As Strategy Meets Action unveils survey-based IT spendingprojections for 2012, just as one might expect, the story containssome news that doesn't feel very new and some that deservesconsideration – maybe even action. Each year, SMA takes a look atIT spending trends and business directions to determine how theyare reshaping business models, enabling strategies, and fuelingcompetitive advantage.

There is optimism about IT investments. SMA research reveals asignificant increase in the number of insurers that say they planto increase budgets. At the same time, there is a decrease in thenumber of insurers that are holding spending steady or willdecrease their budgets. Compared to 2011 projections, 6% moreinsurers are saying they plan bold moves and will increase spendingby over 10% in 2012.

There are two consistent triggers for IT spending: the businesscapabilities that are needed to meet strategic goals, and thecapabilities that the competitive landscape is driving insurers toaddress. Both are important. This is an industry in which being afast-follower in technology adoption has worked well for many. Butthe faster pace of change and the revolutionary nature of thechange could derail that strategy – it just might not work in aworld where the forces that are shaping change are primarily comingfrom outside the industry.

It should be no surprise that the winner of the top spendingcategory is core solutions. While this might be considered old news(since there has been a high level of IT investment over the pastfew years), it is understandable. Insurers focus on what makes themtick, what helps them run their operations. Core systems are partof the application foundation for all other investments. On theflip side, the exciting news is that there is rapid progress in theworld of what we call Next-Gen technologies – mobile, cloud, andsocial media. Insurers are moving from 'watch mode' to action withprojects involving research, exploration, and experimentation. Formany insurers, projections for 2012 spending in these emergingareas are relatively small, but the important thing is that theyare in the plan. And, of significant note, is the news that ITinvestment is planned in many additional key areas: enhancement ofcore systems, improvement in connectivity capabilities to expandchannels, efforts to bring the management of customercommunications into the 21^st century, and everythinginvolving more and smarter use of data and information.

So, what does this all mean? There is one point that isconfirmed by our spending research and apparent in SMA's extensiveinterviews and experience-based work. The day will come when theinsurance industry is no longer able to operate in a somewhatprotective shell where most players offer similar products, deliverthem through methods that are common in the industry, and thenservice them in much the same way as other industry participants.Competitive levers are dramatically changing, due primarily toinstant, pervasive interaction that is largely under the control ofthe customer, and the use of BIG data and sophisticated analyticsto achieve an edge. This edge is being shaped in underwriting.Pricing precision is so granular that personalized products caneven be offered for personal lines and simple life products. It isbeing shaped in customer service through integrated, customized,and meaningful management of all customer touch points. And inclaims, the edge is being shaped with proactive prevention andinnovative loss management.

Yes, more aggressive IT spending is planned for 2012 and thecoming years. But, the larger budget will NOT replace prudence.Insurers are tying the delivery of real business value toeverything they do. Defining and sizing the business value of newbusiness capabilities is tough, challenging work – but it iscritically important. It takes an open mind with an understandingof the possible, engaging the entire organization in making surethat value is realized.