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As North American property and casualty (P&C) insurers deal with shifting business priorities and IT investments, a survey by Gartner, Inc. showed that 94 percent of North American P&C insurers indicated that business and IT are aligned within their organizations. However, only 61 percent indicated that business knew the value of IT in driving revenue and business value.
In the third quarter of 2011, Gartner surveyed IT leaders from 62 North American insurers to assess conditions and 2012 priorities in the P&C insurance marketplace. The survey included five companies in Canada and 57 companies in the United States.
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While strategies such as operational efficiencies and cost reduction were top of mind among P&C insurers during the past few years, they are dropping in priority for 2012. The survey found that customer retention was the largest priority among P&C insurers. Approximately 81 percent of respondents felt that this strategy was extremely important to them, far overshadowing all other business strategies, including customer acquisition (which was rated No. 5 out of 10) and expanding relationships (products) with existing customers (which was rated No. 6 out of 10).
"Insurers have increasingly been looking to customer retention as a means to preserve revenue and avoid customer churn," said Kimberly Harris-Ferrante, vice president and distinguished analyst at Gartner. "Protecting the customer base through improved customer service is key for P&C insurers, as well as helping to avoid negative brand images as consumers continue to use social media channels to share complaints and opinions about insurance companies in a public forum. Improving the customer experience and its impact on customer retention are key initiatives for P&C insurers in 2012."
The second-largest priority among respondents was promoting and building relationships with brokers and agents. Focus on strengthening relationships and building loyalty among the distribution channel is essential. Approximately 67 percent of survey respondents thought that agent relationships were extremely important.
The focus on moving from legacy assets to more modern solutions has become a priority among many P&C insurers during the past two years. The survey found that approximately 69 percent of respondents indicated that modern claims and policy management systems were extremely important to them, being rated as the most powerful tools of those listed in the survey that can augment and/or improve P&C core business operations.
"Taking an approach to improve core business applications through adjacent technologies (such as underwriting workstations) and those that can supplement legacy systems to fill gaps is commonplace in the industry," said Ms. Harris-Ferrante. "We have seen an increasing number of P&C commercial and specialty line insurers seeking underwriting solutions to support complex decisioning that is done manually today without proper underwriting support or documentation. Additionally, personal and commercial insurers alike are seeking new platforms to manage product design, assembly and management in an environment outside of the policy system."
Fifty percent of P&C insurers indicated that they were investing in modern claims and policy management systems in 2011, with an additional 31 percent planning on starting to spend in 2012. This was rated as the top investment area among North American P&C insurers during the two-year period, with only 19 percent of respondents indicating that they were not investing in management packages during this time frame.
Other technologies growing in interest include case management, underwriting solutions, and fraud tools for underwriting and claims. All four of these technologies have had limited adoption in the past, but are gaining more momentum among midsize to large P&C insurers that are undergoing core systems renovation projects. However, it is important to note that more than 50 percent of North American P&C insurers surveyed have no planned investment in fraud detection solutions through year-end 2012. While attention is rising, many insurers still have not developed strategies aimed at controlling fraud.
Additional information is available in the Gartner report "North American P&C Insurers: Shifting Focus to Customer Retention, Core Systems Replacement and Technology Evolution." The report is available on Gartner's website at http://www.gartner.com/resId=1949617.
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