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

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

Comprehensive insurance systems are more common in smaller insurers.

For small to midsize insurers, comprehensive systems are used by more than half of the market to support life and P&C insurance.

Large insurers are less likely to use comprehensive insurance systems, relying more on independent systems to support policy administration or claims.

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

Harris believes that insurers have to deploy new tools to modify their systems if they want to remain successful. Those that do not invest in updating their infrastructures will be disadvantaged in the marketplace and be unable to transform their organizations or achieve sales and service excellence.

Meeting with different insurance carriers makes Harris believe that the carriers are ready to start investing in their businesses. Insurers are beginning to look at the vendors, but the problem is whether the vendors can meet the insurers needs, she said. They would like to replace their systems, but the solutions are not out there yet. The carriers are taking the wait-and-see approach and investing in short term improvements. I think it will be another year before the market gets ripe. ROBERT REGIS HYLE

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