Investment in IT is back on trackInsurers set Priorities October 2013 BLOG POST
Overview The financial crisis which originated from USA and took the rest of the world in its grip affected almost all kind of businesses and insurance industry was not an exception. Many large as well as small insurance business groups struggled to grow their top line and bring down the expenses. However, the environment in the insurance industry is changing and most of the global markets have made considerable comeback and now focusing on growth.
Enterprise IT Spending for the Insurance Market Worldwide
81.1
83.4
86.7
91.7
64.5
96.9
68.0
102.1
71.3
107.5
74.8
58.3
59.4
61.2
22.8
24.0
25.5
27.2
28.9
30.7
32.7
2011
2012
2013
2014
2015
2016
2017
Source: Gartner
As global insurance markets are on the course of recovering, insurers are now strategizing on investing in technology so as to improve efficiency and foster growth. A recent research conducted by Gartner shows that the IT spending by global insurance companies is on the rise and it is expected to cross $100 billion by 2016. This accounts for about 4.7% CAGR (20011 to 2016). As per Gartner, Enterprise IT spending for the insurance market worldwide is estimated to reach ~USD107 Bn by 2017. Software services would lead in terms of CAGR till 2017 with 6.2% while IT services would grow with 4.2%. Software includes application software (back-office/ERP and supply chain; front office/CRM; desktop; collaboration), infrastructure software (application development and middleware; information management; storage management software; and system and network management) and vertical industry-specific applications. External IT services include product support services (software support and hardware support) and business services (consulting, implementation, IT outsourcing and business process outsourcing).
Investment in IT is back on track - Insurers set priorities
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Enterprise IT Spending y-o-y growth by segment 6.8% 6.3% 5.8% 5.3% 5.5%
6.2%
6.4%
6.3%
5.6%
5.4%
5.3%
4.9%
4.9%
2016
2017
5.4%
4.0% 2.7% 3.0% 1.8%
2012
2013
2014 Software
2015 IT Services
Total
Enterprise IT spending for the Insurance Market by regions
1.5% 1.5% 3.1%
3.3%
1.6% 1.7% 3.1%
3.3%
1.7% 1.9% 3.3%
3.4%
1.8% 2.0% 3.3%
3.4%
2.0% 2.1% 3.4%
3.5%
2.2% 2.3% 3.6%
3.5%
2.3% 2.4% 3.7%
15.1%
15.0%
13.0%
12.5%
12.1%
11.8%
11.5%
30.9%
29.5%
29.3%
28.7%
28.2%
27.9%
27.8%
44.6%
45.8%
47.3%
48.2%
48.6%
48.8%
48.7%
2011
2012
2013
2014
2015
2016
North America Emerging Asia/Pacific
Western Europe Eastern Europe
Mature Asia/Pacific MENA
Latin America Sub-Saharan Africa
3.6%
2017 Greater China Eurasia
Source: Gartner
North America and Western Europe would continue to dominate the total IT spend with collective share of over 75%. Mature Asia Pacific which includes Japan, Australia, Singapore and S. Korea would gradually come down to ~11.5% by 2017 from over 15% in 2011. China and Emerging Asia Pacific would increase their share from ~1.5% each in 2011to 2.4% and 2.3% in 2017 respectively.
Investment in IT is back on track - Insurers set priorities
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Worldwide – Total
Emerging Asia/Pacific and China expanding with double digit growth and will continue to do so
20% 15% 10% 5%
Latin America, Eastern Europe, MENA and SubSaharan Africa region which witnessed very low growth in 2012 are expected to see the most rapid growth till 2017
0% -5% -10% -15%
Worldwide – Software 20%
Western Europe which saw the negative growth in 2012 is expected to see moderate positive growth of 3% in 2013, reaching out to 5% by 2017. Mature Asia Pacific saw a drastic decline in 2013, would grow moderately till 2017
15% 10% 5% 0% -5%
Worldwide – IT Services 20% 10% 0% -10% -20% 2012 North America Eurasia MENA
2013
2014
Latin America Mature Asia/Pacific Sub-Saharan Africa
2015
2016
Western Europe Emerging Asia/Pacific
2017
Software services would lead the growth with Latin America, Emerging Asia/Pacific, China, MENA and SubSaharan Africa touching double digit growth during 2013-2017
Eastern Europe Greater China
Source: Gartner
Investment in IT is back on track - Insurers set priorities
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Insurers’ Technology Priorities
Globally, Insurers are now prioritizing investments in technology. Insurance industry as a whole has seen lot of transformation in terms of customers, competition and other aspects of business. In order to have an enhanced go to market approach insurers are prioritizing mobile applications, customer interaction and distributor portal as an investment option to improve channel management applications. Insurers Underwriting and Claims management are also the key priorities for technology investments. Cloud computing is gaining attraction from both life and P&C insurers and the focus is on customers and operational effectiveness. As per Gartner, by year-end 2013, the percentage of the IT budget of insurers allocated to cloud computing will grow from less than 5% today to 25% and by year-end 2014, 25% of face-to-face sales and service interactions by insurance agents will migrate to video, phone and electronic channels. It is also expected that by year-end 2014, at least one social network provider will become an insurance sales channel and by 2015, more than 80% of North American life insurance agents will use media tablets or smart phones for insurance sales.
Investment in IT is back on track - Insurers set priorities
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