Survey: Insurer IT Spending Up 2 Percent This Year

NU Online News Service, 3:01 p.m. EDT?NorthAmerican Insurers' information technology budgets on average are up2 percent?particularly in software?according to a survey by aresearch consulting group.

The research was reported by the Cambridge, Mass.-based GigaInformation Group, a subsidiary of Forrester Research, Inc. Thefirm also found that most carriers are seeking to increase profitsby improving employee efficiency in their agent channel and intheir use of technology.

Giga, which studied the top business and information concerns ofchief information officers, titled its report "Improving Businessand IT Efficiency Tops Priority List For North American InsuranceCompany CIOs."

The company said that even as North American insurer revenuesand profits are rising, stock market declines, bond defaults, andincreased claims have left insurance companies uncertain about thefuture.

As a result, Giga said, most insurance companies surveyed in thereport are looking to increase profits by improving efficiencyamong their own employees, in the agent channel (which stillremains critical for insurance sales), and in their own use oftechnology.

"The insurance company CIOs we talked with are primarily focusedon incremental improvements, both to business operations?internallyas well as with agents?and in their own IT activities andoperations," said Andrew Bartels, vice president at Forrester.

CIOs, said Mr. Bartels, "have gotten business support forincreased IT spending focused on improving efficiency andincreasing customer loyalty, but they are not pushing major new ITprojects."

IT budgets in 2003 for North American carriers are up 2 percentoverall on average, with the highest increases in software (5percent), network equipment (3 percent), and salaries and benefits(3 percent). Spending on hardware and outsourced services is flat,and spending on consulting is down, Giga said.

Giga reported that top areas of new spending are security,content and document management, and core transaction systems,followed by data warehouses, focused customer relationshipmanagement (CRM) projects, agent- and claims-related software, andbusiness intelligence.

While insurance companies are generally not adoptingleading-edge technologies, such as Web services, or more maturetechnologies like portals or Linux, they are leading adopters of ITmanagement best practices, such as enterprise architecture,business alignment techniques, IT vendor management, andstandardized project management methods, Giga found.

Giga said insurance company CIOs can use its survey results tobenchmark their organizations against industry peers.

The company advised that to keep up with competitors, insurancecompanies should be increasing their IT investments where it canhelp improve productivity and efficiency, both among employees andin the agent distribution channel.

Companies that have lagged in adopting IT best practices shouldquickly move in addressing this, Giga said, especially in areaslike IT vendor management and IT/business alignment. Insurancecompanies, Giga advised, should also be looking more aggressivelyat IT and/or business process outsourcing, customer relationshipmanagement, and infrastructure upgrades.

The company said the key issues for insurance CIOs are companyIT budgets and spending and company IT management practices.

A commentary by Andrew Bartels or a copy of the full report withdetailed charts and graphs are available by e-mailing [email protected].