(Photo credit. Anthony R. O’Donnell.)
The P&C core solutions market is evolving rapidly. In 2017, Gartner revamped our P&C Magic Quadrants to reflect the move toward broader platforms that had expanded beyond traditional core modules (such as policy, billing and claims) to provide digital experience (portal and mobile offerings), data and analytics. We see a strong preference among buyers for a P&C core platform from a single vendor in market activity, Gartner client inquiry, and in the stream of core system mergers and acquisitions over the past few years.
Ironically, the rise of insurtechs has been a significant factor behind heavy investment in core platforms. The industry is past initial concern that insurtechs would displace incumbent insurers. (Most insurtechs have a narrow focus; it’s increasingly clear that, like startups in any industry, most will fail.) However, insurtechs have raised expectations for innovation, compelling customer experiences and operational excellence. They’ve put a glaring spotlight on the limitations of current systems and practices. IT and business leaders are recognizing with a greater sense of urgency that, to support innovation and meet new standards for excellence, they must renew or replace their antiquated systems.
P&C core platform vendors now have an opportunity to cultivate ecosystems that bring together the strengths of their platforms and insurtechs. Core platforms now offer a much greater range of capabilities (especially for customer experience and data/analytics) but they don’t match the cutting edge capabilities and use of emerging technologies, such as AI, that we see with insurtechs. Insurtechs are pushing the envelope in terms of the art of the possible for the industry, but most lack the breadth and depth required to stand on their own.
Leading P&C core platform vendors are now actively recruiting insurtechs as ecosystem partners, integrating them with their core platforms, and providing venues (such as accelerator libraries or app stores) to make insurtech offerings available to their customers. This is giving insurance leaders who want to pursue new business models and emerging technologies an easier means of identifying and deploying new capabilities. As a growing number of core platforms are being deployed to the cloud, some vendors are beginning to offer managed integrations in which the vendor shoulders the burden of maintaining these integrations and to ensure they stay intact through ongoing maintenance and upgrades.
P&C core platform capabilities are still the primary focus of Gartner clients, but we see a growing awareness and increasing level of importance being placed by insurance buyers on the vendor’s ability to attract insurtech partners and manage a broader partner ecosystem. Gartner expects buyer emphasis on ecosystems (and the market’s response to this) to increase significantly. Over time—likely just a few short years—the fortunes of core platform vendors will no longer rise and fall on the strength of their core modules. As the importance of these core modules fades, these vendors will succeed or fail based on their ability to orchestrate insurance ecosystems in support of business transformation.