Global IT spending in insurance will grow to US$184.9 billion this year, according to a report released on Thursday by Celent, a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies.
The report, titled IT Spending in Insurance: A Global Perspective, estimated that continued growth will increase to US$208.1 billion in 2018, a compound annual growth rate of 6.1%. “This upward shift is above last year’s estimates and is the result of increased premiums in most regions and efforts to keep competitive in a digital market,” Celent said in a press release.
The report compares and contrasts the direction of IT spending trends, noting that growth is spread across the regions at various levels, with North America and Latin America seeing the highest growth rates. North America is expected to spend US$79.6 billion this year, up to US$93.7 billion in 2018. The lowest spending is for “all other” regions, including Africa, the Middle East and the Commonwealth of Independent States, with US$5.1 billion in 2016, up to US$5.3 billion in 2018.
Celent noted in the statement that European and North American financial institutions currently account for 74.6% of global IT investments by insurance companies. Firms in the Asia-Pacific region account for 18.7%, Latin America accounts for 4%, and the Middle East/Africa/Commonwealth of Independent States account for the balance.
Celent senior vice president Jamie Macgregor, one of the report’s authors, said in the release that, as with 2015, IT investment continues to be targeted towards profitable growth, with IT investment continuing to rise. “However, unlike last year, there is leveling off of expenditure in some territories owing to the perceived fragility of the macroeconomic environment,” said Macgregor, who wrote the report along with Celent’s senior analyst Juan Mazzini, analyst Karen Monks and analyst KyongSun Kong.
Monks noted in the release that life insurers are harder hit. “Low interest rates in developed markets continue to take their toll,” she said. “Bright spots remain with the continued investment in digital across both P&C and Life, and core systems transformation to drive improved market responsiveness.”