Some 40% of firms may not be spending enough on IT to meet future business and client demands, according to a study.
A survey of 50 insurers, brokers and reinsurers found 40% allocate more than two-thirds (70%) of their technology budget to run and maintain their existing operations. Of those, 20% spend more than 75% of their budget.
IT firm CSC said: "This leaves less than a quarter of the cake to pay for change initiatives and could leave firms struggling to keep pace with the fast-evolving insurance market".
Patrick Molineux, CSC's industry manager for general insurance, said the top three projects insurers working on were: platform simplification and consolidation (68%), which means combining multiple insurance systems into a single platform; core systems modification and upgrade (58%) and leveraging data more effectively (44%).
Speaking at an event in London about use of technology in the insurance sector, Molineux said by making changes to their core systems, insurers could free up a significant amount of their IT budget to spend on innovation.
He described a trend where insurers were turning to cloud-based service to support their technology initiatives to keep costs down. According to the survey, 43% of respondents said they had increased their use of cloud computing for core applications in the last 12 months, while another 21% planned to do so.
Molineux explained insurers could save 50% to 70% of their budget by making changes such as moving to cloud technology "which is simply cheaper" and "requires fewer people to manage it".
He said insurers could create a "clear strategy and vision" of how their organisation should look in the future by reviewing their existing IT capabilities and making changes to their core technology.
"By doing this we're finding insurers can reduce the amount they are spending on their run technology and reapportion funds to change initiatives," he added.
