Insurers in BRICS region will spend more on IT this year

USA: IDC Financial Insights reveals that global insurers will increase IT spending to almost US$101 billion in 2015, a year-on-year increase of 4.4% compared to 2014, with rigorous investments in technologies to boost efficiencies and innovation.

Li-May Chew, CFA, associate research director, and global lead for IDC Financial Insights' Worldwide Insurance Strategies service, sees investments centering around new core applications development and management such as data warehousing, claims and policy administration systems. These replacements or refreshes are required as legacy IT systems become increasingly complex, inflexible, and archaic, to the point of negatively affecting technology integration and interoperability.

Insurers are further spending on change transformation and business optimization initiatives to augment productivity and support intermediaries, as well as in knowledge management, business analytics and customer relationship management applications to improve underwriting insights, raise customer centricity and intimacy.

Also critical is the need to enhance not just the intermediated distribution channels comprised of insurance agents, brokers, and bancassurance, but also newer, disintermediated digital portals of the Internet, social platforms, and mobile delivery.

Chew expects the 3-year CAGR in mature nations to be 3.1% and globally to be 3.8%.

“Geographically, the emerging markets continue to shine. While cumulated spending for these nations may still be a comparatively smaller $19 billion, this will rise at a three year compound annual growth rate (CAGR) of 6.7% between 2015 to 2018, which is double that of mature nations," said Chew.

Herein, IDC Financial Insights sees especially noteworthy IT developments within the insurance sectors of the five "BRICS" economies (of Brazil, Russia, India, China, and South Africa); Chile, Colombia, Mexico, and Argentina in Latin America; and the Southeast Asian countries of Thailand, Indonesia, Malaysia, and the Philippines.

As insurers currently undertake renovation of their legacy systems and upgrade to newer, more innovative infrastructure, IDC Financial Insights recommends that they utilize this as the opportune time to make a quantum leap and incorporate wholesale transformations (built on 3rd Platform technologies around mobile computing, cloud services, social networking, and Big Data analytics) into their IT organizations.

However, as they do so, Chew offers a word of caution and notes that they also need to know how to fail fast - and fail safely. “Emerging technologies are driven by an experiment and learn culture and hence failure is a distinct possibility. Insurers have to be prudent in developing a portfolio mindset for their innovation projects, be ready to write off sunk investments, and cut loses for seemingly ineffective projects,” she said.