Every insurance carrier has a slightly unique view of the world, according to Craig Weber, senior analyst in the insurance practice for Celent. That view often is based on the data carriers have acquired over the years and is the basis for the customized rating systems many carriers continue to rely on. In his recent report on trends in rating among property/casualty insurers, Weber estimates slightly less than two-thirds of the spending done by carriers in this area is directed internally for the creation of customized systems or toward staff supporting a customized vendor-based system.

"It's a little surprising how many carriers still are using totally custom systems to support rating," says Weber. "I think the reason for this is they have been rating the same way for a long time, and perhaps some of the vender packages available today were not available when they first built out the system."

Today's vendor packages come with better functionality, more flexibility, and the ability to support more complex rating procedures, Weber believes. "In talking to carriers that use packages, I haven't found any company that said its package couldn't do something it needed it to do," he says. "It's a classic buy-vs.-build decision. You have to weigh the long-term cost of ownership vs. flexibility."