Will insurance IT in 2007 continue the recent trend toward more strategic spending and a lesser focus on cutting costs? Insurers and analysts interviewed by Tech Decisions believe so, although memories of tougher times never will allow the outlook to be completely rosy. Spending likely will stay at 2006 levels and might go up slightly, many agree, but on the horizon most insurers are preparing to deal with a softening market.

"We're certainly coming off some great years at ACUITY, and 2006 was another great year for us, but if you have been following the insurance cycle, we are in a softening market," says Neal Ruffalo, CIO at ACUITY. He believes there will be continuing pressure to decrease expenses to offset the price concessions carriers have to give out in this environment. "In order for companies to grow in this soft market, you either have to cross-sell or up-sell or find a new way to penetrate the markets," he says.

"There's a general agreement we had a cycle without any big losses [in 2006], so people are seeing product lines get more competitive," indicates Matt Josefowicz, group manager for insurance at Celent. "It's going to get tough to maintain a lot of top-line growth next year. Smaller carriers feel the pressure. The big guys have been investing in distributor-facing systems and rating engines over the last few years."