European insurance companies persuaded to avoid in-house IT developments
Reading, ENGLAND, 7th March 2001
– In a recent European survey conducted by Datamonitor on behalf of a number of
companies including PeopleSoft, worldwide eBusiness solutions leader, responses suggest
that insurance companies may be unaware of the benefits packaged IT solutions could
deliver to the entire organisation.
200 interviews with key decision makers in the European
insurance sector were conducted across 15 countries.* The tendency for European insurers
to consider packaged solutions from external vendors was relatively low. Insurers rated
between 3 to 3.3 out of 5, reflecting the traditional reliance of in-house application
development. Back-office functions are mainly developed in-house particularly in areas such as policy
administration, where 50% of interviewees said they would purchase solutions from IT
vendors, and 34% for claims processing. However, general ledger and human resources
applications are solutions insurers would consider an external alternative.
The survey findings indicate insurers who are considering
investing in a packaged solution are doing so to enable them to concentrate on their core
competencies. In addition to human resource and general ledger applications, desktop and
network services are the most likely areas to be sourced externally (31%), followed by
internet applications (27%). The survey concluded that 28% of insurers would use a
packaged solution for call centres, conveying their consistent requirement to place more
emphasis on customer retention and customer satisfaction.
When asked to give a rating out of 5 of what they expect IT
vendors to offer, the most popular area was a strong knowledge of the insurance business
which achieved a rating of 3.8 out of 5 – they must be able to offer services and products
that contribute to the overall business strategy. An ability to be able to retain control
over the management and development of the IT system after investing in external solutions
achieved a rating of 4.1 out of 5. A rating of 4.1 out of 5 was also given in regard to
the IT vendor supplying rapid and ongoing support, fast implementation times were rated 4
out of 5, the introduction of new skills, 3.9 out of 5, and price competitiveness, 3.9 out
of 5. The importance of speed to market and the cost and risk associated with developing
IT solutions internally drives the need for these requirements.
Commenting on the survey results, Donovan Wright, director
of financial services strategy and enterprise performance management (EPM) for financial
services, Europe, Middle East and Africa, said: “Insurance companies are recognising
that they would struggle to overcome the challenges faced by re-architecturing an IT
infrastructure, for example, in preparation for offering internet services, if they keep
this process in-house.
“Working with IT partners for non core software
solutions insurance companies will be able to refine a sharper competitive edge providing
customers with an even greater level of service and focus more on customers insurance needs.”
Adam Hill, an Analyst from Datamonitor, commented on the
results: “The growing tendency of IT vendors to provide partnerships with insurers to
enhance and implement IT solutions, allowing insurers to operate with the latest
technologies more cost effectively, will allow IT vendors deliver greater return on
investment for insurance companies when adopting new technologies.
“Also, by achieving a technological upgrade and
capitalising on the benefits provided by the internet, insurance companies will enable
their customers real-time access to the information they need when they need it. The
survey demonstrates that insurance companies need to recognise how considering packaged
solutions as part of their entire IT system will place them in a much higher competitive
position than those who don’t.”
Over 200 interviews were recently conducted with key
decision makers in the European insurance sector across 15 countries including; Austria,
Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands,
Norway, Spain, Sweden, Switzerland and the United Kingdom. Belgium, Netherlands and
Luxembourg were combined as BeNeLux in the final analysis. The focus of the interviewees
was from a business (58%) and an IT (42%) perspective, and in most cases, an interviewee
from both perspectives was interviewed for each insurer. The insurance areas covered for
the survey comprised of the composite sector (39%), insurers who sell life and non-life
insurance; the life and pensions sector (33%); general insurance (24%) such as motor and
property and any others (4%). The objectives of this survey were to understand the current
and projected key business and IT issues faced by business leaders in Europe’s
insurance sector, and to analyse both the differences and similarities in the views of
such business leaders.
In Europe, Middle East and Africa PeopleSoft has operations
in the UK, France, Germany, The Netherlands, Belgium, Switzerland, Spain, Italy, South
Africa and the Nordics (Sweden, Denmark, Norway and Finland).
PeopleSoft Inc. is a world leader in providing eBusiness
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internet. PeopleSoft’s pure internet Customer Relationship Management, Supply Chain
Management, and Enterprise Management solutions provide the industry’s most open and
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