Matt Josefowicz isn't seeing anything particularly new for insurance technology spending in 2011.

“We're seeing a continuation of what we've seen previously,” says Josefowicz, head of the insurance practice at Novarica. “With the exception of the largest companies over $1.0 billion in direct written premium—those companies are most likely to keep their budgets relatively flat—by and large most companies are expecting to increase their budgets somewhat,” he says. “Companies below $100 million in premium on the P&C side we see more of a split. Some are expanding and some are contracting. It's fairly even for that very small segment.”

Josefowicz explains the large carriers on both the property/casualty and life/annuity sides don't feel the pressure to spend more on technology.

“They already have a lot of resources so they have more opportunity to find efficiencies and redeploy existing resources,” he says. “Smaller companies, in order to create the business capabilities they need—have to make additional investments.”

Priorities Listed

Growth and competitive parity are the major issues companies are looking to support their strategies in 2011, explains Josefowicz.

“Some companies also are looking at organization-wide expense reduction and operational effectiveness as major drivers,” he says. “Other than some of the larger life/annuity companies, we're not seeing compliance or investment-market losses driving a lot of action. At some of the larger companies we are seeing pressure to reduce IT expenses which we take to mean redeploying more effectively as a big priority.”

Competitive Parity

Josefowicz believes when it comes to distributor service and customer service, carriers always are looking for ways to provide the best service they can and are not being lapped by competitors.

When we look at specific business capabilities we see distributor and customer ease of doing business, support for distribution channels, speed to market for product and BI and data analytics are showing a high response in terms of companies and their top three project lists,” he says

Satisfaction

Carriers can't afford to be satisfied with their performance these days. Josefowicz feels continuous improvement is the key phrase.

“One of the challenges for senior executives on the business side is they say they've invested in IT and feel they are done,” he says. “You're never done. There is continuous advancement. No company is able to solve its IT-related challenges in any given year. There always are new things coming up, whether it is new capabilities on the business side, new demands on the distribution channel, or new capabilities that are enabled by technology advancements like mobile, virtualization, cloud or anything on those lines. There is always change.”

Mobile Technology

In a lot of cases it's building off the work already done to enable real-time transactions and information through the Web. The interface or delivery layer may differ, but all the investments done to enable that real time, outside the firewalls delivery can be leveraged in mobile. When we look at what companies are spending on their IT budgets for mobile, the average is less than 2 percent of their total IT budget around mobile initiatives, and that includes mobile-enabling their internal staff. There is a lot of focus around consumer smartphone apps, a lot of productivity enhancements and benefits will be in enabling company staff, whether it is marketing, claims adjusters or others with table devices and other mobile platforms.

Core Systems

It definitely continues to be a major area of focus. We see for 2011 more than half p/c companies and more than 30 percent of l/a companies list PA projects in their top three projects. The only thing that approaches it in terms of the top priorities are agent portal on the p/c side and BI overall and commissions on the large l/a side. One of the interesting things about our survey was how diverse the top three priorities are. There are very few areas that show up as the top three for more than a quarter of the companies at any given time. They are very diverse. Over all, core system and distributor systems and BI generally are the top three priorities for the industry, but any given company may have solved two of those at the time being and is working on another two things.

Continuity and focus on solving core problems and delivering core business capabilities continue to be the focus. We don't see anybody running off in one direction chasing something at the end of the hype cycle. The problems are well known and the solutions are not easy. People are working on them.

Cloud Computing

The thing about cloud is it's going to have a strong effect on things like the development environment and testing. It's being used in ancillary areas like HR. There is a lot of adoption of hosted CRM so there already is a lot of remote-system usage in insurance. The various evolutions of remote-systems usage now known as cloud will mostly be internal IT things. One of the biggest challenges around cloud will be business executives reading the general media and coming back and asking what our cloud strategy is. Cloud means something we don't own. It's similar in a lot of ways to SOA because people would come in and ask what the SOA strategy is because the general trade media write about it. It's something they have to take into consideration.

Special Reports /

Budget Busters: IT Spending in 2011 Part 3

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