U.S. insurance industry gearing up for IT growth, technological advancement

A new survey of 75 insurance industry practitioners in the United States indicates that IT budgets will grow as 67% of respondents report they will increase investments in 2014.

Based on the findings, technology investment is the clear priority for an industry widely considered to be a relative laggard in this area, notes a statement Wednesday from Xchanging plc, a business process, procurement and technology services provider.

Of those polled, 67% reported they expect their company’s IT budget to increase this year with 44% significantly increasing it (6%-10% increase or more).

Investment in technology was the number one priority for 60% of respondents while 86% ranked technology as the first or second priority, the statement notes. Mobility was selected by 39% of respondents as the first or second priority, while claims investment came in second as the top priority with 16% of respondents.

With regard to the key areas of technology investment, Xchanging reports that Big Data/analytics (36% of respondents selected this as having the highest likelihood of an increased investment in 2014) and mobile apps (27% expect these to get a boost) are investment priorities, but e-placing platforms will also receive attention (45% say it was a first, second or third priority).

In terms of claims technologies, respondents indicated they most value predictive modelling/analytics (42%) and Big Data (25%) as focus areas. Only 8% ranked cyber security technology as the most valued.

Findings from the 15-question survey, detailed in The 2014 Insurance Technology and Spending Trends Report, are based on responses from 75 insurance industry practitioners conducted at the Acord Loma Forum in May.

Survey respondents – the majority of whom were from the life/annuity, property and casualty and reinsurance/large commercial insurance sectors – included those at the director/project manager level (26%), executive level (27%) and IT staff (16%). The remainder was a mix of agents, brokers, analysts and others.

“The core messages that we are taking away from this survey is that the U.S. insurance market is ready to tackle its challenges and find a new gear in terms of growth and improvement,” Jenna Richardson, director, North American Insurance Services for Xchanging, says in the statement.

Beyond exploring insurance technology and spending trends, the company reports the findings reveal a number of opportunities and challenges for insurance professionals. These include the following:

• Just 11% of respondents ranked attracting qualified talent as the top challenge, alarmingly low given the concerning future talent gap. That said, 48% of respondents had “strategic sourcing of talent” as the second highest priority in order to increase efficiency, cost savings and overall competitiveness.
• Four in 10 respondents said their level of business process outsourcing (BPO) engagement would increase, with 53% reporting they would increase IT outsourcing and 32% reporting they would outsource back-office services in 2014, including policy and claims administrative duties.
• While 49% of respondents cited U.S.-based insurance companies as their biggest competition, 30% reported that they believe non-conventional sources will be the biggest threat.

With regard to opportunities for this year, 75% of respondents ranked engaging customers in new ways as a first or second priority, speaking to the tremendous interest in Big Data and mobile apps.

“We expect to see a marked investment in advanced technologies, business processing outsourcing and IT outsourcing as companies look to differentiate their businesses, combat growing competition and increase their market share in 2014,” Richardson adds.