The research and consulting firm analyzed nine categories of IT services. Custom development, for instance, is defined as the design, creation, and implementation of custom applications. Maintenance constitutes keeping existing systems running.

The Celent report also looked at the following categories:

• Package implementation: The implementation of select commercial software packages.

• Domain consulting: Consulting advice for rate/price models and underwriting rules, for example.

• Strategic consulting: Advice on IT and business strategies.

• Testing: The design, build, and operation of testing centers of excellence.

• Infrastructure operations and management: The design, build, and operation of IT infrastructure.

• Architecture design: A higher level of IT involvement to help create modern IT architectures.

• Business process outsourcing (BPO): Staff provided to process service or other transactions for insurers.

The good news for IT vendors is insurers rate them highly. More than 80 percent of respondents rated vendors as good to excellent. On a scale of 1 to 7, more than half of European insurers gave very high marks, with the number being just under half in the U.S.

The scores “should be taken as a mark of a mature and overall successful industry,” according to the report authored by Catherine Stagg-Macey, senior analyst.

“The maturity of the IT service sector and the string levels of customer satisfaction should be key factors encouraging a buyer in the market,” wrote Stagg-Macey. “Whether insurers are facing the next year with an expansionist strategy or a belt-tightening strategy, consideration should be given to how IT service providers can provide capacity and skills to suit the business requirements.”

Though custom development and maintenance are the highest areas of spending for insurers in the U.S. and Europe, nearly 80 percent of European insurance companies use the services, about 20 percent more than in the U.S., Celent found. Other services used much more in Europe are architectural design and domain consulting.

The report also delves into reasons insurers choose service providers, and in both Europe and the U.S., stability of the vendor, responsiveness, long-term partnership potential, vendor IT skill set, and knowledge of the business ranked high.

Stability of the vendor was ranked first among factors insurers consider when seeking a vendor in Europe. The factor was ranked second in North America, which chose vendor responsiveness as the number one factor (second in Europe).

Future use of IT outsourcing was only measured in Europe. It looks as if companies here are seeking to increase spending in maintenance, testing, BPO, and infrastructure and operations management.