Business growth and regulation the key drivers of technology investment programmes for insurers in 2012

A recent report released by global research and consulting firm, Celent, indicates that despite experiencing a period marked by financial crises and economic upheaval, 2012 has seen a cautious sense of optimism return to the insurance industry accompanied

“While the report focuses on what IT initiatives general insurers in the UK are investing in, a number of similarities exist between these findings and the trends and challenges currently facing local insurers,” says Rhys Collins, Head of African Operations at SSP.

Collins says that business growth and regulation are the primary business themes currently driving key technology investment programmes. “Almost two thirds of the survey respondents are investing in e-trading or system replacement programmes, while one third are developing self-service capabilities,” he says. “Thirty percent of those interviewed indicate that improving IT as a capability is a priority on their agenda.”

To support this growth, Collins says that insurers are spending considerable resources in ecommerce activities. These include new full-cycle e-trading platforms, increased automation, new products for specific channels and increased third party data integration.

“The need for increased automation has promoted further integration with broker management systems such as pointing a broker management system at the insurer’s pricing engine to remove the need for CD and other more cumbersome update methods,” comments Collins. “New products include the likes of scaled-down motor products that perform well on aggregator sites, the web, or specific variations for affinity partnerships, while increased data integration is enhancing the sales process through improving technical pricing and fraud detection capabilities.”

The focus on growth is reiterated by two-thirds of the respondents indicating that they have core system replacement projects underway, and over one third indicating that efforts are in place to improve IT as a service capability.

“Insurers have increased their investment in projects to replace older policy administration systems with new solutions - either as a complete system replacement project or by adopting a phased approach to modernisation such as SSP’s Enhance and Evolve. From an infrastructure perspective, improving IT as a service capability involves consolidating data centres and removing duplication in infrastructure such as exchange servers, centralising services and platform virtualisation,” Collins explains.

WAN upgrades and desktop virtualisation are other areas Collins says that are currently being considered by several insurers. “Some are also planning to consolidate group service centres to incorporate people, process, technology and governance, while others have targeted software delivery for improvement. The role of agile development and employing tools for broader automated testing is also being reviewed by certain insurers,” he says.

Collins says that self-service is a particular area of focus for insurers this year, particularly for those with more modern core systems from which enabling self-service for MTA’s or renewals is seen as a natural leverage of the existing platform. “This will allow for a reduction in cost and enhance customer service through having less traffic coming into call centres and allowing each individual customer to choose their preferred channel,” he adds.

Other areas for investment include development programmes on existing systems and collaboration tools, while security and fraud remain areas that continue to attract investment. “Development programmes targeted at exploiting investments in recently implemented solutions, are focusing on areas such as adding new products, changing pricing, and responding to new affinity partnership deals. Other key areas where insurers are planning to make improvements include customer experience, channel integration, and product flexibility,” says Collins. “All in all 2012 has been a year of growth in the insurance industry and with general insurers in the UK currently spending around 3.3% of premiums on IT investment, this is good benchmark for local insurance companies looking to drive future growth.”