The UK insurance industry is set to increase software and IT services expenditure by 8.6 per cent in 2008, according to the latest market analysis.
While the rate of growth for core software and IT services will decline from 2007 as a result of the current difficult economic conditions, Pierre Audoin Consultants said insurers would have to increase spending in response to additional regulatory pressures.
The researcher said recent events in the banking sector have now put the spotlight onto the insurance industry's negative image of mis-selling policies and high pricing and the technology its uses to manage its customers.
The Financial Services Authority (FSA) has introduced the "Treating Customers Fairly" regulation, which stipulates that by December 2008, insurers must be able to demonstrate that they are treating their customers fairly, from how they recommend products to after-sales service and complaints handling.
To add to the challenge, the Association of British Insurers (ABI) has also introduced a customer impact survey' to measure insurers' service levels around complaints handling, sales and after-sales service. It plans to publish the survey to enable customers to compare services levels of various UK providers.
"Consequently, insurers are further increasing their focus on customer-centric strategies and have recognised the need to invest in IT as an enabler to achieving customer satisfaction," said PAC. "This will push demand for core software and IT services."
This growth will be largely driven by outsourcing segment, as insurers seek to increase cost efficiency in processing claims and service levels to customers, it added. A number of large deals have been signed in this space in the last two years, with the most recent including Sun Life Financial and Tata Consulting Services (TCS) and Marsh signing up Capita.
Application software expenditure will also rise as insurers look to adopt reporting applications that monitor customer service levels, along with front-office systems to enhance services that can be delivered over the web, such as feedback and complaints handling, policy renewals.
PAC added that customer relationship management (CRM) systems investment would increase to improve customer visibility and interaction, while project services will be in demand to provide systems integration and development to facilitate a single view of insurers' customers.
PAC made its predictions in its software and IT services vertical market report entitled Insurance Sector in the UK 2008.
