- Most insurance companies will increase or maintain current tech spending levels in 2023, according to a Gartner report published Monday. The analyst firm surveyed more than 2,200 CIOs, including nearly 100 in the insurance industry.
- That spending will shy away from revenue-growing efforts in favor of improving CX technologies, modernizing legacy applications and expanding analytics capabilities, the report said.
- A triple squeeze impacting all sectors — an economic downturn complicated by talent shortages and supply chain woes — has forced this shift in enterprise IT spending, Kimberly Harris-Ferrante, VP and distinguished analyst at Gartner, told CIO Dive.
Signals that large insurers were rethinking IT strategies began surfacing last year, as inflation hit historic highs, tech unemployment hovered at record lows and interest rates began to climb.
At Principal Financial Group, VP and CIO of Enterprise Business Solutions Ryan Downing spent more time talking to his team about improving customer outcomes than about IT architecture, while MetLife’s Bill Pappas, EVP and head of global technology and operations, focused on ways to recruit top-tier tech talent to the company’s innovation campus in Cary, North Carolina.
New York Life leaned on data science and AI to reimagine the underwriting process, Alex Cook, SVP and head of strategic capabilities at the company, told CIO Dive in September.
In a rocky economy, companies of all types tend to adopt conservative business strategies. In the notoriously risk-averse insurance industry, objectives shifted away from revenue growth to consolidating prior gains, maintaining revenue levels and holding onto market share, according to Harris-Ferrante.
“CX for new customers has given way to CX to protect the company’s existing customer base — to avoid customer churn,” said Harris-Ferrante. “Companies don’t want their customers to cancel or reduce their policies.”
Most insurers will keep investing in cloud in order to cut the cost of large legacy systems, the report said. Nearly half of respondents plan to reduce legacy infrastructure and data center spending in 2023.
Similarly, cybersecurity remains a priority, with two-thirds of insurance company CIOs planning to increase investment in that area this year.
Trends in the insurance industry are reflected to greater and lesser degrees in other sectors, Harris-Ferrante said. But insurance is unique.
“Insurance companies have a lot more legacy systems and have not been able to break those shackles as easily as in some other industries,” Harris-Ferrante said.
Life and even auto insurance are also relatively low-touch businesses, which means customers commonly go for five or six years without direct contact with an agent, underwriter or claims adjustor.
When those customers do reach out, insurers, and their CIOs, want to make that experience as seamless as automation and other technologies allow.
Prior to those interactions, insurers want to use advanced analytics to proactively intervene — first identifying customers most at risk of the churn that happens in a turbulent economy.