Insurers have to balance strategic initiatives with operationaland tactical changes in order to succeed in 2012. That's the "callto action" presented by the research and consulting group StrategyMeets Action (SMA) in the latest in its Insurance EcosystemResearch Series.

"You can't focus on one more than the other," says DebSmallwood, founder of SMA. "We asked insurers to think moreholistically. You can have separate strategies for areas such associal media, mobile technology, or customer communication, but youneed to bring them together. Innovation is where insurers need tofocus. How do you leverage all your assets and bring in emergingtechnologies such as cloud so you can take everything to the nextlevel."

Despite cuts in expenses made by insurers in recent years, costcontainment remains a significant factor among the key businessdrivers for growth, according to Smallwood. Costcontainment/expense reduction was cited by over half of therespondents (52 percent) to the SMA survey.

"Insurers are trying to simplify the ITenvironment so overall total cost of ownership is lowered," saysSmallwood. "There is still room for expense reduction and costcontainment, but I am surprised it was number two on the list. Iwould have thought business optimization (number three on the listwith 44 percent) would be higher. There is still a balance incutting costs, growing, and customer service."

Business growth through new lines/markets/geographies was fifthon the list at 34 percent.

"Three years ago when the market crashed, we saw a higher numberof insurers looking to grow through new lines," says Smallwood."Companies were looking for alternatives, but since then they'vedecided to go back to what they do best and keep with their corebusiness."

On the p&c side, carriers are looking at rating andmaintenance of rate rules and forms, linking to actuarial,underwriting, and product development as areas where theyanticipate increased spending, according to Smallwood.

On the marketing side, carriers are using analytics and businessintelligence to capture information on how to grow theirbusiness—what markets, what agents, and what products to grow.

"Marketing is really market segmentation," says Smallwood. "It'sunderstanding the market and setting strategy. Spending is reallyhigh in front office/middle office and it ties back to growth. Itis interesting to watch the same survey over the course of threeyears continue to reinforce the story and show more emphasisthere."

One of the top projects for carriers this year will beagent/broker portals, according to Smallwood.

"They have them for personal lines and they want to add them forcommercial lines," she says. "Or they'vedone them for quoting andwant to add service elements. We're actually seeing the nextgeneration of portals.  They used to put lipstick on thelegacy system to get enough ease of business and now they find thenext generation of portals involves elements of sales andservice."

Portals need to offer users first notice of loss, billing,commissions, scorecards, and tools for the agents to manage theirbook of business, according to Smallwood. Portals should allowagents and brokers to show the carrier risk appetite and becomecenters for sales and service.

"Many insurers are replacing the technology and creating a hubfor their portal," says Smallwood. "When you talk to many insurers,portals aren't just the front end to allow someone to key-ininformation; it becomes the hub. If someone want to pass datathrough real time or they want a front end to capture data entry bythe agent or if you have a comparative rater or an exchange, it cancome through the technology hub of the portal and beintegrated."

Integration continues to be one of the majorexpenses for insurers. Smallwood believes whatever vendors can dowith partnerships and alignments to introduce plug and play intotheir environment will be key for their success and for that oftheir insurance carrier customers.

"We are starting to see synergy between solution providers withpre-integrated components," she says.

This is the third year for SMA to publish its ecosystem reporton technology spending, drivers and projects and Smallwood has beenfascinated to watch the industry continue to mature and spend awisely.

"It's not about how insurers can leverage next generationtechnology," she says. "Many [carriers] are looking at how toleverage cloud computing, big data, social media or mobile. Theyhave to understand how those are going to change our industry andhow [the carriers] are going to be in a position to respond."