Insurers invest in IT projects

Posted On 21 Oct 2013
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As global insurance markets recover, insurers are moving from a cost-cutting stance to investment in strategic IT projects. According to recent research by Ovum, overall global insurance IT budgets will grow at a 6.5 per cent compound annual growth rate (CAGR), with total IT spend reaching US$109bn by 2017. Insurers are prioritising investment that will drive customer acquisition and retention and improve operational effectiveness, says the global industry analyst. This is a stark change from the five years of substantial IT budget cuts, which were necessitated by the global economic slowdown. The life-insurance sector in Asia-Pacific will see the most rapid growth” expanding at 11.6 per cent CAGR to 2017, overtaking Europe as the second-largest regional market. The key business priority for European life insurers centres on reducing operating costs. This is driving IT investment in legacy system modernisation, online channels, and fraud detection systems. Legacy systems are not a new concern, but market conditions are now forcing insurers to address the problem. Ovum expects to see continued expansion of IT budgets in support of consolidation/transformation and core system replacement projects, with an annual spend of nearly US$5bn by 2017. ” The sharp decline in new business growth across all life insurance markets following the global slowdown led most insurers to rapidly and significantly cut their IT budgets,” says Charles Juniper, senior insurance analyst, financial services technology, Ovum.” However, accelerating year-on-year growth in 2013 following some cautious expansion from 2011 confirms that life insurers are now moving from a cost-cutting mindset toward reinvestment in strategic IT projects.” The key IT priorities for insurers in the emerging Asia-Pacific countries will be implementing core processing platforms and developing digital channels to capture the rapid market growth. In response to emerging regulatory requirements, North American insurers are implementing digital channels, particularly mobile and social media. Charles concludes:” As insurers emerge from short-term cost-cutting, they should all, at the very least, be re-assessing their current IT approach to ensure sufficient focus is given to revenue-growth initiatives and to prevent becoming stuck in a ‘maintenance only’ IT strategy.”

About the Author
Brian Sims BA (Hons) Hon FSyI, Editor, Risk UK (Pro-Activ Publications) Beginning his career in professional journalism at The Builder Group in March 1992, Brian was appointed Editor of Security Management Today in November 2000 having spent eight years in engineering journalism across two titles: Building Services Journal and Light & Lighting. In 2005, Brian received the BSIA Chairman’s Award for Promoting The Security Industry and, a year later, the Skills for Security Special Award for an Outstanding Contribution to the Security Business Sector. In 2008, Brian was The Security Institute’s nomination for the Association of Security Consultants’ highly prestigious Imbert Prize and, in 2013, was a nominated finalist for the Institute's George van Schalkwyk Award. An Honorary Fellow of The Security Institute, Brian serves as a Judge for the BSIA’s Security Personnel of the Year Awards and the Securitas Good Customer Award. Between 2008 and 2014, Brian pioneered the use of digital media across the security sector, including webinars and Audio Shows. Brian’s actively involved in 50-plus security groups on LinkedIn and hosts the popular Risk UK Twitter site. Brian is a frequent speaker on the conference circuit. He has organised and chaired conference programmes for both IFSEC International and ASIS International and has been published in the national media. Brian was appointed Editor of Risk UK at Pro-Activ Publications in July 2014 and as Editor of The Paper (Pro-Activ Publications' dedicated business newspaper for security professionals) in September 2015. Brian was appointed Editor of Risk Xtra at Pro-Activ Publications in May 2018.