This was unveiled in the recently published report by IDC Financial Insights, "Global Insurance 2015 Top 10 Predictions: Perils and Prospects for the New Year” (January 2015, IDC Financial Insights Doc #AP250896), that presents its top 10 perspectives on the perils and prospects for the global consumer and commercial, life and non-life insurance markets for 2015.
Li-May Chew, CFA, associate research director, and global lead for IDC Financial Insights' Worldwide Insurance Advisory Service, sees investments centering around new core applications development and management such as data warehousing, claims and policy administration systems. These replacements or refreshes are required as legacy IT systems become increasingly complex, inflexible, and archaic, to the point of negatively affecting technology integration and interoperability.
Insurers are further spending on change transformation and business optimization initiatives to augment productivity and support intermediaries, as well as in knowledge management, business analytics and customer relationship management applications to improve underwriting insights, raise customer centricity and intimacy. Also critical is the need to enhance not just the intermediated distribution channels comprised of insurance agents, brokers and bancassurance, but also newer, disintermediated digital portals of the Internet, social platforms and mobile delivery.
"Global insurers need to know where and how to seek pockets of growth amidst economic uncertainty. In order to regroup and focus on sustainable, profitable growth, organizations will have to confront multiple perils – ranging from reengineering or rebuilding legacy applications, to countering mounting insurance fraud – and still ensure they are well positioned to embrace growth prospects as these present themselves.”
“We expect the global insurance industry to invest more rigorously in technologies, and project global IT investments rising to almost US$101 billion this year as these support campaigns to boost efficiencies and innovation. Geographically, the emerging markets continue to shine. While cumulated spending for these nations may still be a comparatively smaller US$19 billion, this will rise at a 3-year CAGR of 6.7% between 2015 to 2018, which is double that of mature nations,” says Chew.
She expects the 3-year CAGR in mature nations to be 3.1% and globally to be 3.8%.
Herein, IDC Financial Insights sees especially noteworthy IT developments within the insurance sectors of the Big Five BRICS economies (of Brazil, Russia, India, China, and South Africa); Chile, Colombia, Mexico, and Argentina in LATAM; and the Southeast Asian countries such as Thailand, Indonesia, Malaysia, and the Philippines.
Chew added that insurers are cognizant that strategic execution needs to be technology-enabled and are hence proactively embracing technology-driven innovation. She is thus confident that their budgets for such deployments will continue to rise alongside, and oftentimes, quicker than annual premiums growth.
In addition to elaborating on IDC Financial Insights' projections on investment spending at global insurers, this document also details the nine other Predictions listed below:
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Legacy modernization will gather momentum with zero-tolerance for infrastructure failure and demand for reliability and availability, driving the adoption of modular approaches to upgrades and replacements; meanwhile, the value proposition of cloud will continue to strengthen
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Insurers will be under pressure to enhance processes efficiencies and reduce cost for core operational functions such as policy administration, underwriting, and claims performance; focus will be on transforming the IT enterprise with effective reengineering programs
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Customers will be increasingly shaping the policyholder-insurer relationship and influencing insurers' customer-centric strategies; marketing heads will collectively spend US$6.6 Billion in 2015 to enhance the total customer experience
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Big Data Analytics will transition from descriptive applications to predictive and even prescriptive capabilities, with these serving to create data-driven insights and enhance propositions to customers
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Insurers' channel outreach will be increasingly digitally driven, transforming their distribution delivery with up to a third of premium sales transacted via Internet-enabled computer or mobile devices and social networks by 2018
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Despite the rising popularity of direct distributors, intermediated channels will continue to dominate at up to 70% of global premiums; Insurers focused on agency or broker management will need to inject these with a new lease of life
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As the threat of fraud heightens with the digital revolution, insurers will need to spend US$3.3 Billion in 2015 to invest on information security and to counter financial crimes
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Rigor on risk management will continue as insurers enter an era of re-regulation; Risk and compliance are more than just threats but opportunities for value-creation that insurers have to embrace without stifling innovation
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Potentially game-changing, disruptive technologies stemming from the Internet of Things (IoT) evolution will raise insurers' competitive advantage, but such radical innovations need to be closely aligned with strategic objectives
As insurers currently undertake renovation of their legacy systems and upgrade to newer, more innovative infrastructure, IDC Financial Insights recommends that they utilize this as the opportune time to make a quantum leap and incorporate wholesale transformations (built on 3rd Platform technologies around mobile computing, cloud services, social networking, and Big Data analytics) into their IT organizations.
However, as they do so, Chew offers a word of caution and notes that they also need to know how to fail fast - and fail safely.
“Emerging technologies are driven by an experiment and learn culture and hence failure is a distinct possibility. Insurers have to be prudent in developing a portfolio mindset for their innovation projects, be ready to write off sunk investments, and cut loses for seemingly ineffective projects.”
For more information about this report, "Global Insurance 2015 Top 10 Predictions: Perils and Prospects for the New Year” (January 2015, IDC Financial Insights Doc # AP250896) please contact Sheryl Fuertez at +65-6829-7758 or sfuertez @idc.com. |
