Total insurance IT spending across North America, Europe, and Asia-Pacific will grow to $140.2 billion in 2013, according to Celent, which represents an increase of 3.0 percent over 2012 spending. The increase is slightly lower than the 3.5 percent IT spending growth increase experienced in 2012.
This slight shift is a cautious but encouraging indicator of future growth, according to Celent, which released a new spending study: IT Spending in Insurance: A Global Perspective.
European and North American financial institutions currently account for 73.2 percent of the global IT investments by insurance companies. Firms in the Asia-Pacific region account for 20 percent, Latin America accounts for 3 percent, and the Middle East / Africa / Commonwealth of Independent States account for the remaining 3.8 percent.
“Regional uncertainty in Europe is putting a damper on insurance premiums and the resulting IT spending,” says Catherine Stagg-Macey, senior vice president with Celent's Insurance Group and coauthor of the report. “North America has a respectable growth rate for the coming years, and the emerging markets continue to forecast very strong growth off a small base.”
Key findings of the report include:
- Premium growth rates slowly climbed in 2011 and 2012 due to the prolonged economic and political challenges facing the global economy. These global challenges caused insurers to continue their cautious and calculated IT investment paths. As a result, Celent spending estimates for 2013 are not much different than our estimates for 2012.
- Although there are many ways to split the spending pie, the most telling indicator of future spending and growth relates to investments in new IT projects. Of the total investment in IT in 2013, 57 percent will go towards maintenance. The percentage of funds dedicated to maintenance activities is high; it has slowly been coming down in some regions. However, percentage will remain fairly flat throughout the globe in 2015.
- Even though economic conditions and the financial crisis have slowed spending on new investment, insurers are often running systems that are too slow and inflexible for their needs. These systems are impediments to efficiency and product development. Slowly but surely, many insurers are becoming more aware and/or experiencing the benefits of upgrading old technology, improving internal workflows and processes, and improving agent and user interactions and investing in upgrading these older systems. Once they have made the decision to replace a new system, Celent expects that they will optimize the investment and “reuse” where possible.
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