New York, NY, USA
June 10, 2002
IT Spending in US Insurance
Report Published by Celent
Total IT Spending by US Carriers is
estimated at US$18 billion, up 7% from 2001.
Despite
the general, economy-wide pullback in IT spending since 2000-2001 and the
many financial challenges faced by the insurance industry in particular,
Celent’s new report, IT Spending in US Insurance, estimates that
U.S. insurance companies are continuing to increase their technology
spending, with 2002 budgets an average of 7% higher than in 2001, for an
industry-wide total of US$18 billion. Celent estimates that this average
growth rate will hold steady for the next 2 years.
 Celent estimates that IT spending accounts for approximately 12% of an
average insurance carrier’s non-commission operating expenses. Within IT
budgets, expenditures on internal staff consume the lion’s share,
roughly 44% on average, with another 11% spent on consultants. Software
licensing and support forms the next largest block, with a 20% share,
followed by hardware with 15% on average. Connectivity and bandwidth, in
an increasingly networked industry, consume about 8% of overall budgets.
An
estimated average of 35% of a carrier’s IT budget is devoted to new
projects and initiatives. Insurance carriers are primarily focusing their
new project IT spending on improving customer service, increasing
delivery speeds, and cutting costs, in that order. Increasing
flexibility to enter new markets and introduce new products is also
important, but not as high on the priority list as the first three goals.
"There is a renewed focus within insurance IT
spending on short-term, demonstrable ROI," says
Matthew
Josefowicz,
a senior analyst at Celent and author of the report.
"We urge carriers not to confuse the two. While it is of critical
importance to set clear, measurable goals and manage projects diligently,
an exclusive focus on short-term ROI can discourage carriers from
undertaking much-needed but longer-term and more systemic
improvements."
 The report includes 14 figures and 4 tables, which
are listed in an appendix.
A Table of
Contents is available online.
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