Technology spending by insurance firms is exceeding the IT budget

Investments made by insurance companies are occurring outside the IT budget, according to research by SMA.

The market insights firm said in some cases spending is exceeding the budgeted IT spend by 50%. SMA’s report said that companies need to realise that current levels of IT spending are high and many have been finding additional funding in business units in order to meet their goals and gain a competitive advantage.

The IT Budget and Spending Realities and Trends study, which surveyed the North American P&C insurance market, revealed the percentage of premium that insurers are allocating to IT budgets currently averages between 3% and 3.5% – although there was a wide variance in across the industry.

“It is great news that more insurers report better alignment of IT investments with business objectives and strategic initiatives,” said Deb Smallwood, SMA founder. “This alignment is critical to driving new collaborative approaches for addressing both challenges and opportunities. The industry is serious about investing in the modernisation of systems and architectures. That investment is laying a foundation for the optimisation of business processes and operations in every aspect of the environment. The result is transformation that delivers real value and the ability to drive innovation for the future.”