Most insurers only plan modest increases in their IT budgets in 2015. And while other industries are spending more and more in emerging tech areas such as mobile insurance, big data and the cloud, very few in the insurance field plan to do the same, according to a new Novarica survey.
Those trends emerge from a survey of 88 insurer chief information officers or their equivalents – all members of the Novarica Insurance Technology Research Council – about their IT budget and plans for 2015.
If anything, the results reflect the conservative nature of the insurance industry as it is confronted by outside technology changes and advances – slow and steady with no rush toward early adoption of new bells and whistles.
“Despite the rapid changes in technology across the economy, the main theme of 2015 insurer IT budgets and project priorities is one of continuity. Again,” Novarica said in its summation of the responses.
Specifically, overall average IT spending ratios are growing slightly to 3.8 percent. That compares to 3.5 percent or 3.6 percent in past years, Novarica said. But the company said these slight jumps are not unusual.
“Average IT spending ratios (IT budget as a percentage of premium) remains consistent with historical norms, indicating that budget increases are tracking premium growth rather than exceeding it in most cases,” Novarica said. “Novarica regards this mostly as a statistical aberration within a shifting sample group rather than evidence of a significant reallocation of resources in the industry.”
Specifically, 60 percent of large property/casualty insurers said they’d boost their IT spending in 2015 versus 2014, and 49 percent of small to mid-sized companies responding in the survey said they would do the same, Novarica noted.
Other notable findings from the report:
- Almost half of insurers have some investment in mobile or cloud capabilities, but fewer than 10 percent said they have “extensive deployments in any emerging area.”
- Insurance IT investment is driven by a desire to support growth and operational effectiveness, rather than a push to cut expenses or boost competitiveness.
- Property/casualty insurers in particular invest in IT areas such as business intelligence and analytics to enable speed-to-market, a goal that has now jumped over “distributor ease of doing business” as one of the most typically requested capabilities.
- Less than half of insurers are happy about their existing technology and IT capabilities.
- As far as areas of investment in IT, close to 40 percent of insurers are focusing on policy administration system replacement for 2015.
Here’s a list of the numbers and types of insurers who participated in the Novarica survey: 6 personal lines insurers, 22 commercial/specialty companies, 8 mono-line workers comp firms, 33 multi-line property/casualty insurers, and 19 health/life insurers, Novarica said. The company supplies information and analysis of markets, operations, and technology for financial services and insurance executives.