Few insurers have the abilities to meet demand and attract support staff for specialized needs, and as such are turning to external partners for infrastructure and commodity tasks, according a recent Novarica report.

The report, "Insurance IT Outsourcing Update," is based on a survey of 95 insurer CIO members of the Novarica Insurance Technology Research Council.

Twenty-seven percent of the CIOs are planning to increase outsourcing this year in the areas of application development and maintenance (ADM), 34% on specialized skills–including analytics and mobile develpment–and 36% on infrastructure.

"There are few pure cost reduction initiatives taken today," says Matthew Josefowicz, managing director at Novarica and author of the report. "More of the demand centers on creating new capabilities rather than just reducing the cost of current capabilities."

Most of the CIOs include outsourcing in their infrastructures currently, as 85% outsource on ADM, 62% on specialized skills and 64% on infrastructure. But among those that don't outsource, few are planning to turn to external partners this year, Novarica states.

Light users are expanding usage, but heavy users are scaling back. Regarding ADM, 38% of light users will outsource more, but 42% of heavy users will reduce their spending.

Outsourcing consumes between 16% and 24% of the CIO's IT budgets, the report states.

The CIOs are less satisfied with offshore services, particularly in the area of specialized skills, which the CIOs rated at "below acceptable" levels. None of those surveyed rated their satisfaction levels as "very good" in any of the three categories.

Special Reports /

Novarica: More Than 25% of U.S. Insurers to Increase IT Outsourcing Budgets in 2014

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