Financial Services Firms Increasing Spending, But Priorities Differ

Spending is increasing among financial services firms across the insurance, banking and securities/capital markets sectors. But priorities differ, according to a joint survey conducted by Insurance & Technology and its sibling publications, Bank Systems & Technology and Wall Street & Technology.

Policy Admin Apps Top Insurance Spend

Policy administration was far and away the highest priority for P&C and life insurance companies' spending on business application areas, with about 82 percent of P&C companies saying they would focus IT resources in that area. This was followed by underwriting (59 percent), accounting/billing/finance (48 percent) and claims (41 percent). Though fewer life insurers identified policy administration as a spending focus (67 percent), the category nonetheless stood out as a top priority, with claims, underwriting, accounting/billing/finance, agent portals, policyholder portals and risk/CAT management each being identified by 33 percent of respondents.

According to Josefowicz, these priorities are consistent with the key drivers of business cases identified by Celent, namely time to market, distributor support, and better ability to access and analyze data. "Those drivers filter down into investments such as policy admin or product definition and management platforms, transactional portals, underwriting, and claims," he says. "It's about delivering a tangible benefit to business units dissatisfied with their current capabilities."

Dissatisfaction with the status quo is expressed at Conseco (more than $4 billion in annual revenue) by the company motto "fix, focus and grow," according to EVP and CIO Russ Bostick. In terms of IT spending at the Carmel, Ind.-based manufacturer of life, annuity, long-term care, Medicare supplement and specified disease insurance products, that dictum translates into more spending on fewer improvements that will yield greater benefits.

In terms of the "fix" imperative, Bostick's organization is working on systems conversions for in-force books of business, an initiative that stems from the carrier's accumulation of more than 30 systems introduced through M&A activity. Conseco's focus will be on "more spending on distribution, but on fewer target ideas," Bostick comments. "We're also spending more on the 'grow' part, which is related to new products and the capability to sell other people's products by cobranding," he adds.

"We're spending less money on the running-the-business items, such as mainframe costs and maintenance programming," Bostick continues. "Overall we'll spend a little more cash due to the investments we're making in our business.

As noted, Conseco's increased investments are representative of a trend among insurers. But globalization of IT organizations is driving a more complex budget picture, as explained by respondent Scott McKay, SVP and CIO of Richmond, Va.-based Genworth Financial ($11 billion in annual revenue), who also reports increased technology investment dedicated to both operating efficiency and competitive capabilities.

Globally, the cost of technical talent is increasingly driven higher by growing demand for applied technical expertise and declining education system graduation rates, according to McKay. "In the near term, businesses with globally deployed technology teams will also be pressured by foreign exchange rates," he comments. "Contrasting higher labor costs, we see continuing deflation when purchasing technology infrastructure and are realizing efficiencies from emerging software-as-a-service (SaaS) offerings."