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Industry Outlook: Insurance IT
Rakesh Sharma has more than nineteen years of Program Management, Product Management and Solutions experience for the Insurance industry. In his current role, he is responsible for the Insurance Practice for Infogain and drives the business and technology strategy in the Insurance space. Prior to joining Infogain, Rakesh worked with various Insurance and IT companies managing Programs, Products, Engineering and Solutions. He joined Infogain in 2009. |
Insurance Industry Technology in 2009
As we look forward to the rebuilding of economic confidence in this new year, I took a step back to reflect on the impact it will have on the insurance industry.
2009 was a year of unprecedented turmoil in the global economy as it was adversely impacted by way of rising unemployment, subdued returns and eroding confidence in the financial system. But as insurers navigated through these turbulent times and budget decreases outpaced increases in 2009, many have managed to stick to investments in IT, especially in core areas like legacy modernization, automating distribution processes and new product development systems. The investments in mission critical areas remained intact and conscious focus was seen in strategic areas like product development, , underwriting and business analytics.
Whether these are good or bad times, IT capabilities alone can help insurers steer them through external and/or internal pressures. IT initiatives and spend in the Insurance Industry largely revolve around producers and consumers, and in terms of functional components, the focus areas remain underwriting, product development, claims and servicing. The year 2009 was no exception.
Insurance Industry Outlook for 2010:
While economic indicators may suggest a financial recovery and the technology spend for the insurance industry as a whole should reverse for positive in 2010, I believe spending will still be relatively weak. Last year was marked by the industry’s sharp focus on core areas, which may be repeated this year as well. Traditionally the insurance industry has been dominated by legacy applications and traditional processing environments to a great extent as the industry has failed to catch up to its sibling in financial services vis-à-vis the adoption of new technology.
2010 presents an opportunity for insurers to revisit their strategies and reposition their value to customers. The learning out of the global financial meltdown is forcing insurers across the globe to look at growing the business, organization wide expense reduction and prioritizing operational effectiveness in their day-to-day operations. While there is value in investing in areas like policy administration, business intelligence (especially underwriting and claims analytics) and agent portals, ignoring disruptive technologies like Web 2.0/social networking, mobile computing, workflow, and straight through processing will be disastrous. Besides bringing in operational velocity, these areas help Insurers to remain competitive in the marketplace.
Within the North American market, underwriting has been and will be the number one priority. This is largely because of the commoditization of vendor products and lack of standalone underwriting solutions. In the North American market, there is increased interest in buying products from a single vendor; however, while reducing the potential risk of having numerous vendors in the application portfolio, this option obviously increases the risk of having all products in one basket. This is especially the case with mid-tier insurers. Insurers need to make a tradeoff between time, money, risk appetite and the overall roadmap while choosing between single-vendor products and best of breed solutions.
Like 2009, year 2010 will witness insurers investing in core systems. However, as we gain economic confidence, insurers will focus on emerging areas like underwriting and rating tools, workflow, predictive analytics, web 2.0 technologies and mobile computing which will help insurers remain competitive and bring in operational efficiency and effectiveness. In addition, it is highly likely that we will see growth in the adoption of web services-based computing within the industry with emphasis on outsourced SaaS and cloud computing to further lower the cost of IT operations.
Posted by Rakesh Sharma on 3 March, 2010
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