Financial Crisis Still Takes a Toll on Insurers
Jamie Macgregor | November 11, 2014
In a post-global financial crisis world, continued low interest rates and lackluster investment performance continue to take their toll on the insurance industry. Heading into 2015, there is likely to be no respite.
Reduced growth prospects from the BRIC countries (albeit higher than most developed markets), flat or deflationary pressures in Europe, political instability in the Middle East, heavily indebted governments, and a period of political inactivity in the U.S. in the run up to the next presidential election are all likely to have a dampening effect on the level of ambition in investment as these global issues impact at home. More than ever, insurers are having to make a greater return from their core business of managing risk.
Despite this backdrop, we saw an increase in IT investment across the industry in most markets around the world in 2014, with 4.7 percent in the U.S. We expect IT investment growth to continue in 2015, albeit modestly, as insurers look to take advantage of technology to tackle their toughest issues in their core business and open up opportunities in distribution and proposition design to deliver a superior return.
Advances in adjacent industries around analytics, customer experience, and digital continue to raise expectations. Clients are demanding the same experiences they have on their personal devices (such as iPads) in their professional interactions with insurers. This is not just a retail phenomenon either. Commercial and corporate clients are increasingly demanding digital capabilities that differentiate the proposition for their staff and operations. The pressure is being felt in different ways by different insurers, depending on where they are in their simplification journey.
Early movers in core systems replacement will be better placed to direct future investment toward new digital platforms, analytics, and the heightened security awareness that comes with opening up processes and systems to the outside world. Those in the middle of core upgrades will be pushing to finish them quickly so they can free up resources to play catch-up.
Those still waiting “until the time is right,” or to get funding approved, will increasingly feel compelled to act to address their technical debt, a rapidly retiring workforce, and the fear of being left behind. 2015 could be a crunch year for some late adopters; we are already beginning to see a clearer divide in market agility between those that “have” and those that “have not” addressed their legacy.
With an increased focus on all things “digital” comes a renewed interest and growing appreciation for how insurers’ technical architectures will need to change to accommodate the Internet of Things, external data sources, and new offerings from fintech start-ups. Progress towards adoption, however, is likely to be slow in 2015 as many insurers reflect first on what all of these technologies mean to the core business result, while watching and learning from those brave enough to experiment. However, discussions among architects, proposition leads, and underwriters will still go ahead on both the opportunities and implications, and parallel investments will be made in internal capabilities to stay ahead.
For 2015, the proverb “Necessity is the mother of all invention” probably best sums up the outlook. Smart capital investment with a rapid payback, efficient operations, and innovative technology-led approaches to hunting down new profitable niches are likely to shape many of the IT investment portfolios next year while insurers keep watch for the good times to return.
(Jamie McGregor is global senior vice president of Celent’s insurance practice.)
- Now Accepting Nominations for the 2019 ITA Bridge Awards
- It's time to register for ITA LIVE!
- Registration is Now Open for ITA LIVE 2019!
- What to Expect from a Digital Experience Platform Implementation
- ITA Pro Magazine September Edition is Now Available
- It's National IT Professionals Day
- Save the Date for ITA-LIVE 2019
- OneShield Software and UrbanStat Work Together to Improve Real-Time Analytics and Risk Decision-Making
- ITA LIVE 2019 - SAVE THE DATE!
- Insurance Technology Association Announces New Editor-in-Chief
- August 2018 Edition ITA Pro Magazine is Now Available
- Enterprise Architecture in an Agile World
- Top 10 Tips for Securing Your Mobile Devices and Sensitive Client Data
- Industry Insight: 4 Global Insurance Trends in Digital, Data, Content Services and Security
- Diving Deeper into Prioritizing Your Strategic Digital investments
- Why Content Rules
- How Mass Personalization Will Open the Small Business Benefits Market
- At Year End 2017, Will Your Organization Be Protected from Cyber Risks?
- Do Insurance Bots Dream of Mitigating Risk?
- Conditioned to Respond
- Managing & Mobilizing Insurance Data in a Connected World
- Race to the Finish Line
- New Tools, New Opportunities in Claims
- ITA LIVE: Reaching Insurance Industry Crossroads
- Advice to Insurance IT Leaders: Keep Your Eye on the Ball
- New Date, Venue for ITA LIVE 2017
- Guidewire Makes Major Push to Small and Midtier Market by Acquiring ISCS
- Insurance Disruption is Happening Right Now
- Insurity Adds Strategic Investment Partner, General Atlantic
- Beyond Transformation: The Convergence of Finance, Risk, and Actuarial Functions
- The Rapid Evolution of Consumer Protection Regulation
- Talent Hunt: Finding, Attracting, Retaining Top People
- Insurers Flexing Their Distribution Models
- Technology Driving Disruption in Insurance
- Fear of ‘Next Bubble’ Challenges Life, Annuity Carriers
- Technology Allows Commercial Lines Insurers to Stand Out
- Single Sign-on Viewed as Biggest Tech Challenge for Agencies
- ISCS Observes 20th Anniversary; Scurto Predicts Major Changes Ahead
- Policyholders and Their First Impressions
- Progressive Making Progress on the UBI Front
- High and Dry: Insurers Search for Disaster Recovery Plans
- Insurers Sign The (Un)Dotted Line
- Reflections of a Retired Insurance CIO
- Mobile Device Management Just One Answer to BYOD Issue
- Lessons from GEICO and Progressive on Winning the Critical Buying Stage
- You Are a Target for a Cyber Attack
- Web-based Systems are the Next Evolution in Claims Technology
- Gaining a “Wow” Experience from Web Users
- Time to Shift from Business/IT Alignment to Business/IT Alliance
- Healthcare Insurers Changing to Consumer Model
- Organization is the Key for Selecting Software Vendors
- Analysts Expound on the Needs of the Mid-tier Insurance Market
- Finding the Cure for Obamacare’s Website
- New Software Solutions Benefit Insurers on the Inside and Outside
- Products, Market Impede Investment in Systems for Life Insurers
- Combatting Cyber Threats: Predict, Prevent, Persist
- The Future of Telematics Heads Beyond Insurance
- The Shame in Cyber Security Lapses
- Building Policy Administration Systems for the Future
- Insurers Look Into The Eyes of Their Policyholders
- It’s a New Dawn for the ITA
INSURANCE IT NEWS
- Hippo Insurance Secures $70M Series C Investment Led by Felicis Ventures and Lennar Corporation
- Cloverleaf Analytics Announces Version 2.0 Release
- AmWINS selects ClarionDoor’s Digital Distribution Suite to Power Underwriting Platform
- Ask Kodiak Connects TrustedChoice.com Carrier Appetite to TechCanary Agency Management System
- Seth Bostock Joins Lucens Group as CTO with Vision to Simplify the Disability Insurance Experience
- Life Insurers Enhancing Claims Systems, Novarica Profiles Six Prominent Providers
- HazardHub Releases Frozen Pipe Score, Ice Dam Score and enhanced Weather Variables
- Big Gains & Big Bets in the Independent Insurance Channel
The Email Chat is a regular feature of the ITA Pro magazine and website. We send a series of questions to an insurance IT leader in search of thought-provoking responses on important issues facing the insurance industry.
ITA is pleased to present the 2014 Webinar Series. We have many topics for you to choose from and attendance is open to all ITA members. The webinar topics are current and exciting — ranging from predictive analytics to telematics and will focus on the direction insurance carriers need to follow for the future. All webinars are presented by insurance IT professionals along with some of the leading analysts and consultants in the field. There is no cost to attend an ITA webinar. For more information and to register for the webinar, click the “title” of the webinar below.
BLOGS AND COLUMNS
The Insurance Technology Association is pleased to announce that ITA Live 2019 is scheduled for May 5-7, 2019 at the Marriott Harbor Beach Resort and... READ MORE
It has become a common refrain over the past few years to view the practice of enterprise architecture (EA) as something that time has passed by, much... READ MORE
You have surely heard it said that small businesses are the growth engine for America. Today, the phrase has a special ring to it for benefits... READ MORE
With stagnant growth and lingering low interest rates, the life insurance industry faces a challenging future... READ MORE
Finding insurance carriers willing to write commercial lines risks has always been a challenge for producers... READ MORE
As Guidewire Software prepares for the start of Connections, its 11th annual user conference that begins on Nov. 2, Brian Desmond, chief marketing... READ MORE
Fraud detection has always been and will continue to be a critical component of claims management. Learning the lessons from current claims Straight... READ MORE
- Vendor Views