IT Investment Impelled By Desire For Business Growth, Survey Finds

NU Online News Service, April 1, 12:00 p.m. EST

The top reason insurers embarked on technology initiatives was to grow their business, according to a consulting firm survey of chief information officers.

Those findings were revealed during a Webinar yesterday presented by Celent, a member of Oliver Wyman Group, which is owned by Marsh & McLennan Companies.

Craig Weber, Celent senior vice president, said that 87 percent of property and casualty CIOs and 80 percent of life and health CIOs placed driving the business as the primary impetus for information technology initiatives this year.

Mr. Weber called this "a stark difference from previous years."

There was a split on other options. Seventy four percent of p&c respondents saw ease of doing business as a major driver, while 74 percent saw cost reduction as the main driver on the life side.

The results underscore the fact that "growth is clearly on the agenda," said Mr. Weber.

The survey consisted of a total of 41 respondents, most of whom were on the p&c side. Mr. Weber noted that the survey could not be viewed as a statistical trend of what insurers are doing with their technology investments, but is an anecdotal indicator of what is happening.

When asked how the economic crisis impacted IT investment, Mr. Weber said that 54 percent of the respondents said the cost of proposed projects were scaled back in 2009, while there was an even split of 32 percent of CIOs who said either projects were reduced or staff and contractor levels were reduced.

What was a good sign, despite the recession, he said, was that insurers did not perform a wholesale cutting in their IT operations.

"Stuff is still happening," said Mr. Weber, adding that when it comes to investing in technology, "If you are not moving the ball forward, than you are falling behind."

"CIOs across the board are under pressure," said Mr. Weber, something he said that is not new for them, but it has become a bit more intense as they are being asked to do more with less.

"The good news is, I think, in terms of technology, there are more solutions that allow CIOs to be more effective," he continued. "I hear a fair amount of optimism from our CIO contacts about what they are trying to do and the availability of tools to do that."

More legacy systems will be replaced this year, he said, and an overwhelming majority said they plan to rip out and replace with modern systems on the policy administration side. Other functions saw a high number of CIOs planning complete overhauls.

"There is a very significant appetite for core systems replacement," Mr. Weber pointed out. "I think that's a little different from what we saw as recently as three or four years ago where surround and contain, wrap and extend...was a much more prominent strategic choice. Today, there is much more appetite for going head on at these core systems. I think that is a very interesting result."

The Webinar was sponsored by the ACORD/LOMA Systems Forum.