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By Leah Hollstegge Ward Group

Information Technology spending is always under scrutiny, but how do insurance companies view their IT spend considering the current economic conditions?

When analyzing the IT spend overall, the majority of companies that participated in a recent study conducted by Ward Group anticipate an IT budget increase for 2010 compared to 2009. The IT budget as a percentage of gross premiums written was projected to be near 4.5 percent in 2009 and is anticipated to grow five to seven percent in 2010. About half of the growth is attributed to the increases in IT budgets and the other half is driven by the expected decline in premium for 2010. Interestingly, the Ward’s 50 high performers benchmark performed 25 percent lower in IT expense to premium. While the Ward’s 50 group of companies has invested in technology at the same rate as the overall benchmark, they have not been affected to the same degree by declining premiums as the overall benchmark.

While companies believe in the value provided through IT organizations and are choosing to invest in their IT operation during these trying economic times, they are selective about where to invest. IT leaders are making reductions in certain functions to provide for investment in other functions. By evaluating staffing and expense growth expectations in each IT functional area, there is some interesting insight as to how common issues are impacting these investments made by insurance companies.

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