Insurers Nearsighted on IT Decisions According to Sapiens Survey

Research Triangle Park, N.C., March 15, 2004 – Sapiens International Corporation (NASDAQ and TASE:SPNS) today announced results of its survey of U.S.-based senior insurance executives on industry IT trends conducted at the ISOTech tradeshow in Anaheim, California, in late 2003. The survey uncovered an industry inclination toward short-term solutions and quick fixes that could harm companies downstream.

According to the survey, a flat or reduced IT budget ranked high on insurance executives list of short-term market impacts through 2004 and less than half of respondents predicted IT budget increases through 2006.

Asked to rank the greatest market impact on corporate strategy in the short-term, 22 percent pointed to focus on internal IT efficiency and cost containment, 17 percent internal infrastructure focus versus external and 12 percent legacy systems modernization. The short-term strategies are paving the way for anticipated medium-term activities through 2006, including extending distribution channels to meet new demand (15%), rationalizing supported platforms (14%), and moving to data and development standards (14%).

Survey participants also identified the need for agile systems to support changing business conditions (17%) as the most significant automation driver in the near-term in order to meet complex market challenges and the need to control operational costs. Needs driving automation were:

  • Agile Systems To Support Changing Business Conditions . . . 17%
  • Minimize Time And Cost To Maintain Inflexible Legacy Environments . . . 13%
  • Better Information And Service To/From Distribution Channels . . . 11%
  • Automate Manual Or Partially Automate Processes . . . 11%
  • Better Information To Support Customer & Business Exposure Management . . . 11%
  • Achieve ROI For The Business Or Line Of Business . . . 9%
  • Standardize Development Environments And In-House Skill Requirements . . . 8%
  • Integrated Systems And Services For Quicker Regulatory Compliance . . . 8%
  • Better Business Contingency And Recovery Support . . . 7%
  • Separate, Document And Validate Core Business Logic . . . 5%

Illustrating the same tactical outlook, top critical IT success factors cited by respondents were as follows:

  • Better Underwriting For Improved Profitability . . . 26%
  • Integrating Systems To Reduce Time And Cost . . . 24%
  • Operating In Real Time With Distributors . . . 21%
  • Enabling Rapid Response To Markets And Regulators . . . 8%
  • Increased Visibility Of Data And Systems To Streamline Processes . . . 7%

Integrity issues such as managing IT-based risks and increased traceability of business transactions received lower weight as critical, short-term IT success factors, 4 percent and 6 percent respectively.

To help insurers achieve internal efficiency goals and keep costs in line, IT outsourcing is either underway (36%) or under consideration (20%) in more than half the respondents organizations, and business process outsourcing (BPO) is rated as a key consideration through 2004.

Despite continued interest in IT outsourcing and cost containment, 50 percent of respondents indicated their organizations plan to build new applications through 2004 and an additional 32 percent stated they would build with a vendor. A significant decrease in pure in-house development to 26 percent is predicted by 2006, but is slightly offset by an increase in respondents planning to build with a vendor (from 32% to 45%). An increased number of insurers also anticipate purchasing packaged applications during the next three years (from 14% to 23%), while planned use of outsourced options remains largely constant.

“Clearly, a tactical business focus continues to drive insurance organizations,” said Judy Johnson, Vice President of Insurance Strategies for Sapiens Americas. “However, a short-term focus could mean duplication of legacy issues in newer systems. Insurers cannot obtain the medium-term results they desire without changing the way they manage IT. A short-term focus that fails to account for escalating business and IT integrity issues could find insurers facing the same health and reputation challenges as some former household name organizations.”

About Sapiens

Sapiens International Corporation (NASDAQ and TASE: SPNS), a member of the Formula Group of companies, is a leading global provider of proven IT solutions that modernize business processes and enable insurance organizations to adapt quickly to change. Sapiens’ innovative solutions are widely recognized for their ability to cost-effectively align IT with the business demands for speed, flexibility and efficiency. Sapiens operates through its subsidiaries in North America, United Kingdom, EMEA and Asia Pacific and has partnerships with market leaders such as IBM and EDS. Sapiens’ clients include Allianz Group, AXA, Liverpool Victoria, Menora, Norwich Union, OneBeacon, Principal Financial, Prudential, Abbey National, ING and Occidental Fire & Casualty, among others. For more information, please visit