"Slightly" is the budget word for 2013, just as it was in 2012.In Novarica's latest survey on U.S. insurer IT budgets and projectsfor 2013, one of the key findings is that most insurers expect toincrease budgets for next year only slightly, according to MattJosefowicz, Novarica's partner and managing director.

"The priorities appear to be are fairly consistent year toyear," says Josefowicz of the 2012 and 2013 budget surveys."There's some shift in terms of mindset and areas getting the mostinterest, but in terms of where the dollars are being spent itlooks a lot like 2012."

The survey also showed that insurers are critical of their owntechnology-enabled capabilities, according to Josefowicz.

"A lot of that has to do with user experience," he says. "Theculture of insurance IT for the last couple of decades has beenvery much a closed system. Over the last 10 years there's been moreopenness in terms of opening systems to agents and starting to opensome systems to customers."

Over that time, technology has become more pervasive ineveryone's life away from the workplace, so the level ofexpectation for technology applications by employees and executiveshas grown dramatically.

"Insurance IT used to be a fairly insular culture and was allabout record keeping and the transaction process, now it is morefocused on empowering knowledge workers to do their job," saysJosefowicz. "The areas where companies rate themselves asunacceptable are things like agent portals, customer portals, CRM,underwriter work benches, and BI capabilities. Those areas have todo with providing information to people who need it in a useful andeasy way."

Josefowicz agrees there is more "Monday-morning quarterbacking"done by workers in regards to the systems they are using in theoffice and how IT is performing.

"The bar has been raised dramatically in terms of what peopleexpect when they sit down at their desk," he says. "The fact isthat just about everyone who works in an insurance company, whenthey turn on the computer they are in the company's environment. Ifthe environment is not doing what they want it to do it affectstheir ability to do their job effectively."

Core system replacement continues to be the focus most carrierswill be working on in 2013, a pattern that has been in play formost of the last 10 years. Josefowicz believes this direction willcontinue for at least the next three to five years, but he pointsout that could just be the beginning of another cycle in coresolutions.

"At that point the systems put in during the late 1990s and theearly 2000s are going to begin showing their age," he says. "Theindustry has to get over this 20th century idea that a core systemis going to last 20 years or more. Companies need to think abouttheir technology environment continuing to evolve with the businessenvironment. With the advances in technology, I would tell anyoneputting in a core system today that they shouldn't expect to getmore than 10 to 15 years of service out of it, assuming the vendorupgrades and modernizes the system during that period. Companiesneed to think about these systems being evolutionary rather thanstatic. "

Josefowicz doesn't feel this is a problem with the products thatare available.

"No technology is built to last that long," he says.

The desktops and the telephones that were used 15 years ago arenowhere near as powerful or effective as the products on the markettoday, so software shouldn't be any different.

"Technology moves," says Josefowicz. "People need to plan onevolving with technology rather than fixing it and figuring a waywhere they won't have to deal with it for 10 or 15 years. That'snot how things work today."