IT spending to hit $100 billion
Recent research by independent business and technology analyst firm Ovum has found that, in line with the gradual recovery of global insurance markets, insurers are abandoning cost-cutting caution and leaning towards strategic investments in Information Technology (IT) projects. The report suggests that global spending by insurers on IT is likely to grow at a compound annual growth rate (CAGR) of 6.4 per cent, with total spend reaching US$109 billion by 2017, as insurers prioritise investment policies that fuel customer acquisition and retention, as well as improving operational effectiveness.
Recent research by independent business and technology analyst firm Ovum has found that, in line with the gradual recovery of global insurance markets, insurers are abandoning cost-cutting caution and leaning towards strategic investments in Information Technology (IT) projects. The report suggests that global spending by insurers on IT is likely to grow at a compound annual growth rate (CAGR) of 6.4 per cent, with total spend reaching US$109 billion by 2017, as insurers prioritise investment policies that fuel customer acquisition and retention, as well as improving operational effectiveness.
Ovum’s research suggests that the most rapid growth will be observed in the Asia-Pacific life insurance sector, which is set to expand at a CAGR of 11.6 per cent between now and 2017, taking Europe’s place as the second-largest regional market. European life insurers’ key priority is likely to be a reduction in operating costs, which will drive IT investment in the modernisation of legacy systems, fraud detection systems and online channels. Ovum expects the annual spend in support of consolidation, transformation and core system replacement projects to be around $5 billion by 2017.
Charles Juniper, senior insurance analyst for financial services technology at Ovum, commented: “The sharp decline in new business growth across all life insurance markets following the global slowdown led most insurers to rapidly and significantly cut their IT budgets. However, accelerating year-on-year growth in 2013 following some cautious expansion from 2011 confirms that life insurers are now moving from a cost-cutting mindset toward reinvestment in strategic IT projects. As insurers emerge from short-term cost-cutting, they should all, at the very least, be re-assessing their current IT approach to ensure sufficient focus is given to revenue-growth initiatives and to prevent becoming stuck in a ‘maintenance only’ IT strategy.”