In the early part of this year, we saw more insurers turning toward, not away from, technology in midst of the crisis. While many insurers had adjusted their strategies, most remained committed to solving their key strategic needs of improving customer and distributor service, achieving faster time to market, and using enterprise data to make better decisions in marketing, product design, risk management and operations through continued technology investment.
In general, 2009 has turned out better than expected for P&C insurers, and worse than expected for life/annuity/health insurers when it comes to IT budgets, with the former enjoying strong underwriting ratios and the latter dealing with investment losses and rapid declines in demand.
Looking forward to 2010, large P&C insurers are foreseeing mostly level or slightly higher budgets, while midsize P&C companies, which saw slightly greater increases for 2009, are slightly more conservative.
Life/annuity/health budgets are split, with most (perhaps those that buckled down in 2009) preparing to increase spending in 2010, and others projecting continued cuts.
Across the board, insurers' top business drivers for their IT strategies are supporting growth strategies and increasing operational effectiveness, as well as reducing organization-wide expenses. But again, there is variation by size and sector.
Many more large P&C insurers are increasingly focused on expense reduction. On the life/annuity/health side, many insurers are focusing on growth in an extremely challenging marketplace in which many life/annuity/health insurers have suffered serious declines in business volume, assets under management and market capitalization. And many smaller P&C insurers see opportunities to expand out of their historic niches, even in an overall flat market.
The top IT projects undertaken in 2009 were focused on critical enabling technologies. Policy administration, agent portals, and business intelligence were the most common implementations.
Midsize P&C insurers and life/annuity/health insurers continue to prioritize agent portals. The former are also prioritizing underwriter tools and workflow, while the latter are prioritizing consumer portals (which have been underinvested in to date), and larger P&C insurers show high levels of focus on predictive analytics.
For 2010, top projects are similar to 2009, with a focus on claims increasing somewhat among larger P&C insurers, and policy administration slightly more likely for life/annuity/health insurers. Insurers continue to focus on strategic information technology investments that will support growth strategies, reduce operational expenses and increase operational effectiveness.
Strong information technology capabilities continue to be a critical factor in this information industry. Insurers count on IT to help them provide:
- Better distributor service (e.g., agent portal and policy admin projects)
- Better customer service (e.g., customer portal and customer relationship management projects)
- More rapid product introduction (e.g., policy administration system projects)
- Better insights based on data analysis (e.g., business intelligence and policy administration projects)
- More efficient workflows (e.g., projects in claims, underwriting and business process management)
- Acceptable compliance and security (e.g., business intelligence projects).
Smaller P&C insurers are investing aggressively to compete, larger ones are trying to refine and streamline operations to hold their positions, and life/annuity/health insurers are either struggling for breath or else preparing themselves for a comeback. In all cases, it will be an interesting, and for many companies, a potentially transformative, 2010.
This article can also be found at InsuranceNetworking.com.
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