Insurers Cater to Customers
as Digital Business Advances
Record disaster losses, new competitors and
Internet-empowered consumers are all conspiring to force insurers to expand and perfect their
mobile apps, social media outlets and websites
to retain tech-savvy customers, according to a
The “2012 North American Insurance eBusiness and Channel Strategy Trends” report from
Forrester Research found that 97 percent of IT
budget decision-makers in the insurance industry thought of technology as critical to serve
and support customers.
“What surprised me the most was the de-
gree to which mobile apps, social media, analyt-
ics and the Internet are a fundamental part of
the way that insurers do business compared to
five years ago,” said Ellen Carney, senior analyst
serving eBusiness and channel strategy profes-
sionals at Forrester and author of the study.
Technology to Bolster
More than half of U.S. employers say they are expanding the
use of technology to manage costs associated with employee benefits programs, according to research conducted by Prudential
Financial, Inc. According to “Today & Beyond,” employers expect
the importance of benefits technology to grow substantially over
the next five years.
“Employers are looking for their insurers to do more than pay
claims,” said Joseph Hayes, CIO of Prudential Group Insurance.
“They want a streamlined benefits process using technology that
allows their employees and benefits administrators to connect
directly with their insurers.”
Among the key technology strategies noted by employers:
Half of those polled (51 percent) say it is important that their
benefits systems interface with their insurance carrier’s systems;
More than half (59 percent) are looking for their insurance carri-
ers to offer “plug and play”—the flexibility to adapt and connect
to other carriers or a third-party administrator; Nearly half (45
percent) report that benefits technology has helped improve
The push for technology and functionality comes in spite of
survey results that show low-to-average use of online benefits
tools among employees.
Global Insurance IT
Spending to Reach
$140 Billion in 2012
Insurers’ IT spending globally is expected to
reach $140 billion in 2012, indicating a growth in
premiums, according to a report from research and
consulting firm, Celent.
“IT spending is a function of company rev-
enue,” said Catherine Stagg-Macey, Celent SVP and
co-author of the report, “Global Perspective on IT
Spending in Insurance.” “As premiums grow in a
region, IT spending increases, which reflects rising
costs such as labor and the reduced costs of hard-
ware. IT can help reduce duplication of effort and
costs. The smart application of technology allows
a company to do the same things in a smarter way
The study found that insurers in Europe ac-
count for 40 percent of IT spending compared to
35 percent for North American insurers.
IT spending in North America is expected to
climb to $58 billion by 2014. IT spending that impacts the public tends to fall in the areas of pricing,
customer experience, portals, mobile technology
and social media. “Overall, Europe as a region
has more premium income than North American
insurers and so the regional spend on IT is higher,”
Among the best practices that emerged at a Novarica
Insurance Technology 2012 Research Council meeting of
50-plus insurance executives were ways to manage the
increased demand to support a Bring Your Own Device
(BYOD) policy and turn it to the insurers’ advantage.
“One thing that surprised me was the extent to which
BYOD has become common in the industry. While managing user-owned devices adds complexity, some members
reported savings from supporting fewer corporate-owned
smartphones,” said Matthew Josefowicz, partner and
managing director at Novarica. Josefowicz founded the
council, a knowledge-sharing and peer-networking community made up of 325 CIOs and senior IT executives
from more than 275 U.S. insurers.
Another best practice that emerged from the meeting’s
discussion was the wide embrace of agile development
methodologies by council members.
“Many members reported improvements in the business/IT relationship based on the close working environment that agile development depends on,” Josefowicz
Research conducted among insurer members of the
Novarica Insurance Technology Research Council found
that most insurers rate nearly half of their systems below
an acceptable level.
mergers & ACquisitions
Flat in 2011; to
Increase in 2012
While deal value of 2011 insurance M&A transactions in the United States increased 43 percent
to $12.9 billion from $9 billion in 2010, insurers
are still plagued with low valuations.
PwC’s “Balancing Uncertainty and Opportunity:
2012 US Financial Services Insights” study reports
that M&A activity was relatively flat in 2011, with
310 announced deals compared to 304 in 2010.
“There haven’t been many deals or as many sell-
ers due to the low valuation of insurance companies
in 2011. Insurers have been trading at less than their
book value,” PwC Transaction Services Partner Sam
Yildirim told Insurance Networking News. “But we
expect overall values to improve in 2012.”
In contrast, a Conning Research & Consulting
study found that U.S. insurance M&A transactions
increased by 36 Percent in 2011 with deal values
increasing by 18 percent.
Speaking to the contrast, PwC’s Yildirim said,
“We focused on majority acquisitions. We didn’t
include minority deals in our analysis.”
PwC’s study found that market volatility kept
many deals from being completed in the second
half of last year and could also harm deal-making