Ms. Smallwood told National Underwriter that her firm is now seeing IT budget increases of up to 10 percent and even more among p-c insurers.

"We are also seeing some IT budgets where there are significant 12-to-14 percent increases. Insurers are starting to open up their wallets and they are starting to fund some strategic initiatives," she said. "Overall, we are forecasting for the property-casualty sector a 10 percent increase in IT budget in 2004."

From a growth perspective, p-c carriers are all looking to expand distribution channels or improve them, because ultimately they want more market share, TowerGroup stated. And to that end, more insurers are looking at various IT projects that can enhance relationships with agencies.

"They want to improve their overall relationships with agents and they want to improve their overall technology, to make it easier for agents to sell their products. An agent has multiple systems and multiple companies," Ms. Smallwood said.

Another IT area insurers are focusing on is customer service. For p-c companies, especially larger ones with multiple-lines, "when you look underneath the covers in their IT environments, they have separate systems," Ms. Smallwood said, adding that when clients either call an agent or go on a Web site, or call a help desk or a call center, it becomes somewhat of a customer-service challenge to pull all the information together.

On the commercial-lines side, she explained, "if I am a customer, and if I have a question about my price on workers' compensation, and if I want to talk about my billing on auto, and if I have some claims outstanding on my property side, when I go to the call center it's very difficult for them to pull all that information together because they are all separate systems."

On the personal-lines side, "If I talk to someone or go onto a Web site, I can find out information about my homeowners and auto," Ms. Smallwood added, "but when I want to talk to someone about my life policies, they say you have to call a different number." So the goal is to try to create "an ultimate single viewing"--not necessarily one system and one database, but integrating systems and data for a single view for customers, she said.

TowerGroup also noted in its report that business operations in the p-c sector tend to have independent information silos. "So you would have your relationships with agents, underwriting, policy production, billing, claims, and within claims there are even silos. Sometimes, those silos even break down by products," Ms. Smallwood said.

She said over the last 30-40 years, more systems have been built for those silos, "so just about every single insurance company has a legacy problem."

These legacy systems, she added, are expensive to maintain--and it takes a long time to introduce new products or features. "They are almost like anchors, so what we are saying is that insurance companies need to, at a minimum, make tough decisions and develop legacy-and-data-integration plans," she said.

Old legacy systems also make it harder for insurers to outsource their operations and keep their efficiency level on par with other industries. "We keep hearing about offshore and outsourcing these days, and actually some insurance companies have been dabbling for years with outsourcing," Ms. Smallwood said. But for most p-c insurers, sending their legacy systems, "shipping them all over India, is really scary," she pointed out, because in reality, those legacy systems are running their businesses and companies are still so dependent on them.

Another IT issue some insurers are tackling is their operational resilience. For example, during the great blackout in August 2003, there were a number of large insurers that were impacted by the sudden electrical outage, Ms. Smallwood related.

While these companies were actually able to get their computer systems up and running and shift call-center lines to the proper backup, they were less successful when it came to getting their employees to work.

"What they found was that their employees were not in place--people in New York and New Jersey who worked at some large insurance companies didn't go to work, so that was a problem. There was one company that I am aware of that didn't have an at-home work policy, and no one had portable computers," she said.