Every company that plans budgets for 2016 does its best to make
good investments in time, energy, and, most of all, money. So,
how funds are budgeted is weighed against where the money is
going. In its survey on where insurers will put their dollars to
use next year, the research and advisory firm Novarica looked at
several key areas the industry will continue to focus upon.
Investment in core systems replacement continues its relent-
less march through the insurance
IT community, according to
Novarica president and CEO, Matt
Josefowicz. Over the last five years,
roughly one-third of carriers have
been working on such projects.
Some of these projects are
wrapped up in one budget year
and others take years to complete,
points out Josefowicz.
“The general question of
application modernization is one
that continues to consume a lot
of attention and dollars,” he says.
“First, it’s expensive and second, it’s critical to the operation of
the business. Being able to take advantage of digital channels
and data analytics requires core systems that can keep up.”
Analytics tools and business intelligence projects continue
to increase in importance, according to Josefowicz, but not all
of the money is spent on new technology. Most of the activity
in BI and analytics is focused on enhancement rather than
replacement except for one sector.
“We are starting to see a surge in replacement activity
for smaller callers who are taking advantage of some of the
insurance-specific applications coming out—the pre-built data
warehouses,” he says.
For larger insurers, projects tend to focus on the adoption of
Big Data technology or other advanced analytics tools. Josefowicz believes larger insurers invested in an earlier generation
of analytics tools a decade or longer ago and today they are
looking to refresh those tools.
“Smaller insurers didn’t have much of an analytics infra-
structure so they may be bringing in new tools,” says Josefowicz.
“The investments have increased relative to previous years, but
the majority of the effort in the BI/analytics space is enhance-
ment rather than replacement.”
Two hot areas for investment have been cloud and mobile,
but Josefowicz believes these are becoming less distinct cate-
What’s in Your Wallet?
Novarica survey examines where insurers will spend their money in 2016.
gories. Depending on the application and the use case, the majority of users interact with systems on hand-held devices. This
means it has become equally important for carriers to develop a
UI strategy as it is for businesses across the entire economy.
“Cloud has become another option of enterprise computing
the way hosted systems, remote data centers, virtualized servers
or any of the things adopted over the last 20 years that are on
the menu for enterprise computing,” says Josefowicz.
A great deal of energy is being spent on security, but that
doesn’t always account for dollars spent because, overall, digital
engagement is more expensive than security.
“Security comes down to practices, procedures, and audits,
which are not as expensive as building new systems,” he says.
“Security does take a lot of manpower and mental bandwidth.”
Manpower continues to be a problem. Josefowicz explains
it has to do with thinking about the organizational structure of
the company in an environment in which there is a dramatic
increase in competition for IT talent across the economy.
“Most insurers are either in the situation where they are in a
rich talent pool but competing against other attractive employers or they are in a more sparse talent pool where there are not a
lot of competitors, but not a lot of raw talent either,” he says.
Insurers need to study the way their IT department is organized and make it more attractive to new generations of talent.
“Insurers have to think about that in terms of a world where
technology talent has options,” he says. “Companies that are
away from major talent centers are investing in programs with
universities and training programs. If anything, the problem is
just going to get worse.” ITA
Estimated Insurer Average IT Budget Breakdown:
Digital, Data, Core, Security, Other
Source: Novarica estimates based on analysis of Research Council CIO Survey 2015Q3