Insurers Would Benefit from More IT Spending: Novarica
As insurers devote funds to startup partnerships and new technologies poised to disrupt the industry, IT budgets remain consistent—but whether that's a good thing is a matter of perspective.
According to new research from Novarica, “Insurer IT Budgets and Projects 2017”, more than half of P&C insurers and 40% of life carriers are currently engaged in core replacement initiatives. Yet, IT budget ratios continue to straddle around 3.7 percent of collected premiums.
The researcher’s ninth annual IT report surveyed 110 insurance chief information officers at life/annuity and P&C companies. Matthew Josefowicz, president & CEO of Novarica, the study’s author, says that insurers overall still aren't giving IT departments enough resources to respond to a changing world.
“Insurers are missing the opportunity to improve products through better analytics,” says Josefowicz. “They [carriers] are using IT dollars in the same ways they did before, instead of looking for different ways to manage tomorrow.”
Insurers' product development practices haven’t changed in some time, Josefowicz adds. But advances in mobile, data and analytics technology mean insurers could be designing products better suited to customers’ needs. The issue remains insurance providers’ limited availability of resources.
“In order to spend more on IT, insurance companies need to decrease spending somewhere else" like staffing, real estate, and external services, says Josefowicz.
Currently, carriers spend half of their IT funds on running and maintaining systems; leaving limited capital to introduce new offerings and modernizing core operations. CIOs surveyed also acknowledged recruiting and keeping talent as another troublesome area, implying the toughest IT challenges are resource related not technological.
Insurers in 2017 are keen on adding business intelligence and self-service capabilities for agents and customers, according to Novarica. Other projects include: completing core implementations, rolling out new underwriting tools and leveraging cloud models.
“The industry is trying to take the friction out of buying process because it depresses sales,” says Josefowicz. “I think the future of IT will be much more capabilities-led as opposed to resource-constrained.”