North American insurers trail their international counterparts in the use of outsourced software for core information technology systems, according to new research.

Market research firm Celent discloses this finding in a new report, “Legacy Transformation in Insurance: Differences Across Continents.” The latest in a series of surveys undertaken to evaluate insurers’ business and IT priorities in 2014, the new report explores the differences among insurers in the Asia-Pacific, Europe, Middle East Africa, Latin America and North America.

North American and Latin American insurers that express a preference for hosted software as a service (SAAS) trail by 9 to 22 percentage points other insurers that (1) also favor SAAS solutions for running core IT systems and (2) have implementing the technology.

The SAAS model, the report adds, is in use at less than 10 percent of North American insurers. This compares with more than 30 percent of insurers in the Asia-Pacific region.

Four in ten North American insurers plan to make incremental improvements to their core information technology systems in the next two three years, the research shows. Another 20 percent say with will consider commercial off-the-shelf (COTS) vendor packages in their legacy transformation projects.

“American insurers are investing in core systems because the environment is getting more competitive and technology enables faster product introduction, better service and improved business models,” the report states.

Some North American insurers are also spearheading complex system replacement projects. The initiatives cover a range of business applications, including policy administration, underwriting, claims and billing. Also due for an overhaul are rating/illustration, portal/distribution and financial applications.

“The complexities increase when claims and underwriting are considered…” the report states. “We increasingly see large players focusing on the front end…particularly quotes, illustrations and e-applications.

“We have also observed that North American insurers are making strategic choices to rationalize their IT infrastructure to support specific blocks of business (e.g., closed block) to improve their margin[s].”

The report adds that insurers from overseas insurers are more likely than their North American counterparts to buy vendor packages when replacing or modernizing an IT system. Small insurers, irrespective of region, tend to favor end-to-end solutions provided a third-party.

North American insurers account for 35 percent of the 124 survey respondents, all IT decision makers. By line of business, respondents in the life, pension and annuity spaces totaled nearly half of those polled.