P&C Insurers Still Find Cash For IT Systems, Survey Finds

NU Online News Service, Sept. 29, 9:48 a.m. EDT

Property and casualty insurers are increasing spending on information technology from 2008 to 2009 by 1.6 percent, down sharply from the prior two years, a survey found.

By comparison, the planned increased from 2007 to 2008 was 8.1 percent, according to a poll of firms belonging to the Property Casualty Insurers Association of America (PCI) taken by the Gartner research consulting firm.

The findings of a 1.6 percent increase were close to Stamford, Conn.-based Gartner's prediction of 1.9 percent from last year when the last Gartner PCI joint Information Technology spending survey was taken, the announcement said.

Based on the data collected, the planned increase in spending from 2009 to 2010 will only be around 0.2 percent. This slight increase is expected despite the fact that companies are on average predicting a decrease in revenue of 3.7 percent from 2008 to 2009, PCI and Gartner noted.

Scott Joyner, vice president, information technology for PCI in Des Plaines, Ill., said, "This study is the most comprehensive IT expense statistics study in the property and casualty industry. The 22 PCI member companies that participate in the study averaged $400 million in revenue and 474 employees."

Companies responded that for 2008, 59 percent of IT spending is dedicated to "lights-on" support, while the remainder of the IT investments are dedicated to support business growth and transformation.

Eric Stegman, research director, Gartner, commented, "This pattern of holding steady from 2008 indicates that even with a tough economy, these companies are still making some investment in the future."

According to Stephen Forte, a research director with Gartner's Insurance Industry Advisory Service, "With IT costs per policy and claim at $69 and $58, respectively, this validates the trend of property and casualty insurers replacing core legacy administration systems for, among numerous reasons, reducing costs. Obtaining measurable business outcomes remains a key initiative even during the current economic malaise."

PCI counts more than 1,000 member companies whom it says write over $180 billion in annual premium.