As trying as the financial crisis and soft market have been to insurance carriers, it has been more so to independent agents. Shrinking premium volumes hurt both agent’s top and bottom lines, notes a new report from SMA, a Boston-based strategic advisory firm.
The report, “Fronting the Wave: Agent Technology Spending, Drivers & Approaches,” queried 64 agencies, including six managing general agencies about their plans for IT spending. The macroeconomic climate and lingering soft market continue to impact spending decisions, with 55% of respondents describing their operational mode as “sustaining.”
Yet, the report found an undercurrent of optimism in the numbers. “Agencies are not traditionally high spenders in technology, with approximately 1% of revenues devoted to IT,” the report, co-authored by SMA partners Mark Breading and Karen Furtado, states. “But their IT spending plans are surprisingly aggressive under the circumstances, with 40% of the agencies planning on increasing spending in 2010.”
As for what areas are due to receive investment, marketing and product development led the way, with 46% of respondents indicating that they intended to increase spending in 2010. Policy services (35%) and underwriting (31%) also were tapped as areas for increased investment.
Nonetheless, the report finds that agencies are generally laggards when it comes to technology adoption, with only 17% describing themselves as early adopters or innovators. What’s more, when it comes to development philosophy, the survey revealed a marked preference (57%) for standard software packages.
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