Insurance CIO/CTO Pressures, Priorities, Projects, and Plans: 2003 Survey Results

November 14, 2003

Abstract

New York, NY, USA November 14, 2003

Celent’s extensive 41-question survey presents detailed information about motivations, priorities, current activities and initiatives, and future plans at US insurers.

In the summer and fall of 2003, Celent surveyed twenty senior IT executives in order to create a deep resource of information about priorities, behaviors, initiatives, and infrastructures at US insurers. 65% of respondents were CIO/CTOs, while the rest of the respondents were mostly at the senior vice-president and vice-president levels. The life/health versus property/casualty split was 40%-60%. More than half (55%) of respondents came from large carriers, while medium and small carriers made up 30% and 15% of the respondent pool.

"Insurance IT groups are under significant pressure," says lead report author Matthew Josefowicz, Manager of Celent’s Insurance Group. "Resource adequacy is far and away the respondents’ number one concern, but staying competitive and meeting new compliance requirements are high on the list as well. Budgets and staffing levels are generally growing cautiously, but not keeping pace with demands. But insurers are also focusing more on business/IT alignment, to make sure that their spending is occurring in the right places."

In addition to tracking spending and other primary concerns, the survey results address many key areas, including: general priorities and business pressures, business/IT alignment and program offices, priority areas, current initiatives, and best returns on investment. The report includes a chart of more than 40 specific initiative areas, from security and Sarbanes-Oxley compliance to wireless and instant messaging, outsourcing, current and planned usage of different platforms, databases, and technical standards (including J2EE, .NET, and ACORD XML), legacy system issues, vendor usage and preferences, and other IT management issues like IT asset management and use of quality methodologies like Six Sigma and SEI’s Capability Maturity Model.

Among the key findings of the survey:

1. Product development is a key area of focus, and security initiatives are highest priority across the board. Policy administration systems, imaging, and data mastery projects were most commonly cited as yielding the highest ROIs among recent projects.

2. Legacy systems are impeding business effectiveness for a large majority of respondents, but replacement is still years off for most of them. However, insurers are taking first steps with component-by-component replacement strategies, rather than just wrapping and extending legacy systems.

3. To meet the challenge of doing more with less, respondents are embracing onshore and offshore IT outsourcing, but business process outsourcing (BPO) is less common. Some IT outsourcing is projected to move back onshore, but demand for offshore BPO is expected to increase slightly.

4. A move towards less expensive infrastructures is also afoot. Most respondents are planning to increase their reliance on Windows and MS-SQL, while decreasing their reliance on mainframes and DB2. Also, although .NET still less widespread than J2EE, it is gaining ground. A solid majority of respondents reported using ACORD XML in live production systems and expected to see positive ROI within 18 months.

5. The "buy versus build" pendulum has also swung firmly back to the "buy" side, but most respondents believe that "good enough" is the best they can expect from vendors, and most prefer stitching together best-of-breed solutions rather than buying end-to-end systems from a single vendor.

The report is a valuable benchmarking and strategic planning tool for insurance CIO/CTOs and their staffs, as well as providing critical market information for service and solution providers. The 50-page report contains 36 figures illustrating survey responses.

A Table of Contents and a List of Figures is available online.

of Celent Communications' Life/Health Insurance and Property/Casualty Insurance research services can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.

        

Send mail to info@celent.com with questions or comments about this Web site.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

 

New York, NY, USA November 14, 2003

2003 Insurance CIO/CTO  Survey Results

Return to report Abstract

 

EXECUTIVE SUMMARY 3
INTRODUCTION 4
KEY FINDINGS 6
ABOUT THE SURVEY 8
  Methodology 8
  Survey Partners 8
  Sample Group 9
  Note About Presentation of Results 9
GENERAL PRIORITIES AND BUSINESS PRESSURES 10
  General Priorities 10
  Business Trends Driving IT 11
BUDGETS AND STAFFING 13
  Current Budgets and Allocations 13
  Spending and Staffing Projections for 2004 14
BUSINESS/IT ALIGNMENT AND PROGRAM OFFICES 15
  Business/IT Alignment 15
  Program Office Composition 15
  Project Approval Criteria 16
  Business/IT Relationship 17
PRIORITY AREAS, CURRENT INITIATIVES, AND BEST RETURNS ON INVESTMENT 18
  General Priority Areas 18
  Current and High-Priority Initiatives 19
  High Priority Areas: Life/Health 22
  High Priority Areas: Property/Casualty 22
  Satisfaction Levels 23
  Return on Investment 23
OUTSOURCING 25
  Current Usage 25
  Projected Changes 26
  Drivers for IT Outsourcing 27
  Concerns About IT Outsourcing 28
PLATFORMS AND DATABASES 29
  Platforms 29
  Databases 30
J2EE VERSUS .NET 32
ACORD XML 34
  Current Usage of Acord XML 34
  Primary Value of Acord XML 35
LEGACY SYSTEMS 37
  Current Legacy Systems 37
  Time-Frame to Replace 38
VENDOR USAGE AND PREFERENCES 40
  Market Perception 41
  Choosing Vendors 42
OTHER IT MANAGEMENT ISSUES 43
  IT Asset Management 43
  Quality Methodologies 43
CONCLUSIONS 45
  For Insurers 45
  For Vendors 45
APPENDIX 1: LIST OF FIGURES 46
APPENDIX 2: SURVEY DOCUMENT 47
OBJECTIVITY & METHODOLOGY 49

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