The Insurance Industry, as with all other industries, are under pressure to reprioritise their business plans and initiatives as a result of the current economic climate (see previous post). They are reassessing thier positions and evaluating where and when to invest in new IT initiatives and equally importantly, where to cut back.
Reading a recent article it became clear that various insurance companies have opposing views to what the future holds and how they will be moving forward in the short to medium term.
As far as the insurance industry is concerned, there was no such thing as a finalized IT budget for 2009. Most CIOs had their budgets in hand in January, but none knew just how far the economy would fall, how their organizations would fare or how technology spending would be affected as a result.
But while the overall economic picture remains in flux, insurers’ IT budgets seem to be falling into two key categories: those with a view toward the future and the strategic deployment of technology, and those that are taking a more tactical approach to technology in an effort to realize short-terms goals and ride out the recession.
Mike Sciole, CIO of Burlington, N.C.-based Burlington Insurance Group and Hartford-based Guilford Specialty Group said:
“Some companies are opting to execute tactical projects they believe will provide a short-term boost, and they’ve abandoned their long-term strategic objectives. Then there are other companies that are staying the course, being patient and very methodical about executing their [long-term] strategy.”
In the current environment, however, those companies that have been hardest hit simply don’t have the luxury to be so disciplined. Many in the life insurance industry, which by and large was harder hit than the property and casualty sector, simply cannot afford to sacrifice short-term savings and premium growth goals for a larger scale strategic vision.
The recent Novarica survey showed that nearly two-thirds of life insurers were somewhat or drastically cutting the IT budgets they set at the beginning of the year and a number of life insurers have postponed major policy administration projects.
But even those companies that are not slashing budgets have difficult choices to make in the down market. Celent senior analyst Donald Light acknowledges that, with few exceptions, there has not been dramatic changes in individual insurance carrier IT spend for 2009, but that doesn’t man the industry as a whole won’t see a decline. “One thing we are seeing is a slowdown of the decision cycle for new projects and ‘OK’-ing the next phases in large projects,” Light details. “If it takes longer to make a decision, the amount of spending in any given year goes down.”
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