22 ITAPro // December 2014 // www.emagazine.ITApro.org
The Next Great Year?
“When that happens, anyone writing
auto insurance is going to have to get in
line and do the same thing. If they don’t
they will be subject to adverse selection.”
“Telematics offers the opportuni-
ty to give shopping options based on
geo-positioning and it has the opportu-
nity to sell safe-driving services for teen
drivers,” says Lucker. “Those are all ways
to decommoditize insurance products
and insurers are getting the idea on how
this can be valuable, but carriers have
missed the opportunity to be the go-to
spot for things people buy all the time.
Roll the clock back. People used to go to
By Jamie McGregor
In a post-global financial crisis
world, continued low interest
rates and lackluster investment performance took their
toll on the insurance industry.
Heading into 2015, there is
likely to be no respite.
Reduced growth prospects
from the BRIC countries
(albeit higher than most
developed markets), flat or
deflationary pressures in Europe, political instability in the
Middle East, heavily indebted governments, and a period
of political inactivity in the U.S. in the run up to the next
presidential election are all likely to have a dampening
effect on the level of ambition in investment as these
global issues impact home. More than ever, insurers have
to make a greater return from their core business of
Despite this backdrop, we saw an increase in IT investment across the industry in most markets around the
world in 2014, with 4. 7 percent increase in the U.S. We
expect IT investment growth to continue in 2015, albeit
modestly, as insurers look to take advantage of technology to tackle their toughest issues in their core business
and open opportunities in distribution and proposition
design to deliver a superior return.
Advances in adjacent industries around analytics,
customer experience, and digital continue to raise
expectations. Clients demand the same experiences
they have on their personal devices (such as iPads)
in their professional interactions with insurers. This is
not just a retail phenomenon either. Commercial and
corporate clients increasingly demand digital capa-
bilities that differentiate the proposition for their staff
and operations. The pressure is being felt in different
ways by different insurers, depending on where they
are in their simplification journey.
Early movers in core systems replacement will be better
placed to direct future investment toward new digital
platforms, analytics, and the heightened security awareness that comes with opening up processes and systems
to the outside world. Those in the middle of core upgrades will push to finish them quickly so they can free
resources to play catch-up.
Those still waiting “until the time is right,” or to get funding approved, increasingly will feel compelled to address
their technical debt, a rapidly retiring workforce, and the
fear of being left behind. 2015 could be a crunch year for
some late adopters; we are already beginning to see a
clear divide in market agility between those that “have”
and those that “have not” addressed their legacy.
With an increased focus on all things “digital” comes a
renewed interest and growing appreciation for how insurers’ technical architectures will need to change to accommodate the Internet of Things, external data sources, and new offerings from fintech start-ups. Progress
towards adoption, however, is likely to be slow in 2015 as
many insurers reflect first on what all of these technologies mean to the core business result, while watching
and learning from those brave enough to experiment.
However, discussions among architects, proposition
leads, and underwriters will still go ahead on both the
opportunities and implications, and parallel investments
will be made in internal capabilities to stay ahead.
For 2015, the proverb “Necessity is the mother of all invention” probably best sums up the outlook. Smart capital investment with a rapid payback, efficient operations,
and innovative technology-led approaches to hunting
down new profitable niches are likely to shape many
of the IT investment portfolios next year while insurers
keep watch for the good times to return.
(Jamie McGregor is global senior vice president of
Celent’s insurance practice.)
Financial Crisis of 2008 Still Takes a Toll on Insurers