Survey Reveals IT Spending Trends
NU Online News Service, Nov. 23, 1:49 p.m. EDT?A new survey from independent market analyst Datamonitor indicates that the North American insurance industry is reconsidering the use of technology to maintain a competitive edge.
The finding was part of an annual survey of information technology (IT) spending trends among North American insurers, conducted by the New York-based company.
The report, "North American Insurance Technology Spending Strategies," presents the views of 100 IT decision-makers in insurance. The survey report seeks to identify strategy drivers and pinpoint key investment areas for 2005, said Datamonitor.
IT investment, the study reveals, is now being driven by the need for efficiency gains, rather than simply for reduction of operational costs.
According to Datamonitor, 43 percent of those surveyed cited "cost control" as a primary driver for their IT strategy, compared to 50 percent in the 2003 survey.
Meanwhile, the number responding to "efficiency" rose from 34 percent in 2003 to 54 percent this year. "This clear shift in the way insurers view technology suggests changes in type of technologies insurance firms will be purchasing and what they will be doing in the upcoming year," said Ed Blomquist, Datamonitor insurance technology analyst.
The company noted that recent investment in insurance technology has been focused on areas such as dealing with outdated legacy systems, and the elimination of staff-intensive manual processes and redundant applications.
The shift to an efficiency-driven mindset suggests that many of the excess costs have been wrung out of systems, said Datamonitor.
Datamonitor's study also revealed that IT spending is set to increase. Overall, nearly two-thirds of respondents indicated they will increase IT spending from 2004-2005, up from 50 percent who said they would increase budgets from 2003 to 2004.
"The shift in focus to efficiency at a time when budgets are increasing, suggests insurers may be reconsidering priorities to more long-term, strategic projects," said Mr. Blomquist. Datamonitor estimates North American insurance firms' spending on technology will total $16.7 billion in 2005, an increase of more $750 million over 2004.
Datamonitor said its study also indicates that North American insurers realize the potential benefits of architecture standardization and componentization, as opposed to stop-gap approaches to operational realignment.
© 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.