Insurers plan a healthy average increase in information technology investment for 2015. But the spending hike favors larger carriers more than their smaller rivals, a new industry report from Strategy Meets Action has concluded.
Strategy Meets Action found in its report on 2015 insurance technology priorities and spending that investment in replacing or improving information technology should grow by nearly 5 percent on average in 2015. That compares to an average 3 percent increase in IT spending in 2014 and a 2 percent spike in 2013. Even more promising, 71 percent of insurers said they plan to boost IT spending in 2015, with 76 percent expecting to do so from 2016 to 2018, according to the report.
Mark Breading, a Strategy Meets Action partner, noted in an email statement to Carrier Management that “project spending is aligning to strategic initiatives to improve the customer/agent experience, modernize core systems and gain more insights through business intelligence and analytics.”
Strategy Meets Action said that conditions for investment are particularly good on the property/casualty side, especially with a strengthening economy. Two years of combined ratios under 100 thanks to “stringent underwriting and lower than normal catastrophe payouts” have also helped. (SMA sees commercial lines pricing presenting some potential challenges, but expects continued personal lines growth).
Even so, the potential for information technology investment lands much more on the side of larger companies, the report pointed out.
According to the findings, 38 percent of insurers with over $1 billion in premium plan to make significant investments and changes to their business and technology platforms. Only 31 percent of insurers with less than $1 billion in premium want to do the same thing.
About 41 percent of insurers with more than $1 billion in premium expect expansion to their top or bottom lines, but only 31 percent of insurers under that $1 billion premium threshold have similar expectations.
Tellingly, just 15 percent of insurers with more than $1 billion in premium expect little or no growth. But 23 percent of insurers with less than $1 billion in premium fell similarly.
About 15 percent of insurers with less than $1 billion in premium said they’re struggling to be profitable. Only 6 percent of insurers with more than $1 billion in premium gave similar comments.
“While there are significant differences by company size and line of business, the general trend is that more companies are struggling on one end of the spectrum and more companies are transforming and growing on the other end, with fewer in the middle,” the report found.
For the property/casualty sector, IT investments run the gamut. On the personal lines side, double-digit percentages of respondents plan to either replace or improve technology including insured portals, billing and underwriting systems and policy administration. Commercial lines insurers plan to invest in replacing or improving technologies such as agent/broker portals and claims administration. Like their personal lines brethren, they will also focus on policy administration, underwriting systems and rating engines.
Survey respondents represented 105 insurers representing property/casualty and life and annuity segments in North America. Strategy Meets Action said the respondents came from all tiers and major lines of business, including executive leadership and various management levels.
Source: Strategy Meets Action