2020 is winding to a close. Insurers are finishing their 2021 budgeting processes and looking ahead to the coming year. For most insurer IT departments, 2021 will be a lot like 2020 and 2019: essentially flat budgets focusing on perennial challenges like business intelligence, speed to market, digital experiences, and cloud transformation. 2020 has been a year of change—but for many insurers, things are staying the same.
Budgets and Staffing – Stable Despite Pandemic Conditions
Insurer IT spending levels for 2021 are essentially consistent with prior years; at 3.8% of overall premium, it’s technically a slight downtick from 2020 spending levels (3.9% of premium) but well within historical norms. Some insurers anticipate that premiums will be down next year, but there isn’t a correlating spike in budget reductions. Roughly as many insurers will be increasing their IT budgets next year as will be decreasing.
Staffing levels are also consistent with prior years, with no significant reductions in force or large increases in outsourcing and similar ratios of spend on resources, hardware, and software. Outsourcing as a practice across the industry will continue to creep up, but insurers aren’t rushing to save on staffing costs.
Projects and Priorities
For life insurers, 2021 will represent a shift in priorities as they emphasize digital capabilities to support distributors, policyholders, and internal workflows. These insurers are deprioritizing product innovation to focus on improving gaps in processes that remote work conditions have exposed.
Property/casualty insurers also had a midyear pivot toward supporting digital networks and experiences, but for 2021, their priorities have largely returned to normal. They’re prioritizing product speed to market, analytics and business intelligence, and distributor support—just as they were going into 2020.
Moving into the Future
Stable budgets indicate confidence, but they also continue a trend of IT spend that hasn’t meaningfully increased in the last decade. Insurers still need to innovate, even during a pandemic. Rather than treat IT as an expense to be managed to historical norms, insurers could consider the value they can create by using technology to sell more, manager risk better, and cost less to operate.
These insights come from Novarica’s Research Council study Insurer IT Budgets and Projects 2021. This report was also discussed on a recent Insurer Client Virtual Panel; you can watch the recording of that conversation here.
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