After spending the past several years sitting on the sidelines, mid-size insurance companies are poised to break out of their IT spending inertia.In a report titled "Technology Market Snapshot: Mid-Size Insurance Companies," Boston-based Celent Communications Inc. estimates that mid-size insurers-those with direct written premiums between $100 million and $1 billion-will spend $1.1 billion on new technology projects over the next three to five years, primarily on Web-enabled policy administration systems and agent extranets.

While exact figures weren't available, this commitment is viewed as a significant hike from recent spending trends.

"Mid-size insurers had taken a cautious view of implementing Web-oriented technology over the past few years," says Matthew Josefowicz, senior analyst for Celent.

The caution mid-size carriers have exercised toward technology spending is due to two concerns: disintermediation with agents, and apprehension that technology was "immature," according to the report.

Mid-size insurers "tend to be more dependent on independent agents for distribution than larger insurers," Josefowicz says. "With all the hype and confusion in the marketplace about direct Internet sales, many carriers took a wait-and-see approach."

In addition, mid-size insurers are less able to "absorb technology spending mistakes than larger insurers," he adds. With relatively limited IT budgets, many mid-size carriers could not justify becoming early adopters.

However, mid-size carriers' initial concerns about technology are being replaced by one that's actually motivating them to act-pressure from large carriers.

"As the larger insurance companies increasingly adopt Web-based technology to make their distribution channels and internal processes more efficient, mid-size companies are being forced to embrace the same technology in order to avoid losing even more market share to the big companies," Josefowicz says.

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