As the size of insurance IT shops continues to grow, manycarriers are choosing build in the build vs. buy option, accordingto Kimberly Harris, research director for Gartner Inc. (www.gartner.com) and author of thereport Update on Insurance Policy and Claims Systems. Harris said,Carriers who internally build a solution are the biggestcompetition for vendors. They feel they have more control over aproject and the solution is custom-made.

Harris said the decision is not always by choice. Many times thevendors are not meeting (carriers) needs, Harris said. For thereport, Gartner interviewed U.S.-based life and property andcasualty insurers with net written premiums of $100 million ormore. The report listed three key trends:

Comprehensive insurance systems are more common in smallerinsurers.

For small to midsize insurers, comprehensive systems are used bymore than half of the market to support life and P&Cinsurance.

Large insurers are less likely to use comprehensive insurancesystems, relying more on independent systems to support policyadministration or claims.

Harris said there are three approaches that insurers can take inexamining their situation. The first is the tabla roca approach,she said. You just create a blank slate and start from scratch. Shecalls the second option lipstick on a pig. You put pretty things inyour system, but you are just masking the inefficiencies, she said.The third is the handyman approach. You add competency-basedsystems or Web services. These extend the life of your system, butit involves some heavy-duty building.After examining thepossibilities, Harris said, Eventually you have to go back to No.1, she said. You can paint a 1967 Mustang and fix it up, but whenyou get done with it, its still not going to be a 2002 Mustang.

Harris believes that insurers have to deploy new tools to modifytheir systems if they want to remain successful. Those that do notinvest in updating their infrastructures will be disadvantaged inthe marketplace and be unable to transform their organizations orachieve sales and service excellence.

Meeting with different insurance carriers makes Harris believethat the carriers are ready to start investing in their businesses.Insurers are beginning to look at the vendors, but the problem iswhether the vendors can meet the insurers needs, she said. Theywould like to replace their systems, but the solutions are not outthere yet. The carriers are taking the wait-and-see approach andinvesting in short term improvements. I think it will be anotheryear before the market gets ripe. ROBERT REGIS HYLE