Insurers Need Tech ROI, But Cant Afford To Be Left Behind
At a time when most insurers are desperate to lower expenses, the information technology department provides a tempting target. After years of relatively free spending on big-budget tech projects–sometimes without any definite business process justification–many carriers are cutting back considerably, while making their chief information officers and vendors work a lot harder to secure funding to update or replace their tech infrastructure.
While insurance companies spent a considerable sum on IT last year–$19.7 billion–that represented a cut of 8% from 2001, according to IDC, a market intelligence firm. Although tech spending is expected to recover somewhat this year, budgets should only grow 1.6%, IDC added.
Techies gathered at the recent ACORD conference lamented the loss of funding along with new demands to demonstrate a definitive return on investment before carriers green-light any significant IT projects.
While we do not enjoy seeing insurers struggle to make ends meet or CIOs squirm, the fact that tech spending is getting a more critical look is a positive development. There is no reason why the standards for approval of substantial IT investments should be any lower than those applied to other departments within an insurer.
Insurance company CIOs always should be thinking strategically and pragmatically when proposing IT investments. There is no time or resources to waste developing applications that may or may not pan out in the real world of insurance company operations.