When it comes to IT spending this year in the insurance industry, it's déjà vu all over again. In general, industry analysts concur that U.S. insurance companies will increase IT spending only slightly this year-between 1% and 4%. Last year, they predicted cautious increases of 2.5% all the way up to 6.7%.Similarly, carriers' priorities for IT spending in 2005 will focus on projects that ranked high on the list last year as well. Namely, their attention will focus on IT projects with the potential to increase revenues by improving distribution and customer service, and those that cut costs by streamlining business processes and workflow. Also like last year, insurance executives remain resolute about making sure their technology investments align with business strategy. IT governance is key.

This year, however, there is a wild card in the IT spending deck: the expanding investigations into insurance sales practices-kicked off by New York Attorney General Eliot Spitzer in October when his office filed a lawsuit against insurance brokerage firm Marsh & McLennan for bid-rigging and unfair sales practices. Just how these investigations-which now include several states and multiple carriers and brokers-will affect IT spending this year is still a big unknown.

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