As premium growth in most markets returned to positive growth during 2015, many insurers have some confidence to seek ways in which they can use IT to grow their business.
This is according to a new report from global analyst firm Ovum. This confidence however is against a backdrop of accelerating demographic and customer change, which is likely to be another key driver of investment.
Ovum believes the global insurance industry is responding to these changing needs. This is demonstrated by the strong expansion in IT spend being seen in 2015 which looks to be continued in 2016. Ovum’s research shows that of the 389 insurance carriers surveyed as part of the ICT Enterprise Insight (ICTEI) program during Q3 of 2015, 62% are planning to grow IT budgets in 2016 and only 11% are looking to cut expenditure. This compares to 47% that grew and 17% that cut IT budgets in 2014/15.
When it comes to investment, digital channels remains the top area for insurers. However, the significant majority of insurers will be increasing budgets across a broad range of functional areas with no single activity completely dominating spend. This reflects the complex set of priorities that IT groups are being asked to meet by the wider business, simultaneously addressing revenue growth, operational efficiency and regulatory compliance.
Charles Juniper, principal insurance analyst at Ovum comments: “All regional markets will see growth in IT budgets in 2016, led by insurers in Latin America. Most encouraging is the news that insurance premiums are showing positive growth in Europe – providing insurers in this region with a platform on which to grow their IT capabilities. There is increased focus on operational efficiency across the board, with fraud management and underwriting systems emerging as significant areas of IT investment.
“The insurance industry, particularly in Europe, has had a long struggle to maintain profit margins since the financial crisis,” he adds. “While a lot of the investment we will see is insurers responding to changing market pressures, such as changing customer demographics, there is a big opportunity here for IT innovation in the industry. Investment in Internet of Things (IOT) managed platforms, and investing in analytics at the point of use in particular, look like strong areas in which proactive insurers can achieve strong positive differentiation from competitors.”