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

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

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

One reason many small carriers are less concerned with policyadministration is they have fewer policy systems to deal with. Mosthave a single system, whereas midsize and larger carriers deal withmultiple systems, which usually translates to multipleproblems.

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

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

Smaller insurers need to focus on challenges things that aremore tactical until the legacy replacement issue becomes reallypressing, according to Josefowicz.

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

Nothing else was close among the priorities for midsizecarriers. Ten percent of this demographic listed agent portals withe-apps as their top priority, which shows exactly how importantpolicy admin is for the midtier market.

Large carriers are much the same way with one exception: Twentypercent of this group listed CRM, customer data, andanalytics 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 timeinvolved in completing a policy admin project and the expense—bothin new software but in adding staff to handle the demands—make it adifficult challenge for carriers of all sizes to invest in.

Policy administration—upgrades or replacements—will be with usas long as they are the core processing systems for the business ofinsurance. If you are waiting for the right time to do somethingyou may be waiting a long time. There may never be a good time forlegacy replacement, but we can't afford to confuse good withnecessary.