Nearly two-thirds of insurers plan to boost their information technology budgets in 2014, according to new research.
Ovum discloses this finding in “2013 ICT Enterprise Insights in the Insurance Industry.” Based on interviews with 6,500 senior IT executives, the report examines information technology (IT) spending among insurers by region, insurance line and size of insurer.
The report reveals that 65 percent of insurers intend to increase their IT budgets next year. Significantly, 24 percent of insurers are increasing their IT budgets by more than 6 percent in 2014, up from 14 percent of insurers in 2013, an indicator of “cautious optimism” about continuing market improvements.
“However, this picture varies by region and line of business,” the report states. “The Asia-Pacific area continues to show the highest regional growth. IT spending by the global life insurance industry grew at a faster rate than the P&C sector in 2013 and is set to increase further in 2014.
“In part, this is due to the major investment needed in addressing the issue of legacy modernization, which is more acute in the life industry,” the survey adds.
The report notes also that, as part of IT legacy modernization initiatives, chief information officers (CIOs) are trying to balance complex objectives. Among them: Increasing operational efficiency (38 percent of respondents), cutting costs (21 percent) and managing back-office functions (18 percent).
The survey observes also a “greater channel focus on supporting intermediaries” among life insurers. As evidence of the trend, the survey points to the life companies’ investments in mobile product training and sales tools, policy application apps for tablet devices and closer collaboration through enterprise social networks (for example, to enable intermediaries to locate specialist knowledge within an insurer).
“As insurers emerge from short-term cost-cutting, CIOs are now beginning to prioritize projects that drive customer acquisition and retention and/or improve operational effectiveness,” the report asserts in its recommendations for enterprises. “All insurers should at least be re-assessing the current IT approach to ensure sufficient focus is given to revenue growth initiatives and safeguarding against the organization becoming stuck in a maintenance-only IT strategy.”