Midtier insurers always have followed the lead of their larger market leaders, but the task is becoming more difficult. Property/casualty underwriting for the midtiers was the subject of a recent TowerGroup report, and Deborah Smallwood, managing director, insurance, for the research and consulting group, pinpointed some concerns. "I worry about these midtier players because we need regional players that are servicing a niche," says Smallwood. "They are competing with big companies that are spending a billion dollars a year on IT."

TowerGroup found the midtier carriers need what the large carriers already have–rules engines, rating engines, and other elaborate systems–but the smaller carriers don't have the resources to build these systems. As for buying from a vendor, Smallwood notes the midtiers can't find a complete solution.

Software vendors haven't caught up with the market's needs, according to Smallwood. Insurers also are finding underwriting systems require a huge investment to get the content in place. "The big carriers will buy the tools they need, and they have so many business analysts, they can populate the content," she says.

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