Few insurers have the abilities to meet demand andattract support staff for specialized needs, and as such areturning to external partners for infrastructure and commoditytasks, according a recent Novarica report.

The report, "Insurance IT Outsourcing Update," is based on a surveyof 95 insurer CIO members of the Novarica Insurance TechnologyResearch Council.

Twenty-seven percent of the CIOs are planning to increaseoutsourcing this year in the areas of application development andmaintenance (ADM), 34% on specialized skills–including analyticsand mobile develpment–and 36% on infrastructure.

"There are few pure cost reduction initiatives taken today,"says Matthew Josefowicz, managing director at Novarica and authorof the report. "More of the demand centers on creating newcapabilities rather than just reducing the cost of currentcapabilities."

Most of the CIOs include outsourcing in their infrastructurescurrently, as 85% outsource on ADM, 62% on specialized skills and64% on infrastructure. But among those that don't outsource, feware planning to turn to external partners this year,Novarica states.

Light users are expanding usage, but heavy users are scalingback. Regarding ADM, 38% of light users will outsource more, but42% of heavy users will reduce their spending.

Outsourcing consumes between 16% and 24% of the CIO's ITbudgets, the report states.

The CIOs are less satisfied with offshore services, particularlyin the area of specialized skills, which the CIOs rated at "belowacceptable" levels. None of those surveyed rated their satisfactionlevels as "very good" in any of the three categories.