Growth in IT Spending will Take Time to Reach Insurance Industry
Insurance Experts' Forum, August 1, 2011
For a veteran propeller-head like me, one of the most frustrating things about working in the insurance industry is the fact that ever since the 1970s, our industry has to wait longer than just about everyone else for technologies to be adopted and trends to take hold.
Thus, I’m afraid, while the July 15 edition of the Processor has cited a Gartner report that worldwide IT spending is on track to grow by 7.1 percent this year, I have a feeling that the wave of optimism that seems to be washing over others will not reach insurance shores for some time.
According to the Processor article, this is a significant increase from the 5.6 percent growth Gartner had earlier estimated. Richard Gordon, a Gartner research vice president, is quoted as saying that he is surprised the Japan earthquake and tsunami did not have a bigger (negative) impact on overall IT spending, “despite widespread concerns about disruptions to the supply of critical components.” Computer hardware, apparently, is set for the largest growth (11.7 percent), followed by enterprise software (9.5 percent), telecom (6.9 percent) and IT services (6.6 percent).
Gartner also expects spending on cloud computing to grow four times faster than spending on overall IT, the article says.
Looking at these numbers from an insurance perspective, however, my hunch is that spending will be much more restrained. At this point, I’m not hearing a lot about wholesale hardware replacements, especially in an industry that is still nursing every last byte out of its mainframe investments. Enterprise software, in the form of policy admin systems, has certainly seen a lot of action in insurance, but I’m not convinced investments here will grow beyond their already robust levels. Telecom and IT services are also not initiatives we hear much about.
Cloud computing certainly gets talked about a lot in our industry, but most of the talk I’m hearing is extremely bearish, as insurers try to come to grips with their long-held (and somewhat justified) fears about data security in the cloud. Yes, we are an industry that tightens or loosens its purse strings based on the current and anticipated fear level.
On the other hand, perhaps there are some courageous insurers out there who will prove me wrong and will make major investments in IT beyond previous levels. Given the still wobbly state of the national economy and predictions of slower than anticipated recovery, however, that isn’t looking terribly likely right now.
But we live in hope.
Ara C. Trembly (www.aratremblytechnology.com) is the founder of Ara Trembly, The Tech Consultant, and a longtime observer of technology in insurance and financial services.
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