Luxembourg: IT In The Insurance World: Walkin' On Clouds

Last Updated: 8 November 2016
Article by Dieter Putzeys

Most Read Contributor in Luxembourg, September 2019

The first-ever Benelux version of the Insurance Systems Survey is out, looking at insurance technology trends throughout the Benelux region. We found that cloud computing is already in orbit, green IT has yet to lift off, big insurers are not looking to hire, and a healthy minority of insurance companies can't stand their IT outsourcing service. (We even found out why). Our survey sample covers a diversity of market sizes, company types, and countries, and we feel that this sampling, and the insights we garnered from it, are a success. Check out the full text here or read on for a few key highlights.

Trends: the best and the rest

In the realm of IT trends, cloud computing is the runaway favourite, with two-thirds of our respondents reporting that it's on their agendas. Indeed, cloud computing in general is currently enjoying quite an uptick, with Statista recently estimating that the market will reach $160 billion by 2020 (compared to $97 billion in 2015). The confidence in this area might suggest that the long-term bugbear of cloud computing critics—the security issue—is being improved.

Unsurprisingly, there are professional secrecy rules in Luxembourg governing how sensitive data is stored. For a start, it must be within the country, which poses a problem to companies wishing to outsource, since with many cloud storage offerings you don't even know where the data is kept. This could also be an opportunity for data centres in Luxembourg to offer cloud services on a European level.

Another major trend is mobile/apps, as insurers continue to adapt to changing consumer habits. Indeed, the new generation of insurance clients are being raised in a world where smartphones and wifi are omnipresent, and for whom the concept of "office hours" is a relic of the past. Data analytics was also mentioned by many of the survey respondents, suggesting that opportunities within big data are perhaps not yet being taken full advantage of.

In contrast, the Internet of Things (IoT) did not rank high on the list of IT priorities, and green IT, last in line, hardly qualifies as a trend at all.

The geeks downstairs

Unlike what previous surveys told us, we have found that a company's size does not appear to influence the relative size of its IT department, which on average makes up about 11% of the total number of employees. Previous data had shown that small- and mid-sized insurers tended to have relatively smaller IT departments compared to large companies.

Our results furthermore indicate that the size of a company influences how it is preparing to face upcoming IT challenges. Small- and mid-size companies, on one hand, plan on maintaining a stable IT workforce or even hiring additional staff. The majority of large insurers, on the other hand, told us that they plan to hire fewer people over the next two years. This might be an indication that the IT departments of large insurers are already big enough, they feel, to carry out the tasks and responsibilities needed.

Partially or completely outsourcing the IT function is something only of interest to some smaller insurers.

But at what cost?!

Cost containment and cost reduction are among insurers' concerns. Especially with the transparency of cost levels garnering so much media attention recently, the companies we surveyed talked about the extra internal scrutiny they are putting on their cost models. With regulatory changes and operational excellence projects, however, cutting IT costs remains a difficult task. Seventy-five percent of the IT managers we spoke to said that they feel they contribute an equal amount of effort to cost-cutting compared to other departments in their organisations.

Under someone else's roof

IT outsourcing seems to hold somewhat of a less important place on insurers' agendas today. Within our sample, various IT domains have already been outsourced to a large degree, mainly infrastructures, helpdesks, networks and file servers. Fewer companies tend to consider outsourcing IT functions like business process outsourcing, application maintenance, and application development, since they are more closely related to core business activities. However, this does not mean that outsourcing is no longer considered: more than 15% of our Benelux sample will outsource IT functions in the coming years.

Forty percent of insurers are generally satisfied with their IT outsourcing, while another 40% have mixed feelings. Most of the remainder are decidedly unsatisfied, especially with application maintenance and application development. These latter areas would be the next key places for IT providers to develop better offerings.

Where IT fits into the strategy

By definition, IT departments must support the company's business strategy, realise key business priorities, and enable innovative service propositions. According to our survey, IT departments have the greatest impact on operational excellence and scalability, which suggests that Benelux insurers have prioritised improvements and growth in their offerings. Another heavy-impact area is compliance, which, given the age of regulations we're currently in, comes as no surprise—at the moment, this area shows no sign of slowing down.

Interestingly, low on the priority list for IT management were innovation and technology. Perhaps this could be explained by the suggestion by some that customer expectations are what drive innovation within the insurance industry, rather than IT systems, or the commentary by others that innovation is being spurred largely by disruptive competitors.

In all, interesting times are ahead for IT executives in the insurance sector. Rapidly changing market conditions and shifting customer expectations bring new needs, ideas, and issues every day. Anticipating and reacting to every trend is hard enough, but the real juggling comes when you open the budget book—it will be interesting to see how different insurers prioritise their IT spending in the never-ending search for a step up over the competition.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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