Firm Size and the Information Technology Investment Intensity of Life Insurers

Abstract

This article is organized around two research questions: (1) do small insurers exhibit a higher degree of information technology investment intensity (i.e., the ratio of information technology expense to total operating expense) than large insurers? and (2) to what extent does the level of spending on information technology explain the degree of information technology investment intensity? The article offers an interpretation of the dependent and independent variables and uses data obtained from the life insurance industry. The findings on the whole indicate that small insurers spend a larger proportion of their operating expenses on information technology than do large insurers. Given the conditions prevailing in the life insurance industry, this means that large firms were not leaders in realizing the full potential of the economic benefits available. Contrary to expectations, spending more on information technology does not lead to a higher ratio of information technology expense to total operating expense. This finding is consistent with the observation by several academics and practitioners that how the technology is used and managed is an equal if not more important consideration than the level of spending.

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