Late Development Advantage: IT Growth Trends at Small and Midsize Insurance Companies in China

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18 September 2007


Compared to large insurance companies, small and midsize insurance companies have faster growth rates and invest a higher proportion of funds in IT.

There is a huge discrepancy in the shareholding structure and business scale of Chinese insurance companies. Because Chinese insurance companies are at different phases of business growth, the main motivation for IT construction and requirements varies. In a new report, Late Development Advantage: IT Growth Trends at Small and Midsize Insurance Companies in China, Celent compares trends in IT application at small and medium insurance companies in China.

Growth in the Chinese insurance market in recent years has increased companies' IT requirements. This report analyzes new and emerging requirements by examining operational handling, strategic expansion, sales and management, and the impact of these requirements on the IT construction of small and medium insurance companies.

Small and midsize insurance companies generally do not have the burden of reforming old systems, so these companies are able to operate on open platforms from their initial incorporation. Some companies also adopt the model of centralized operations. Small and medium insurance companies have experienced a late development advantage, enabling them to better incorporate new technologies into their IT operations.

During the end of 2006 through the beginning of 2007, Celent conducted a series of surveys with CIOs and CTOs of small and midsize insurance companies. This report analyzes the results of those surveys.

The small and midsize insurance companies that participated in the survey invest an average of 3.38% of their gross premiums on information technology. In 2007, an increase of 30.2% is expected for IT investments compared with 2006 expenditures. In order to meet the requirements for new functions brought about by rapid business growth, small and midsize companies are projected to invest up to 65% on new projects, which is much higher than their investment in maintenance expenses.

"Large companies focus on consolidating systems and resources that are distributed across different subsidiaries to aid standardized management and a pooling of IT resources. The IT construction of midsize insurance companies, however, requires an increased number management-related projects. These companies are exploring how to use IT to increase the quality of management and customer service," said Wenli Yuan, author of the report. "Recently established insurance companies seek to improve the functions of existing systems and to develop new functions to satisfy the requirements of business growth."

This report analyzes survey results in the areas of investments in new projects, investments in maintenance projects, operating platforms for the systems, comparative analysis of J2EE and .NET, application of WebServices/SOA, composition of the employees in IT departments, the likelihood of outsourcing various operational and technological activities, and the evaluation of IT companies by insurance companies. Celent hopes to assist small and midsize insurance companies in formulating their strategic IT planning, while also aiding IT companies in understanding IT growth trends within small and midsize Chinese insurance companies.