He also noted, however, that the anonymity of the Internet levels the playing field for smaller insurers that might not have the resources to modernize fully. "On the Internet, nobody knows you're a $20 million startup carrier," he said. "This is a real opportunity to erode market share from larger carriers."

Ms. Saccocia pointed out that for smaller niche companies, "it's not about technology; it's about the value you can provide."

Panel moderator Denise Garth, vice president of membership and standards for Pearl River, N.Y.-based ACORD, asked the group to comment on the notion that "40 years of IT investments have hindered innovation" among carriers.

Ms. Saccocia noted that not every insurer had been invested in legacy systems for 40 years. "Some are far fresher," she said. However, with some insurers spending "70-to-80 percent" of IT budgets on maintaining legacy systems, "there's no way to compete" with larger carriers that have the financial resources to modernize, said Stephen Forte, senior research analyst with Gartner.

Mr. Josefowicz said that competitive advantage in insurance is supported by two pillars--service and risk management. As a foundation, however, carriers must treat data as a strategic asset. Straight-through processing is also a must--"meaning that information remains consistent and electronic throughout the value chain."

On the subject of data, Mr. Forte questioned whether insurers really have an idea of what their data contains, noting that silos and inaccuracies may make significant differences.

Ms. Saccocia, however, disagreed, asserting that at least some insurers "are clearly on the path" toward working more effectively with their data.

Mr. Josefowicz said his organization's research revealed that distribution and e-business--making those processes easier and faster with less cost--were among the top initiatives for 2006 among carriers.

Ms. Saccocia suggested that distribution needs to be personalized for different customer audiences. She noted the difference in demographics between customers over the age of 50 and "those who were raised on Game Boy."

Ms. Saccocia went on to say that changes within an insurance organization must start with the business architecture, then move on to IT. Business models need to change to keep up with employment trends and technology advances. "Product is the last part of that dialog," she added.

Mr. Josefowicz pointed out that technology advances allow insurers to trim down the service group. If a representative is just reading a screen while on the phone, "that person should be turned into a computer," he asserted.

He also saw more of a focus among carriers on service-oriented architecture and internal services architecture. These will enable insurers to "solve integration problems and get systems to talk to each other," he said.

"You can't buy SOA," said Ms. Saccocia. "It's a strategy."

Mr. Forte opined that insurers have adopted a wait-and-see attitude toward SOA, which has been around since the mid-1980s, but Ms. Saccocia disagreed, asserting that "many" insurers are already working with SOA and that "the technology is farther along than it has ever been."

Mr. Josefowicz added that his research has found that 55 percent of insurers are using SOA in mission-critical systems. The advantage of the strategy, he said, is that it is "open, faster and cheaper."