A recent Ward Research Center survey of senior management at insurance carriers revealed that maintaining profitability continues to be a challenge and a primary concern for companies.

Profitability is challenged by volatile investment returns, the competitive environment, and uncertainty surrounding compliance issues, according to Ward Group. .

Companies have increased spending for information technology and product development, Ward Group found. Among property/casualty insurers, 12 percent of respondents reported significant increases in IT spending from 2009 to 2010 while 38 percent of P&C insurers reported moderate increases. (Significant increases are defined as 15 percent or greater; moderate increases are defined as being between 3 and 15 percent.) Those were the largest increases in spending among the 17 functions rated by Ward Group.

Product development was right behind IT in increased spending, according to Ward Group. Four percent of respondents reported a significant increase in product development spending and 34 percent reported a moderate increase.

"Company leaders are concerned about the uncertainty of our political and economic environment," says Jeff Rieder, president of Ward Group. "As growing revenue becomes more challenging and resources limited, companies are closely evaluating spend levels within the organization. We gain valuable insight about where companies are likely to increase and decrease spending from the results of this survey."

Over 75 percent of participants in the survey indicated it is somewhat difficult to very difficult to grow revenue and generate profits for their business in the current market.

Other findings include:

• Customer satisfaction followed by company profitability is the most important company goal evaluated. Eighty percent of participants ranked both key aspects as 8 or above for level of importance on a scale of 1 to 10. The least important company goal is gaining or maintaining market share.
• As insurance company leaders are looking for ways to improve profitability, expense management may be an area of opportunity. On average, participants ranked their companies as least competitive in expense structure when compared to employee efficiency, profitability, product competitiveness, and product distribution. Less than one quarter of respondents ranked their company's expense structure as moderately competitive or better when compared to the industry.
• Most companies proactively measure their performance to the industry. Over two-thirds of participants responded that their companies compare expenses and operations to other insurance companies on at least an annual or bi-annual basis.