Insurers struggle to track technology investment value

Insurers face challenges in measuring ROI.

Insurers has increasingly struggled to measure the value of their technology investments, facing challenges due to increased spending and the need to balance legacy IT infrastructure with new technologies.

“Traditionally, insurers spent less on their tech investments compared to their peers”, Srinivasan Somansundaram, Client Partner and Head of Insurance for Southeast Asia and China at Cognizant, noted. “As the digital advancement is evolving, they need to narrow the gap. On one side, they have the legacy IT infrastructure, and on the other side, they need to catch up with their industry peers on the digital pool.”

Somansundaram pointed out that the average spend in the insurance sector is rising faster than in other industries, largely due to higher regulatory compliance and the costs associated with managing legacy IT infrastructure. "It's becoming very critical that you need to have a proper governance mechanism to track it and manage the cost going forward."

Jorrit Pranger, Senior Director of Consulting, Insurance for Asia Pacific at Cognizant, emphasised the difficulty many organisations face in deciding where to invest their technology budgets. "They need to understand what their actual spend is in the organisation," Pranger explained. "And surprisingly, that visibility within organisations, across industries and also in insurance, is actually going down."

Pranger shared research findings indicating a decline in visibility of technology spending, from 72% to 57% over the past two years. This lack of clarity complicates decision-making, as firms struggle to identify where their investments are going and whether these investments are yielding the desired outcomes. “Only 35% say that they have that visibility, while 65% say they're really struggling to articulate that,” he added.

One recommendation is for organisations to consider breaking down large-scale transformation projects into more manageable segments to better articulate the value of technology investments and ensure effective tracking. 

"We think that between 30 to 50% of value or technology spend is wasted," he added, suggesting that organisations could unlock significant value without increasing their budgets by focusing on engineering excellence and simplifying their architectural frameworks.

Ultimately, aligning technology investments with broader strategic objectives is paramount for insurers to realise their full potential and seamlessly integrate them into their overall business strategy.