Global information technology spending by insurance companies is expected to reach $140.6 billion in 2012, an increase of 6.3 percent over 2011, according to a new report from Celent, part of the Oliver Wyman (MMC) group. The figure is substantially higher than the 1.1 percent decline in growth experienced in 2011.
According to Celent’s report – IT Spending in Insurance: A Global Perspective – it’s expected that global spending on IT products and services will “grow to $157.5 billion by 2014, a 5.8 percent CAGR from 2012 to 2014.
Celent summarized other key findings in its report as follows:
• European insurers currently spend the most on IT, closely followed by North American insurers. Insurers in Europe account for 40 percent of global IT spending while North American insurers spend 35 percent. Insurers in Asia-Pacific account for 19 percent, Latin America 3 percent, and the rest of the world accounts for the remaining 3 percent.
• European insurers will spend $54.1 billion in 2012, versus $50.6 billion spent by North American insurers, $26.3 billion spent by Asia-Pacific insurers, and $5.3 billion by Latin American insurers.
• Among all regions, the fastest growth will be seen in insurance companies in Latin America, with IT spending increasing at 22 percent in 2012 and a CAGR of 19.4 percent from 2012 to 2014. Growth will continue to rise in this region, and total spending in Latin America is expected to reach $6.2billion in 2014. North America will experience climbing growth rates through 2014 while Europe will struggle. IT spending in North America will climb to $58.6 billion in 2014, a CAGR of 7.6 percent from 2012 to 2014. IT spending in Europe will climb to $56.4 billion in 2014, a CAGR of 2.2 percent from 2012 to 2014. Asia-Pacific is expected to grow at a relatively modest rate (6.1 percent CAGR). Spending in this region will grow to $29.6 billion in 2014.
• While there are many ways to split the spending pie, the most telling indicator of future spending and growth relates to investments in new IT projects. Of the total investment in IT in 2012, Celent estimates that 56 percent will be dedicated to maintenance. In comparison with other financial institutions, insurance companies are predicted to spend more on new IT investments activities than banks or investment firms. The economic conditions and the financial crisis continue to affect spending on new investments, but insurers are aware of the benefits of upgrading old technology, improving internal workflows and processes, and improving agent and user interactions and see the need to invest in new IT. The desire to keep up with emerging and innovative technologies is also driving insurers to invest.
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