Poor data infrastructure is adding to the cost of property/casualty insurer information technology projects, creating a financial burden as analytics becomes more crucial to business, Novarica concludes in a new report.
The study, published through the Novarica Research Partners Program, determined that challenges with a carrier’s data infrastructure environment added more than 25 percent on average to the cost of insurer information technology projects. With that in mind, consider: Property/casualty insurers will spend close to $1 billion on data-related projects in 2015, reflecting 13 percent of their new project budgets , according to Novarica.
“This study highlights the hidden costs of poor data infrastructure,” Novarica President Matthew Josefowicz told Carrier Management via email. “While many insurers have had a hard time developing business cases to improve data infrastructure, they rarely quantify the drag that a poor infrastructure puts on IT projects in general.”
Josefowicz said insurers uniformly recognize the value of enterprise data quality but that it is hard to quantify in the standard of models most insurers use to make their IT investment priorities. He added that “management practices will need to evolve to consider a broad range of factors if insurers are going to be able to build a solid data foundation.”
Property/casualty insurers need data infrastructure that is both accessible and reliable because it will support a number of initiatives, including predictive analytics programs in underwriting claims; straight-through processing initiatives that require strong models; cross-sell and up-sell strategies; account-aware underwriting and service; enterprise risk management; and customer profitability analysis, Novarica said.
Novarica develops technology strategy research, advisory services and consulting for more than 80 property/casualty and life/annuity insurers.