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Property/casualty insurers’ technology investment remains focused on policy administration, with more than one-third of carriers replacing or planning to replace policy administration systems in 2016, according to the newly published Novarica Market Navigator report. While business intelligence (BI)/analytics initiatives top some insurers’ priority lists, those projects tend to be smaller and the majority of IT budgets remain dedicated to policy administration and other core system components, according to the Boston-based research and advisory firm.
The new Novarica report provides more than 600 pages of information about 52 vendors and their core system offerings, which often include not only policy administration and rating, but also billing, claims and ancillary capabilities such as document management and business intelligence. The study is organized in several tiers of information, beginning with an easily understand, high-level view of the space and individual vendors, according to Jeffrey, VP of Research and Consulting at Novarica, and co-author of the study along with Martina Conlon, the firm’s senior VP of Research and Consulting.
“We provide an executive summary that allows you to quickly get a picture of the vendors and see whether they’re a fit, as well as deep content about the vendors across not just their policy administration offerings, but their full suite of core insurance systems,” Goldberg comments. “We believe this the most comprehensive study of policy administration and core system suites currently available.”
Rich Vendor Market
Novarica reports that “a rich vendor market” has evolved to meet the insurance industry’s demand for core system modernization. “The P&C policy administration system market has matured, and several leading players are at the table for most opportunities,” notes Matthew Josefowicz, president and CEO, Novarica. “However, the market hasn’t consolidated, and smaller players continue to be competitive for insurers making selections. Whether it’s in search of the right experience, team, mix of functionality ad technology or just price, insurers continue to cast a wide net when looking for policy administration systems.”
In addition to the information on individual vendors and systems, the Novarica Market Navigator report offers observations on the state of the market, reflecting a number of trends that remain more or less unchanged from the previous year, for example:
- Insurers still seek to improve product speed-to-market and product design agility to meet new market opportunities and exploit profitable niches.
- The P&C industry also remains concerned with reducing the costs associated with legacy core systems platforms. Many carriers report that more than 75 percent of their IT budgets are spent on system maintenance, constraining spending on new product innovation and other opportunistic initiatives.
- Insurers’ data access needs are growing as BI and data analytics are increasingly used for objectives such as more accurate pricing, fraud prevention and detection, and other uses of predictive modeling.
One significant change the study observes is P&C insurers’ increasing willingness to consider or implement core policy administration systems in the cloud or via a software-as-a-service (SaaS) model, according to Goldberg. Only 20 percent of respondents have accepted having a core system in the cloud, though many have chosen that delivery mode for ancillary systems.
Core Systems in the Cloud
“Within five years we may see as many as 50 percent or more putting new core systems in the cloud,” Goldberg comments. “That trend is visible in the report both in how many carriers are seeking cloud-based options and how many vendors are offering them.”
Novarica also observes an increase in insurers concerns about achieving lower total cost of ownership and shorter system implementation times. “There is a concern that while implementation times are getting longer, the lifetimes of systems are shrinking—from decades to maybe 15 years,” Goldberg says. “If it takes five years to implement a system that’s a problem, but we’re happy to see vendors recognizing the importance of deploying systems and getting value faster.”