Celent Projects Growth in IT Spending

NU Online News Service, Feb. 17, 11 :37 a.m.EDT?New York-based Celent Communications predicts thatU.S. insurers will spend $28.8 billion on information technology(IT) in 2005?a figure that it says will grow to $42 billion in2010.

Celent said its newest insurance reports, "U.S. L/H Insurer ITSpending 2005?2010" and "U.S. P-C [property-casualty] Insurer ITSpending 2005?2010," project modest growth over the next fiveyears. The reports break projected spending down among maintenanceand new projects, hardware, software, staff, and a number ofdifferent functional areas.

"U.S. insurers spend between 2.5 percent and 3 percent ofpremium on IT," said Matthew Josefowicz, manager of Celent'sinsurance group and author of the report. "Celent believes thatover the next five years, this will increase to between 3 percentand 3.5 percent as IT becomes even more essential to insurancecompany operations and consumes a larger portion of operatingratios. As overall premium grows modestly over the next five years,IT spending will essentially keep pace."

P-c insurance IT spending is expected to grow from $13.2 billionin 2005 to $20.8 billion in 2010, said Celent. Over that time, newproject spending will shift slightly away from policyadministration and claims and toward product design anddistribution.

Life/health insurance IT spending is expected to grow fromU$15.6 billion in 2005 to $21.2 billion in 2010, the researchernoted. Over that time, new project spending will shift slightlyaway from policy administration, underwriting, and ITinfrastructure and toward product design, distribution, claims, andbilling.

Earlier this month, Needham, Mass.-based TowerGroup said U.S. ITspending in insurance would remain "relatively flat," with totalspending moving from an estimated $35.3 billion in 2004 to $36.4billion in 2005.