It's that time of year again-and I don't mean the holidays-when senior executives' eyes begin to glaze over as they digest the year's financial numbers. And for some insurance executives, the endless piles of spreadsheets contain some frightening numbers.For example, U.S. property/casualty carriers' combined net income dropped 32.5% during the first half of 2000, according to the Insurance Information Institute. Furthermore, the industry's consolidated surplus-assets minus liabilities-declined $7.6 billion during the same period. Contributing to the decline in surplus were $9.1 billion in unrealized capital losses and $3.6 billion in "miscellaneous charges against surplus," according to the New York-based Insurance Information Institute.

Now I'm not an accountant, but these statistics are alarming, especially when you consider that the country has not experienced a major catastrophe in 2000-other than Florida's vote-counting for the presidential election (I'll hold that thought for another month). The underwriting result for the first half of the year was the worst for property/casualty insurers since 1994, when the Northridge earthquake struck southern California, according to the Insurance Information Institute.

Given these results, some insurance executives may be inclined to tighten their expense-budget belts. Funding for new IT projects may be an easy target, but before you get out your budget scissors, consider the long-term implications, not the short-term financial gain. Improving customer profitability, retention and acquisition are all bottom-line boosters. What they also have in common are significant investments in technologies that support what I like to call knowledge management.

It appears that most executives understand the connection between investing in technologies and future profitability. Our internal researchers recently surveyed more than 200 insurance IT purchasing executives and found that 67% will invest in Internet technologies in the next year, and 52% will purchase technologies supporting e-commerce. Furthermore, 40% will purchase client/server technology, and 38% will invest in data management technologies.

As competitive pressures continue to mount, carriers cannot afford to slash technology spending. I'm not advocating that insurance executives write a blank check for every IT project that's proposed, or blindly purchase systems and software without first understanding the business case for such investments. But executives need to understand that necessary IT investments should not become hostage to the growing pool of red ink. Executives need to make wise spending decisions, and as other industries have demonstrated during past economic downturns, technology is a wise choice.

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