Tower said that while insurers scored high marks for basic IT alignment across all components measured by the study, priority-setting for IT maintenance investments and achieving an "enterprise view" of IT were both noted as key areas for improvement.

Deborah Smallwood, Insurance Practice leader at TowerGroup, said over the past 40 years, p-c companies "have built an enormous amount of IT capability as well as sophisticated processes and structures to facilitate and support IT development."

However, she said, after spending millions on runaway failed projects, "insurance companies are asking: 'What are industry leaders doing to better integrate IT with the business?' This study was designed to explore this and related questions."

Ms. Smallwood said three main issues were revealed by the study.

? Basic IT alignment has been mastered for all components: All companies examined in the study demonstrated both a vision and an IT strategy, including significant business involvement for priority-setting and management oversight.

As a result of preparations for Y2K, most companies clearly understand their respective business application portfolios. Yet these components of IT strategy are no longer a differentiator in the sector?they are a necessity for effective business operation.

? Improvement is needed in priority-setting / budget metrics for maintenance: Only one of the carriers interviewed by

TowerGroup appears to have "mastered" the right ratio between maintenance and development, or has implemented formal priority-setting for all subjective maintenance spending.

Ms. Smallwood said in today's competitive landscape and strict budget allowances, these controls are of vital necessity.

? Enterprise solutions are next big hurdle facing insurers: Driving an "enterprise view" of IT strategy, planning, priority-setting and architecture will be the next wave to position insurers for competitive advantage.

The benefits of this process will reach far beyond savings in IT spending. TowerGroup said that all companies examined in the study recognize the significance of enterprise development, as well as the effort it will take to clear this hurdle.

"It is imperative for insurers to understand their own areas of weakness and continue to adapt to emerging best practices," Ms. Smallwood said.

In her view, neither the leader nor the laggard companies should assume that IT alignment is a differentiator. "Rather, aligning IT with the business is a now requirement for conducting business effectively in the insurance industry."

She added that "planning, designing and building common, scalable and reusable IT solutions across the enterprise is the key. Enterprise solutions will have a direct impact on the bottom line from an improved time to market, decreased development costs and a decrease in overall maintenance budgets. This will drive a true competitive advantage."

Conducted during the last half of 2003, the study used TowerGroup's IT Capability Model to assess five major areas of IT alignment in the p-c sector: IT strategy, governance, organization structure, business application and enterprise architecture.

Tower said the study was conducted with five insurance carriers that collectively spend more than $1 billion annually on IT, through interviews held with a variety of levels within each carrier's IT organization, including business executives, chief information officer, chief technology officer, application development head, lead architect, business analysts, strategy group and chief financial officer/controller.

The consultants said their final report is available for purchase by insurers and industry vendors. TowerGroup added that, for interested insurers, it will develop a customized scorecard benchmarked against study results to help them better understand their areas of 'leadership' status versus areas of opportunity for further development.

Tower said Ms. Smallwood, the lead analyst and author of the study, is leading tailored half-day workshops for insurers to review study findings, key industry best practices and implications for each specific organization.

More information on the study can be obtained by contacting TowerGroup Customer Care at +1.781.292.5200 or e-mailing [email protected].