New hardware and software for insurance companies can come withbig price tags. But new research shows that the companies spendnearly twice as much on existing IT equipment than on newsolutions.

Novarica, a research and advisory firm specializingin insurance technology strategy, unveils thisfinding in a 2015 benchmarking report. Based on 69 responsesfrom the Novarica Insurance Technology Research Council, the studyhighlights key issues to consider when benchmarking.

[Related: What's driving tech investment decisions for agentsand brokers?]

The report reveals that insurers spend on average 20% of theirinformation technology budgets on maintenance fees for IT solutionsthey own. This compares to 11% for new hardware and software. (Seechart below)

The largest percentage of their IT budgets (41%) is allocated tointernal IT staff. An additional 9% is spent on other IT-relatedneeds.

The benchmarking report additionally finds that insurersallocate:

• About 50% their IT budgets to running the businesses.

• 30% growing their businesses, and

• 20% transforming the business.

The study also notes that:

• About half of large insurers and less than 10% of midsizeinsurers have mostly outsourced IT staffs.

• The average number of IT staff per enterprise application rangesbetween 3 and 6.

"One of the benefits of this report is that it takes a supplyand demand approach to IT rather than focusing exclusively onspending levels," the report states. "The supply and demandapproach contextualizes spending levels (supply) against companysize, new project volume and current state of theorganization, technology infrastructure, and product volumeand complexity (demand), which can help participants betterunderstand the significance of peer data."

The report adds that external benchmarking data is used byinsurer CIOs for self-assessment and communication with seniorbusiness management. Benchmarking data can aid in spending andbudgeting decisions, as well as highlight areas of concern.