Aggressive IT Spending Predicted For P&C Carriers

NU Online News Service, Dec. 4, 11:25 a.m. EST

If the results of a survey of North American property and casualty insurers hold true, 2010 should be a year of growth for information technology in the industry, according to Deb Smallwood, founder of Strategy Meets Action.

Results from the survey conducted by SMA show three quarters of carriers believe their enterprise either will grow or sustain their position next year.

"Insurers are really looking at growth strategies [for 2010]," Ms. Smallwood said. "They plan to spend aggressively on technology solutions."

Ms. Smallwood and two of her partners at SMA, Karen Furtado and Mark Breading, presented the results of the survey and their analysis during a Web seminar: "Riding the Wave: Insurer Technology Spending, Drivers and Approaches for 2010 and Beyond." The Webinar was conducted by Tech Decisions for Insurance and National Underwriter.

In looking at the top drivers for technology spending, Ms. Furtado reported that business growth was cited as the top driver by 66 percent of respondents. This was followed by both business process optimization and cost containment/expense reduction, each of which was cited by 56 percent of respondents.

"These drivers reflect the need to strengthen processes and stay competitive," Ms. Furtado said.

The survey indicated that 37 percent of insurers will increase IT spending in 2010, with 36 percent expecting IT budgets to remain flat.

Twenty-one percent reported their IT spending will decrease, with 4 percent expecting a significant decrease in spending of 10 percent or more, and 1 percent reporting a significant increase in spending of 10 percent or more.

"This indicates a belief that technology investment is essential to remaining competitive in today's marketplace," Ms. Furtado said, adding, "The health of the [IT] market shows the industry is very strong."

Ms. Furtado indicated the trend revealed in this survey is that marketing and product development will be the top priority for 2010 and beyond. Investments in this area include purchase of external data and use of predictive analytics and business intelligence tools, she noted.

"Competitors are finding ways to attract customers, whether through price or service," Ms. Furtado explained. "Brand loyalty is not what it was in the past."

Ms. Smallwood's message for insurers is that IT spending is an investment--not just a cost--but that there is no room for missteps. She also advised carriers to develop a strategic plan for the business, including a road map.

"[A road map] needs to be for three- or five years," she said. "It has to go beyond just legacy replacement."

As for IT solution providers, Ms. Smallwood said she believes the industry is "crying for solutions that are easy to implement and easy to integrate."

For access to this free Web seminar, go to www.tech-decisions.com/webseminars.

Robert Regis Hyle is associate editor at Tech Decisions For Insurance, part of Summit Business Media's P&C Magazine Group, which includes National Underwriter.