Datamonitor survey: Insurance companies persuaded to avoid in-house IT developments

In a recent European survey conducted by Datamonitor on behalf of a number of companies including worldwide eBusiness solutions provider PeopleSoft, responses suggest that insurance companies may be unaware of the benefits packaged IT solutions could deliver to the entire organisation.

200 interviews with key decision makers in the European insurance sector were conducted across 15 countries. The tendency for European insurers to consider packaged solutions from external vendors was relatively low.

Insurers rated between 3 to 3.3 out of 5, reflecting the traditional reliance of in-house application development. Back-office functions are mainly developed in-house particularly in areas such as policy administration, where 50% of interviewees said they would purchase solutions from IT vendors, and 34% for claims processing. However, general ledger and human resources applications are solutions insurers would consider an external alternative.

The survey findings indicate insurers who are considering investing in a packaged solution are doing so to enable them to concentrate on their core competencies, explains PeopleSoft SA MD, Jan Coetzee. In addition to human resource and general ledger applications, desktop and network services are the most likely areas to be sourced externally (31%), followed by internet applications (27%). He says the survey concluded that 28% of insurers would use a packaged solution for call centres, conveying their consistent requirement to place more emphasis on customer retention and customer satisfaction.

When asked to give a rating out of 5 of what they expect IT vendors to offer, the most popular area was a strong knowledge of the insurance business which achieved a rating of 3.8 out of 5 - they must be able to offer services and products that contribute to the overall business strategy. An ability to be able to retain control over the management and development of the IT system after investing in external solutions achieved a rating of 4.1 out of 5. A rating of 4.1 out of 5 was also given in regard to the IT vendor supplying rapid and ongoing support, fast implementation times were rated 4 out of 5, the introduction of new skills, 3.9 out of 5, and price competitiveness, 3.9 out of 5. Coetzee points out that the importance of speed to market and the cost and risk associated with developing IT solutions internally drives the need for these requirements.

Donovan Wright, director of PeopleSoft`s financial services strategy and enterprise performance management (EPM) for financial services, Europe, Middle East and Africa, says: "Insurance companies are recognising that they would struggle to overcome the challenges faced by re-architecturing an IT infrastructure, for example, in preparation for offering internet services, if they keep this process in-house.

"Working with IT partners for non core software solutions insurance companies will be able to refine a sharper competitive edge providing customers with an even greater level of service and focus more on customers insurance needs," he says.

Adam Hill, an Analyst from Datamonitor, comments on the results: "The growing tendency of IT vendors to provide partnerships with insurers to enhance and implement IT solutions, allowing insurers to operate with the latest technologies more cost effectively, will allow IT vendors deliver greater return on investment for insurance companies when adopting new technologies."

He continues, "Also, by achieving a technological upgrade and capitalising on the benefits provided by the internet, insurance companies will enable their customers real-time access to the information they need when they need it." Hill says the survey demonstrates that insurance companies need to recognise how considering packaged solutions as part of their entire IT system will place them in a much higher competitive position than those who don`t.

Survey Scope:

Over 200 interviews were recently conducted with key decision makers in the European insurance sector across 15 countries including; Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland and the United Kingdom. Belgium, Netherlands and Luxembourg were combined as BeNeLux in the final analysis. The focus of the interviewees was from a business (58%) and an IT (42%) perspective, and in most cases, an interviewee from both perspectives was interviewed for each insurer. The insurance areas covered for the survey comprised of the composite sector (39%), insurers who sell life and non-life insurance; the life and pensions sector (33%); general insurance (24%) such as motor and property and any others (4%). The objectives of this survey were to understand the current and projected key business and IT issues faced by business leaders in Europe`s insurance sector, and to analyse both the differences and similarities in the views of such business leaders.

In Europe, Middle East and Africa PeopleSoft has operations in the UK, France, Germany, The Netherlands, Belgium, Switzerland, Spain, Italy, South Africa and the Nordics (Sweden, Denmark, Norway and Finland).