Technology is a critical driver for competitiveness in property and casualty (P/C) insurance. However, creating competitive value requires funding mature IT organizations that can support modern systems, compete for top talent, and support strategic objectives.
Datos Insights has released the Property/Casualty Insurer IT Budgets and Projects report for 2024, based on a study of our Insurance CIO Council. The study focuses on insurer IT spending, staffing levels, system capability self-assessments, and planned technology investments and business priorities for the 2024 fiscal year.
The story for 2024 is similar to those of the past several years: insurers remain committed to strategic initiatives and transformation, forging ahead with level budgets and ongoing talent and bandwidth challenges. Some key highlights from this year’s study include:
Overall Insurer IT Spend Is Level with 2023
Industrywide, insurers’ IT spend ratio (that is, how much an insurer spends on IT versus how much it earns in annual written premium) looks to hold level at 4.2%, right in line with last year. This is the third year spend has held above 4%, after hovering between 3.6% and 3.9% for the better part of the last decade. Individual P/C insurers who are increasing or decreasing their IT spend relative to last year tend to be making small adjustments, rather than major swings.
Bandwidth, Talent, and Staffing Are Key Concerns
This is another trend that has held steady for years. In spite of having level budgets, insurers aren’t stepping away from strategic projects, and most are adding new ones. Equal money, equal staff, and more projects means there’s going to be a crunch somewhere. Fittingly, almost every insurer included IT operations (i.e., project prioritization and business/IT alignment) in their top three challenges for 2024. Nearly three-quarters listed talent, and almost half listed costs. Insurer CIOs will once again have to demonstrate their skills in accomplishing key goals via careful bandwidth and program management.
Insurers Are Eager to Engage Generative AI
The emergence of generative AI at scale in 2023 has introduced new types of AI capabilities to insurers, beyond perennial areas of AI investment like unstructured text ingestion and machine learning. And P/C insurers are taking to this exciting new technology eagerly: more than a third of all P/C insurers already have a large language model in-house. Among those who aren’t already playing with ChatGPT and Claude, another 50% of larger insurers and 33% of midsize insurers are planning to pilot a generative AI application this year. Most insurers are currently engaging limited pilots or setting up guardrails for employees to experiment with ways to improve operations. There’s clear enthusiasm here, so insurers and solution providers should be keeping close track of new developments and announcements.
Conclusion
Insurers are moving into 2024 carefully: increasing spend where they must, holding steady or looking to achieve savings where they can, and remaining aligned with strategic transformation and system replacement commitments. Their 2024 planning reflects the economic uncertainty that persisted through much of 2023, though recent positive indicators suggest that 2024 may be a rosier year than initial forecasts predicted.
The Datos Insights Insurer IT Budgets and Projects report is designed to help insurers understand peer behavior, budgets, and priorities for the coming year as context for their strategic planning activities. Solution providers can use this report to identify insurers’ needs and specific areas that require investment, revealing insights that can guide development roadmaps or market positioning. Visit our website to download the full report.
