Raising The Bar On Offshore IT For Insurance

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16 May 2003


Boston, MA, USA May 16, 2003

Carriers are leaving money on the table by not implementing the offshore IT model more aggressively, despite a growing number of carrier success stories and improved vendor maturity.

Celent predicts that offshore IT spending by North American insurance carriers will increase from US$695 million in 2003 to almost US$1.5 billion in 2006. Even so, Celent believes that most carriers are not currently maximizing the value of their offshore initiatives.

"Many carriers, especially larger ones, are getting good at managing their offshore projects, generating savings of 30 percent or more compared to doing those same projects in-house,"

says senior analyst Craig Weber, author of Celent's latest report, . "And the major offshore vendors have all gained valuable insurance experience over the past few years. But despite the gains, the approach is still being applied too selectively, given the compelling value that it can create for carriers. There are risks to offshoring, but we feel the risks are worth taking on a much broader scale."

Weber estimates that U.S. carriers alone will miss out on savings of over US$6 billion between 2004 and 2006 due to slow or incomplete application of the offshoring model. "That痴 money being left on the table, at a time when most carriers are chasing down every penny," Weber says.

The report suggests that mid-tier and smaller carriers should also increase their offshore efforts because the benefits are present even on smaller, standalone IT projects in the US$500,000 to US$1 million range.

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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 for more information.

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