We had some fun last week with our holiday gift guide for tech geeks, but this week we want to look at what insurance IT departments really want—and need—for the holidays.

It comes as no surprise that p&c carriers of all shapes and sizes cite policy administration as the top project area for 2012, according to Novarica, which recently published its report on budgets and projects for 2012.

Just over 40 percent of both midsize and large carriers listed policy administration as a top priority—by far the largest percentage of any of the 10 priorities cited. Small p&c carriers had other opinions. Twenty-five percent of small carriers listed claims, integrated workflow, and management as their top priority alongside business intelligence.

One reason many small carriers are less concerned with policy administration is they have fewer policy systems to deal with. Most have a single system, whereas midsize and larger carriers deal with multiple systems, which usually translates to multiple problems.

Novarica's Matt Josefowicz agrees with that point, but adds that for a small carrier replacement solutions can take a huge bite from the IT budget.

“If you're a $50 million insurance company you might have a $4 million total IT budget and if you're going to do a policy admin replacement, that might be your entire IT budget for the next two years,” he says.

Smaller insurers need to focus on challenges things that are more tactical until the legacy replacement issue becomes really pressing, according to Josefowicz.

“Eventually it will become more pressing,” he says. “But if you wait long enough, a less expensive more cost-effective SaaS option might rear its head where you could have a lower total cost of ownership going forward. We're already seeing those kinds of things on the market.”

Nothing else was close among the priorities for midsize carriers. Ten percent of this demographic listed agent portals with e-apps as their top priority, which shows exactly how important policy admin is for the midtier market.

Large carriers are much the same way with one exception: Twenty percent of this group listed CRM, customer data, and analytics as the top priority for 2012.

Underwriting workflow or predictive analytics may be easier, less expensive, or further along than other technology projects, but it always comes back to policy administration. Both the time involved in completing a policy admin project and the expense—both in new software but in adding staff to handle the demands—make it a difficult challenge for carriers of all sizes to invest in.

Policy administration—upgrades or replacements—will be with us as long as they are the core processing systems for the business of insurance. If you are waiting for the right time to do something you may be waiting a long time. There may never be a good time for legacy replacement, but we can't afford to confuse good with necessary.

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