Celent annually surveys insurance company CIOs to determine thepressures, priorities, and practices they face for the coming year.This year's report covers two topics: selected results from the2013 CIO survey, and how CIOs enable innovation in theircompanies.

In the report, “2013 North America Insurance CIO Survey:Pressures, Priorities, and Innovation,” Celent describes the rangeof IT budgets as a percentage of premium, year over year changes inIT budgets, and three strategies for core system replacements. Thereport also describes how CIOs are dealing with the four levels ofCelent's Innovation model: perception; analysis; process,decisions, and experience; and results.

“Insurers who view innovation as integral to their business arefocused on creating the right organization for identifying anddeploying innovative projects,” says Chuck Johnston, researchdirector with Celent's Insurance Group and coauthor of the report.“In many cases, these are IT-led initiatives, since technology isseen as an innovation enabler.”

Key findings of the report include:

• There are many drivers for insurers to become more innovative,some internal, some external. The 2013 Celent CIO survey showscarriers are addressing the innovation topic and are at variouslevels of maturity. There are concerns about process, cost, valuemeasurement, and how to deal with large legacy tails. In the surveywe saw no real examples of creative disruption in the insurancemarket, which is why this report is really focused on improvementvs. innovation and the fine line in between.
• As in prior years, the average IT budget is in the range of3.0% to 4.5% of direct premium written.
• The average year over year increase in IT budgets of thesurveyed CIOs was 6.3%. This is a robust increase, somewhat greaterthan other surveys have reported. Celent believes that this data iscorrect directionally-and reflects very positive increases in ITbudgets.
• A large majority of CIOs allocate between 1% and 5% of theirtotal budget to R&D.
• Four categories of initiatives consume just over half of totalnew project resources: policy administration; new business /underwriting / rating; distribution and external portals; andclaims.

“Four categories of initiatives consume just over half of totalnew project resources: policy administration; newbusiness/underwriting/rating; distribution and external portals;and claims,” says Donald Light, director, AmericasProperty/Casualty with Celent's Insurance Group and coauthor of thereport.

Regarding their three year plans for core systems, the surveyrevealed:

1) All CIOs plan to deal with their policy admin systems overthe next three years. Consolidation of multiple systems, wrap andextend, and incremental improvement are the most popularoptions.

2) Nearly two-fifths of the CIOs plan to wrap and extend theirunderwriting system.

3) For both claims and billing, replacement with a modernpackage system is the most common strategy; accounting for aboutone-fourth of all CIOs.

4) Portals are the only category in which “no plans” is the mostpopular option (40 percent), though the next most popular option is“rewriting using modern code.”