Insurance Technology Spending in 2016: More of the Same or Seismic Shifts?

February 23 2016 | Monique Hesseling

As always, the beginning of a new year prompts predictions on what this year will bring us. Some of those predictions are based on extensive research, others more on crystal-ball gazing. It has been interesting, especially this year, to see what everybody has come up with since the predictions covered such a wide range of different priorities and strategies around insurance technology. Reading through it all, I sometimes feel that insurers are focusing on absolutely everything in 2016, and all of it has top priority. I read that core systems replacements will continue to be most important, or possibly data privacy and cybersecurity, maybe customer experience and distribution management support, or master data management. And of this is to support many different operational insurance functions or insightful analytical exercises. I think it is fair to conclude that the world of insurance is transforming at a fast pace and that insurers are looking for multiple ways to best position themselves for the future.

Seismic crackAs in every year, SMA has conducted research with over one hundred insurers and asked them about their technology priorities and spending in 2016. This year, we did notice some significant changes from the past years that are worth mentioning:

  • For the first time ever, technology solutions are beginning to drive business strategies instead of supporting them. This is primarily the case for the customer and agent experience, in improving agility in the business by deploying modern core systems and in using analytics insights to improve profitability.
  • Because of these transformative projects, and in an attempt to fully engage in the new digital world, IT funding is increasing this year by approximately 5% over last year. A significant part of that budget is specifically allocated to the strategic initiatives.
  • Interesting to note is that this is the first year in which we see a big part of the budget for strategic-initiative technology residing within the business units, not in IT.     

Seismic shift or business as usual? I would conclude we are experiencing some serious seismic activity. Not in a scary, adventure-movie, life-threatening way, but definitely noticeable enough to wake us all up and shake us into action.

For insurers, those actions should include validating their IT spending with competitive data to ensure that they are not falling behind. Even more importantly, they should get a deep understanding of customer and distribution expectations and work on at least minimally meeting these. They need to consider data a strategic asset and manage that asset wisely. They ought to position for an ever faster-moving society by being agile, enabled by modern core systems. All of these efforts must be driven by an overriding strategy to become a true Next-Gen Insurer. Before we know it, it will be “Now-Gen.”

Solution providers have a big role to play in this transformation; they need to understand which business strategies are driving insurers and how their solutions clearly support those. They need to build relationships with insurers’ functional business owners and listen and learn about their technology needs. Their solutions need to be flexible and support digital, mobile, cloud, analytics, and easy interoperability. And they need to own the success of their solution and cooperate closely with insurers on transformative projects.

2016 will be an interesting and exciting year. Healthy seismic activity will take place, and new ground will be uncovered. It looks like our industry might be ready for it.        

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To learn more, please contact:
Monique Hesseling
Strategy Meets Action