Insurance sector CIOs plan to increase IT spend on CRM and private clouds

Almost half (47%) of insurance company CIOs are expecting to increase IT spending next year, focusing on investment in CRM and private cloud deployments, according to research.

Almost half (47%) of insurance company CIOs are expecting to increase IT spending next year, focusing on investment in customer relationship management (CRM) and private cloud deployments, according to research.

The latest report from analyst firm Ovum shows some insurance CIOs expect budgets to increase by "significant amounts". As a result, two-thirds of insurance CIOs plan to invest in CRM systems in 2012.

"While the CIOs we surveyed had mixed feelings about their IT budgets in 2011, confidence for 2012 is much higher," said Barry Rabkin, Ovum insurance technology principal analyst.

"This commitment to increasing spend on CRM systems shows that the insurance industry is getting to grips with the need to understand customers better," he added.

Almost half (40%) of insurance companies are currently using or plan to begin using private cloud computing platforms in 2011.

"The fact that many have already begun to take the first steps in the private cloud computing arena shows that they have grasped the potential benefits it can bring," he said.

Replacing core systems

Ovum found insurance companies commonly have duplicate core administration and operating systems, which are draining IT budgets.

While many of those surveyed plan to keep duplicated operational systems, over half are investigating a rip-and-replace approach to those core systems.

"Making an already burdensome IT situation worse, as many as 10% of insurers plan to add an additional new policy administration, claims management and agent/broker compensation system," said Rubkin.

The survey also showed insurance CIOs were reluctant to outsource business processes (BPO), favouring information technology outsourcing (ITO). Rabkin said BPO suppliers need to convince CIOs in the sector to adopt the technology.

"Only slightly more than half of the insurance CIOs we surveyed felt comfortable using BPO," said Rabkin.

"For an industry that is fundamentally very traditional and slow moving, adopting BPO requires a big shift in attitude. What our survey findings tell us is that outsourcing vendors are not doing enough to convince insurers that potential benefits such as cost savings make it worth taking the BPO plunge," he added.

Ovum's report showed insurance CIOs also acknowledged the need to use business intelligence (BI) to analyse new customer risks. Other plans included using data visualisation to make data queries more interactive.

Rabkin added there is also greater emphasis on rich internet application (RIA), service-oriented architecture (SOA), open source and software-as-a-service (SaaS) IT strategies over the next 12 months.

Sign up to Computer Weekly to read more analyst reports from Ovum:

Read more on IT strategy