Some people still are grappling with what service-oriented architecture actually is, but those in the know are excited about its future. SOA finds itself on the list compiled by TowerGroup of the top 10 technology initiatives for the insurance industry this year, and senior analyst Karen Pauli believes it deserves the top spot on the list. "SOA probably is the number-one focus we're tracking," says Pauli. "Almost all of the carriers, to one degree or another, are involved."

SOA discussion initially was hampered by a lack of understanding, according to Pauli. "It's one of those odd subjects because some people think it's an actual technology–like you can go to Radio Shack and buy it," she says. TowerGroup views SOA as more of a philosophy. "It's a guiding principle and a way to create architectural formats and designs," she explains, predicting SOA will be a huge factor in 2007 because of the business issues carriers have to deal with. "The number-one value [of SOA] is reusability," she says.

For instance, Pauli points out if a carrier wishes to invest in predictive modeling for catastrophe management, it will sign on with one of the big vendors, which is a big-dollar expense. "In an SOA environment, that purchase then can be used by commercial lines, personal lines–all of the enterprise," she says. "The cost gets spread out and makes total cost of ownership go down significantly."