In today’s insurance market, which features a good economy and stable weather conditions, insurers tend to get more adventurous in terms of their risk-taking. Such daring can be costly if poor decisions are made, but in a world where the balance between risk and profits is particularly thin, technology often plays a key role in a carrier’s decisions. As another year winds down, the market is one of several key issues insurance IT leaders are focusing on to stay sharp for 2008 and beyond.

Mike Sciolé is eyeing the insurance market carefully, particularly where standard insurers have been willing to enter spaces they typically avoided in a hard market. Despite such deviations, Sciolé claims it will not change the direction of the twin carriers he represents, Burlington Insurance Group and Guilford Specialty Group, as CIO. “We’re a midsize company,” he says. “Our budget dollars are held much closer to the vest than you find with a larger, standard-market company. In the E&S space, we try to manage our costs closely and do what we can to deliver more to the business with less.”

Sciolé has learned that with a midsize company, employees are much closer to the revenue stream. “A lot of what we do has direct implications on revenue coming in the front door,” he says.

The soft market increases competition and determines in which direction carriers need to head, points out Teri Shaffer, who works in the risk advisory services group for Ernst & Young. “The recurring mantra in insurance is to grow the business, reduce costs, and get a tighter relationship with the customer,” she says.

Those are mantras heard in good times and in bad, but at a time when the market is challenged, Shaffer feels those goals have a greater emphasis—and IT plays a big role in accomplishing them. Because of that, she predicts IT departments will see some increases in their 2008 budgets, though nothing major.

DOWNWARD PRESSURE

The market continues to show indications there is downward rate pressure, according to Vivek Mehra, vice president global financial services and insurance for the Keane consulting group, and it’s expected to continue globally. “Companies that have high expense and loss ratios are finding IT is not exactly helping the business,” he says.

While insurance IT has been thought of more as a follower than an early adopter of best practices, Mehra has seen an increased interest in newer ideas such as agent portals and demand generation.