to people who need it in a useful and easy way."

Josefowicz agrees there is more "Monday-morning quarterbacking" done by workers in regards to the systems they are using in the office and how IT is performing.

"The bar has been raised dramatically in terms of what people expect when they sit down at their desk," he says. "The fact is that just about everyone who works in an insurance company, when they turn on the computer they are in the company's environment. If the environment is not doing what they want it to do it affects their ability to do their job effectively."

Core system replacement continues to be the focus most carriers will be working on in 2013, a pattern that has been in play for most of the last 10 years. Josefowicz believes this direction will continue for at least the next three to five years, but he points out that could just be the beginning of another cycle in core solutions.

"At that point the systems put in during the late 1990s and the early 2000s are going to begin showing their age," he says. "The industry has to get over this 20th century idea that a core system is going to last 20 years or more. Companies need to think about their technology environment continuing to evolve with the business environment. With the advances in technology, I would tell anyone putting in a core system today that they shouldn't expect to get more than 10 to 15 years of service out of it, assuming the vendor upgrades and modernizes the system during that period. Companies need to think about these systems being evolutionary rather than static. "

Josefowicz doesn't feel this is a problem with the products that are available.

"No technology is built to last that long," he says.

The desktops and the telephones that were used 15 years ago are nowhere near as powerful or effective as the products on the market today, so software shouldn't be any different.

"Technology moves," says Josefowicz. "People need to plan on evolving with technology rather than fixing it and figuring a way where they won't have to deal with it for 10 or 15 years. That's not how things work today."

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