When it comes to the insurance IT vendor market, the closer you
look the more differentiated and specialized the vendors become.
Some vendors are still focused on either personal or commercial
lines. Some offer suites; others best-of-breed solutions. Some are
Microsoft; others Java. Everywhere you look there are differences
And yet the further back you stand the more you see some
obvious and striking commonalities and
patterns. The most striking pattern I
see today is the rapid maturation in the
vendor marketplace. I believe there has
never been a better time for carriers to
buy third-party core insurance systems.
There are more options. The software is
better. The acquisition options are more
varied. The implementation success rate
is higher. All these signs speak to the
maturation of the vendor marketplace.
Let’s take a look at some of these
areas in more detail.
The first job of a software vendor is to
build software that provides significant
functional (and technical) improvements over what is currently available.
These improvements can be seen in
both the scope as well as the quality of
the software. It is certainly the case that
the functional footprint of insurance
core systems has grown considerably in
Consider the insurance suite. A few years ago this term
was synonymous with policy, billing and claims. Now, it more
often than not includes document creation and (less often)
document management; portal capabilities for agency and
possibly insureds; some ceded reinsurance functionality; and a
data warehouse/BI capability. These are not minor add-ons, but
rather are significant functional sub-systems.
The vendor no longer gets to win based on who has the
slickest out-of-sequence endorsement process; such capabilities
are now no more than table stakes in the ongoing functional
escalation which characterizes this marketplace. It is no longer
enough for a core-systems suite to support a series of insur-
ance transactions. These systems must now support improved
service, promote business acquisition and retention, increase ef-
ficiency, reduce regulatory drag, and facilitate speed-to-market.
The scope of an implementation project is largely driven by the
gap between what the carrier wants and what the vendor has to
offer; the narrower the gap, the smaller the project. The obvious
way to reduce the gap is for the vendors
to embed more business functionality
into their base offering.
The second way in which vendors
are reducing the implementation scope
is by providing tools that facilitate the
development of gap functionality. So-
called configurable software has been
around for about 10 years. During that
time it has gained wide acceptance in
the marketplace and has been broadly
adopted by vendors companies. Today,
it is more likely than not that a core
insurance system will incorporate a
configuration toolkit as part of its soft-
ware offering. In fact, I believe configu-
ration is becoming the new table stakes.
I recall saying to a vendor CEO several
years ago that he would not sell another
COBOL-based solution; it’s getting close
to the point of declaring the same with
reference to non-configurable software.
Not only does the configuration
toolkit enhance the ability to develop
gap functionality during the implementation it also supports the
speed-to-market and reduced regulatory drag business drivers
that were mentioned above. The promise of configurability is
that, starting with an off-the-shelf package, the carrier can end up
with a highly customized solution, which was achieved with min-
imal programming and which is still upgradable going forward.
Software is now simply better built than in the past. It is better
designed, better coded, better tested, more easily integrated,
and, in some cases, is even documented. The upgradability
mentioned above comes from the separation of base-system
code from user configurations and extensions. This allows for
base-system upgrades, which can, generally speaking, coexist
Right Before Our Eyes
Look at those vendors getting all grown up.