By Matthew Josefowicz
In the midst of the massive
changes sweeping the economy driven by the rapid evolution of information technology, insurers’ IT plans for 2015
are mostly a continuation of
current projects and priorities.
For a few insurers, this is a
result of a willful blindness—a
stubborn refusal to accept
that information technology is
changing everything including
the insurance industry—and a
fervent wish that it would all just go away. These insurers
pine for life to get back to “normal,” when they communicated mainly by phone and mail, and business operated
on a schedule based on human, not electronic rhythms.
Most insurers, though, recognize the importance of
improving their operational agility and the ability to
adapt and change as market and stakeholder expectations continue to evolve. However, even these insurers
have a backlog of required capabilities to build and investments to make (many of which require multi-year
projects) in order to be capable of adapting.
Legacy core systems, inflexible architectures, legacy
development and management practices, and other
challenges inhibit even those insurers who know that
they need to be able to change more rapidly. These insurers have little alternative but to roll up their sleeves
and continue to build for the future.
They are doing so in a traditional way. While Novarica
research shows most insurers plan modest budget
increases, overall average spending ratios are up only
slightly to 3. 8 percent from 3. 5 percent or 3. 6 percent
in previous years. This slight statistical increase is consistent with historical norms of 2-5 percent spending
ratios rather than evidence of a significant shift in
resource allocation within the industry.
Supporting growth continues to be the dominant stra-
tegic goal of insurance IT spending. Insurers are more
likely to cite growth and operational effectiveness as
the key drivers of their IT strategies than they are to
cite expense reduction or even competitive parity.
Speed-to-market remains a top priority for business
stakeholders across the board. For P&C insurers,
business intelligence and analytics have surpassed distributor ease of doing business as the next most commonly requested capabilities, but for L/A/H insurers,
there’s less demand for analytics and business intelligence and more for distributor ease of doing business.
Core policy admin remains the most active area for
replacement, with nearly 40 percent of insurers currently
engaged in or planning a policy administration system
replacement in 2015. These replacements can vary from
just core record keeping to full suite replacements that include billing, claims, and other elements as well. Business
intelligence is the most active area for enhancement.
While few insurers are shopping for new BI environments, more than half are planning major enhancements
in reporting, data repositories, and analytics capabilities.
True Big Data initiatives are rare, but some insurers are
starting to invest in tools like Hadoop or NoSQL to tackle their own enterprise data problems.
“Digital” is much discussed, but with little agreement
on terms. For most insurers, digital strategy centers
on agent and customer portals, as well as improved
internal workflows in core processes like claims and
underwriting. Mobile, social, and cloud are becoming
less buzz-wordy and more mainstream. The majority
of insurers have some experience with cloud, at least in
ancillary areas, and mobile (especially tablet) is rapidly
becoming a core part of any communications strategy.
A few insurers who have already deployed modern core
and communications infrastructures are able to focus their
technology spending and strategies on other changes on
the horizon, changes that will be driven by the Internet of
Things, wearable devices, and other pervasive computing
and data that change the balance of power in information
businesses across the economy. But for most insurers, 2015
will be a ground game of moving the ball forward in hard
slog against legacy environments and attitudes.
(Matt Josefowicz is managing director of Novarica.)
Technology Just Won’t Go Away