Study: Insurers' IT Spending Fell 8% Last Year
NU Online News Service, May 22, 3:29 p.m. EDT?U.S. insurance companies spent some $19.7 billion on Information Technology in 2002, a drop of 8 percent compared with the previous year, according to a research firm study.
The study by IDC of Framingham, Mass. added that among the various IT areas of expenditure, hardware spending took the largest hit last year.
The forecast for the 2003 spending growth is around 1.6 percent, the study said. "The outlook for 2003 is indicative of the fact that this group of companies is in a recovery mode," said IDC in its report.
Jessica Goepfert, program manager for U.S. IT opportunity at IDC, argued that the overall insurance industry has been "troubled with uncertainty" for the past year and a half. She predicted that it will take some time for profits to stabilize, and even longer for insurers to make significant IT investments.
But on a more positive note, "barring any unforeseeable catastrophes, the groundwork is laid for more favorable IT spending," Ms. Goepfert said. "We expect the insurance sector to slowly return to normal growth over the five-year forecast." IDC said it expects the IT spending by insurers to return to normal by 2007.
The research firm also forecasts that the property-casualty insurance lines will have "essentially flat growth" in 2003. Although this segment had healthy overall revenue growth, it is still recovering from the 9/11 events, the IDC report suggested.
The report also categorized three areas of IT projects that insurers are most likely to invest in. These are: projects that can assist insurers run more efficiently, such as outsourcing; investments that can drive profitability, such as improved underwriting capabilities; and those that help insurers stand out in a crowded market, like enabling brokers and agents to improve services.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.