Another area, core system reengineering, is imperative for insurers to address escalating maintenance costs connected with aging systems and processes. As a means to further control maintenance costs, TowerGroup expects insurers to take a closer look at business transformation outsourcing in business processes and technology infrastructure.
TowerGroup does not anticipate any aggressive technology investments in insurance over the next 12 months. The information technology spending environment will remain controlled and allocations will be limited to short-duration projects of 12 months or less. The focus on controlling costs and maintenance by use of flexible IT architectures will be of utmost importance.
Insurers are planning for the next market cycle of growth and for many organizations, 2004 will be a critical year to close the gap between IT spending and strategic business operations.
JAMIE BISKER is a director and CYNTHIA SACCOCIA is a senior analyst in the insurance practice at TowerGroup (www.towergroup.com), a Waltham, Mass.-based research and advisory services firm focused exclusively on the global financial services industry
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