Insurance in the United Kingdom 2014: Business and IT Priorities
Against a backdrop of fragility in the UK economy and wider European economy, and with continued persistent low interest rates applying pressure to the core business, the outlook for investment in IT among UK insurers remains weak. Compared with recent years, however, renewed optimism is starting result in increased activity focused on growth through distribution and new propositions.
“Digital” is a theme across many insurers as they work through how technology advances in mobile and data will impact their businesses. For some insurers, IT budgets are even increasing in real terms, albeit by small amounts and often linked to the funding of a larger change initiative.
In 2014 and the run-up to 2015, IT investment appears to be increasingly targeted towards the following capabilities:
- Distribution. Often aligned with “digital,” initiatives are under way for improved output management across multiple channels, portal and mobile development, business process management, and integration.
- Transforming core business operations. Continued investment in core systems within the nonlife sector to either support new distinct propositions or transform the core strategic platform. Some early adopters of modern packaged solutions are preparing for upgrades to maintain currency. Whereas, in the life sector, many firms continue to look towards ways to transform the platforms running their oldest books of business. For these firms, the trend in outsourcing remains strong.
- Information security. As more information assets are being made available to partners and clients online and through mobile, many insurers are revisiting their information security processes.
- Data and analytics. Investment in analytics and business intelligence solutions continues. Some insurers are experimenting with new sources of data to augment with their own to apply to their business. However, as stated by one insurer, “Our priority is to use the data we have more effectively first.”
“As with many other mature markets around the world, UK insurers are under pressure to perform given the highly competitive nature of the market and the persistent financial pressure resulting from a low interest rate environment,” says Jamie Macgregor, Senior Vice President of Celent’s Insurance Group and author of the report. “In times like these, aligning investment behind initiatives that will deliver improvements in core business performance, such as underwriting, operational efficiency, and distribution capability, are likely to continue to dominate.”
Between 2014 and 2015, Celent believes that insurers will invest cautiously, aiming to balance demands for efficiency against new demands for growth driven by digital ambitions. Assuming no economic shocks, Celent expects IT budgets to grow, albeit slowly, heading into 2015 as the laying down of digital foundations begins to take hold and the resulting impact of greater access to information drives new demand in infrastructure and information security.
This report looks at the key business themes driving investment in IT in 2014 and in the lead-up to 2015, including a more in-depth look at the priorities of digital transformation, legacy and ecosystem transformation, and innovation. It will discuss the implications for IT budgets as well as some of the challenges facing CIOs in their role as they look to balance efficiency with growth.