Sometimes the decision to build a system internally is wise. When it comes to claims solutions, though, a recent study comes down firmly on the buy side.

Claims is one of the most important processes in the world of property/casualty insurance because of its significance on an insurers bottom line. With combined ratios for P&C insurers averaging 96.9 for the first quarter of this year, insurers are walking a tightrope. Pure loss and loss adjustment comprise more than 70 percent of that figure, so any savings a carrier can find in the claims department is welcome in the world of profit and loss.

Celent Communications recently ex-amined a number of claims systems on the market, and Donald Light, senior analyst in Celents insurance group, came away with the view few carriers have the ability to build their own claims systems. It is not a small or easy system to put together, he says. You probably can count on the fingers of both hands the number of insurance companies that really have the skill base to start from ground zero and say, Were going to build a modern claims system with all these functionalities. The other 1,990 [P&C] insurance companies really should look at one of the vendor solutions. Given insurance company IT resources, he believes it is an overwhelming task even for the handful of insurance companies that actually could do the job.