Survey: Insurer IT Spending Up 2 Percent This Year

Survey: Insurer IT Spending Up 2 Percent This Year

NU Online News Service, 3:01 p.m. EDT?North American Insurers' information technology budgets on average are up 2 percent?particularly in software?according to a survey by a research consulting group.

The research was reported by the Cambridge, Mass.-based Giga Information Group, a subsidiary of Forrester Research, Inc. The firm also found that most carriers are seeking to increase profits by improving employee efficiency in their agent channel and in their use of technology.

Giga, which studied the top business and information concerns of chief information officers, titled its report "Improving Business and IT Efficiency Tops Priority List For North American Insurance Company CIOs."

The company said that even as North American insurer revenues and profits are rising, stock market declines, bond defaults, and increased claims have left insurance companies uncertain about the future.

As a result, Giga said, most insurance companies surveyed in the report are looking to increase profits by improving efficiency among their own employees, in the agent channel (which still remains critical for insurance sales), and in their own use of technology.

"The insurance company CIOs we talked with are primarily focused on incremental improvements, both to business operations?internally as well as with agents?and in their own IT activities and operations," said Andrew Bartels, vice president at Forrester.

CIOs, said Mr. Bartels, "have gotten business support for increased IT spending focused on improving efficiency and increasing customer loyalty, but they are not pushing major new IT projects."

IT budgets in 2003 for North American carriers are up 2 percent overall on average, with the highest increases in software (5 percent), network equipment (3 percent), and salaries and benefits (3 percent). Spending on hardware and outsourced services is flat, and spending on consulting is down, Giga said.

Giga reported that top areas of new spending are security, content and document management, and core transaction systems, followed by data warehouses, focused customer relationship management (CRM) projects, agent- and claims-related software, and business intelligence.

While insurance companies are generally not adopting leading-edge technologies, such as Web services, or more mature technologies like portals or Linux, they are leading adopters of IT management best practices, such as enterprise architecture, business alignment techniques, IT vendor management, and standardized project management methods, Giga found.

Giga said insurance company CIOs can use its survey results to benchmark their organizations against industry peers.

The company advised that to keep up with competitors, insurance companies should be increasing their IT investments where it can help improve productivity and efficiency, both among employees and in the agent distribution channel.

Companies that have lagged in adopting IT best practices should quickly move in addressing this, Giga said, especially in areas like IT vendor management and IT/business alignment. Insurance companies, Giga advised, should also be looking more aggressively at IT and/or business process outsourcing, customer relationship management, and infrastructure upgrades.

The company said the key issues for insurance CIOs are company IT budgets and spending and company IT management practices.

A commentary by Andrew Bartels or a copy of the full report with detailed charts and graphs are available by e-mailing press@forrester.com.