Large numbers of insurers are relying on at least some form of information technology outsourcing to enhance their daily operations, Novarica found in a new survey of industry CIOs.

The reason: increased use of analytics and digitization of workflows. With that in mind, Novarica said it expects the practice will grow with both large and midsize insurance companies – the latter segment in particular – as outsourcing becomes more viable from a cost perspective.

“Outsourcing will increase, especially at the midsize firm level and will remain a key tool to meet those demands,” study author Chuck Ruzicka, vice president of research and consulting at Novarica, said in prepared remarks. “The nature of outsourcing agreements is changing to better align with the need for greater adaptability and variable cost structures.”

Novarica last conducted this survey in 2014, with the latest roundup considered to be an update. To gather the data, Novarica surveyed 104 insurer CIO members of the Novarica Insurance Technology Research Council late last year.

Among the findings:

• All large carriers rely on some level of external staffing, with less than 10 percent of insurers overall not using some form of outsourcing.
• Carriers are placing more value on variable staffing models so they can become more agile and cost-effective in order to reach peak capacity.
• Most of the growth in outsourcing will hit midsize P/C carriers, as outsourcing gains greater acceptance and firms seek specialized skills.
• About 25 percent of insurers said they will either expand somewhat, pilot/test or significantly grow their outsourcing of IT infrastructure.
• Only 8 percent are looking at some level of outsourcing expansion for application development and maintenance.
• Approximately 37 percent said they will be making varying levels of commitment to using a blended/variable staffing model for outsourcing.

Source: Novarica