A little over four years ago I wrote an article that looked back
over the prior five years. The cause for reflection and review was
the publication of “Shop Talk” my best-selling spy thriller about
an aging, legacy programmer who foils a terrorist plot, saves the
President’s life, and almost gets the girl.
No, wait, “Shop Talk” is my other book; the one about insurance legacy system modernization. The one that actually got
published. Forgive me, time plays tricks on the mind. Anyway,
rereading the article, it struck me time and again both how much
and how little has changed in the industry over the past four
Four years ago there were too many vendors in the market.
There are now as many, if not more. Total vendor count in the
property and casualty “Policy Administration” category remains
above 50. There has been merger and acquisition activity but
it hasn’t reduced the number of vendors overall. Changes that
happened include: Duck Creek, which had been acquired by
Accenture, was partially divested; Guidewire, which went public, became worth $4.5 billion; Xuber appeared on the scene (as
part of Xchanging), acquired several small European insurance
vendors, and then got itself acquired by CSC; Innovation Group
was acquired by The Carlyle Group and became 1insurer;
Coverall was acquired by Majesco which shed Mastek and went
public; and One Inc. appeared on the scene and became the
new, smart kid on the block.
One thing that did happen was that M&A activity accelerated, stimulated I think by the private equity people watching
Guidewire and wanting some of that. What didn’t change is we
still have too many vendors in the core-systems space, most of
whom are not significantly changing or growing.
One point that was true four years ago and remains true
today is that the insurance technology vertical remains the
domain of small “homegrown” vendors that focus only on P&C
insurance. The multi-billion dollar, multi-market software
behemoths—Oracle, SAP, PeopleSoft, etc.—remain either incapable or uninterested in penetrating anything other than the top
tier of insurance carriers.
From the inside out, insurance is complex, fractured and
idiosyncratic. From the outside in, it’s just another part of
“financial services.” Vendors that hold this view will never make
it in insurance. Large vendors are faced with three choices: quit
the market, status quo, or acquire expertise and market share.
Interestingly—and for the reason I cited above—it is smaller
P&C, not multinational software vendors
Better than Ever
More important than market gyrations and branding changes,
vendors now write better software than ever. The bar has been
raised permanently as to what is an acceptable level of functionality, configurability. and architectural quality. This positive
trend started more than four years ago but I think has accelerated in recent years. Configuration tool kits are now broadly
desirable, if not table stakes. ISO content, similarly, is a recent
necessity for the vendors competing in small commercial and
personal lines. And oh, by the way, there are fewer successful
vendors that cater
only to one or the
other major P&C
or commercial lines.
The vendors who
started with a best-of-breed roadmap are
suites with out-of-the-box functionality.
The vendors that
built integrated suites
are figuring out how
to implement them
as separate components. The days when
vendors could sell stinky software on legacy platforms are long
Carriers may not be as good at selecting software as we
might hope, but they are good enough that vendors have had to
improve or face irrelevance. I am pleased these days to be able
to introduce client carrier companies, almost regardless of size,
to a short list of high-quality vendor solutions. This was not
always possible in the past.
Another positive trend is that carriers now have more choices as to how to contract and pay for software. Many vendors
now offer both purchase and rental options for their solutions,
as well as usage-based pricing. A new generation of vendors is
now pushing (or pulling) the market into a cloud-based software environment where implementations are quicker and the
total cost of ownership is lower.
The More Things Change . . .
As the old saying goes, the more they remain the same. Technology is improving,
but selecting and implementing the right product remains a challenge.
By George Grieve
think by the
wanting some of