Insurance Sector IT Spending Goes Up in 2014

As global economies continue to mend gradually and insurance markets harden, IDC Financial Insights projects technology spending of Asian insurers rising in tandem. 

Amongst others, IDC Financial Insights sees the necessity to - enhance operational flexibility and optimize on business process; innovate in product development and pricing; improve speed to market to stay competitive and dynamic; and keep pace with innovation and social phenomena in redesigning customer engagement strategies - leading to an intensified reliance on technology to achieve these goals. It projects global technology investments rising to US$101.6 billion in 2014, based on a 4 per cent compound annual growth rate (CAGR) over the forecast period of up to 2017. 

"At the end of the day, as tighter coupling of technology with day-to-day businesses and operations sees IT becoming more intrinsic to an organization, budgets for technological deployments by insurers would need to rise," explains Li-May Chew, CFA, associate research director for IDC Financial Insights' Worldwide Insurance Advisory Service. 

"Herein, the star performer continues to be the Asia/Pacific region, with an anticipated 5.6 per cent rise in technology investments to US$18.1 billion in 2014, buoyed by countries in emerging Asia, such asChina,India,Indonesia, andMalaysia." 

"Our industry conversations in Asia/Pacific indicate that the top three most frequent areas of spending centers are around e-channel strategies  for online, mobile, and possibly also social media; core applications development and management – for instance, for claims, policy administration, and product development;  and for business analytics and CRM applications," remarks Chew. 

"It is reassuring to note that Asian insurers increasingly comprehend that business-as-usual will no longer suffice and they need to transform to remain relevant to the game. Insurers are thus becoming more generous in allocating resources into technology, and this is resulting in investments around core applications as they replace installations that are reaching obsolescence, spend to expand their network of operations, or  provide technology support as they enter into new markets or form collaborations with domestic incumbents."

"We see insurance market leaders increasingly snapping out from years of conventionalism and inertia to future-proof operations," comments Chew. 

"Getting their organizations future-ready mean needing to reinvent and simplify business processes to dramatically reduce cost; optimize on customer experiences with the assistance of analytics; enhance the digital outreach; play a more active role in risk modeling and assessment; and explore disruptive innovation within the mature markets such as Australia, Singapore, Hong Kong, Taiwan and South Korea."

10 Predictions for Global Insurance in 2014

1    Countries will revive interest rates as global economies mend, but benefits are not instantaneous and life insurers will need to reevaluate immediate growth strategies 

2    Multinationals will be lured by aggressive growth in the emerging markets of developing Asia and Latin America

3    Aggregated insurance technology spend will increase by 4 per cent in 2014, with the star performer being Asia/Pacific with 5.6 per cent growth

4    Modes for delivering core systems will be increasingly diverse but most transformational projects will still be conducted on an incremental basis 

5    Increasing complexities in operating models will drive insurers to simplify business processes to reduce cost

6    The need to implement a total customer relationship will drive requirements for advanced analytical techniques

7    Insurers will not be hamstrung by existing distribution channels and continue to enhance digital outreach capabilities 

8    Managements will be more active in risk modeling and assessment, focusing on enterprise risk management and handling enhanced regulatory requirements

9    Progressive insurers will explore disruptive innovation from State-of-the-Art technologies such as telematics

10    At up to 15 per cent of premiums, fraudulent activities will have fraud management kicking into even higher gear 

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