Engage an insurer in a conversation about IT solution providers and you are likely to get one of two reactions: indifference or uncertainty. It’s not that IT solution providers are irrelevant or unimportant–in fact, they play a very critical role in the plans of most insurers. The reaction is more likely due to the fact it’s a real challenge to keep up with what is going on in the IT solution provider marketplace: mergers and acquisitions, new entrants, evolving technology approaches, and a continual flurry of press releases, advertising, and marketing materials. Yet new research on property/casualty in North America by SMA Strategy Meets Action reveals the IT marketplace has been quietly transforming and now is positioned to deliver increasing business value to insurers. The marketplace is surprisingly vibrant, and the solutions are increasingly sophisticated.

(For more research from Strategy Meets Action, read this opinion piece from SMA founder Deb Smallwood.)

Shift in IT Spending

IT spending increasingly is being aimed at more strategic projects and shifting toward the front end of the value chain. While the greatest dollar amount of the IT spending still is being directed to policy servicing and claim systems, the increases in spending are focused on marketing and product development, distribution, and underwriting. Two thirds of insurers surveyed plan to increase or significantly increase spending in these categories from 2010 through 2012. In addition, new IT initiatives increasingly are focused on leveraging data and analytics to better understand customer needs, support precision pricing, and enable cross-selling.

More than 1,000 companies compete for the $45 billion in annual IT spending by North American insurers (increasing to more than $50 billion by 2014). These companies range from boutique firms with specialized offerings to multinational companies. For property/casualty alone, the marketplace has almost 500 companies with insurance content in their offerings, with half of those companies exclusively servicing the insurance industry (see Figure 1).

Many insurers believe there are few choices in the market, even though our analysis identified at least 40 providers for each capability area (marketing, distribution, underwriting, etc.). Many insurers we’ve spoken to have the perception most solution providers are “one step away from the grave,” or in the words of one senior insurance executive, “in a suspended state of underperformance.” However, our survey revealed 74 percent of the providers report they are growing.

Evolution of IT Offerings

A decade ago, most players in the market were focused on pure plays–offering applications or data solutions or services. At that time, the responsibility for cobbling together the various offerings rested with a systems integration provider or the insurer’s IT department. The concept of designing systems in a more modular way and externalizing specialized engines was well understood, but the monolithic nature of the existing legacy systems made it difficult to accomplish. Some external engines did exist for rating, and tools for workflow and document management were beginning to emerge. In the early days of automation, it often was difficult for insurers to take full advantage of externalized rating and rules because the required interface with legacy systems was an overwhelming challenge. Today, almost 100 providers offer tools and engines designed specifically for insurance.

Over time, the SOA and component-based approaches have enabled IT providers to create a variety of hybrid offerings–offerings that combine data and applications, applications and tools, and data and tools as well as offerings that integrate services offerings with data, applications, and tools (see Figure 2). Solution providers now are able to bring increased value to insurers by delivering content-rich services insurers are able to integrate more easily into their architecture. Opportunities for prebuilt integration and components are readily available. This trend in new offerings is fostered through strong partnership models and industry aggregators that have acquired major components to deliver these solutions and services. These solution aggregators are well positioned to deliver the required capabilities of future systems. However, success will depend on their ability to integrate the disparate solutions acquired to create real value for insurers.

Power of Data and Analytics

While SOA and component-based approaches have enabled this transformation, the true power of IT now is being unleashed as sophisticated analytics are applied to external and internal data. The automation of operations is still important–few insurers would claim they are done seeking more efficient and streamlined operations. Cost reduction and speed to market will remain as business drivers. But a new breed of IT solutions–based on analytics and data–are enabling strategic, real-time insights, and beginning to fulfill the true promise of decision support, business intelligence, and other terms that have been used in the past.

Putting the data to work is a critical imperative for insurers. Successful insurers of the future will have a unified enterprise data strategy, enabling analytics to support each specific capability area. For example, the marketing and product development capability areas are dependent upon data for their very existence. Solution offerings with the most value in these areas combine external and internal data with analytic tools and applications to uncover patterns and trends in customers’ needs and behaviors and also capitalize on historical risk data.

Real-time analysis of data is becoming increasingly important for distribution. Whether the channel is human or electronic, the data provided by the prospect/customer must be combined with supplemental data and analyzed in the midst of the transaction to identify opportunities for cross-selling, up-selling, or enhanced customer service. Likewise, putting the data to work in underwriting, billing, claims, and even reinsurance decisions will yield competitive advantages for insurers. These capabilities now exist in solutions available in the marketplace, with many providers offering sophisticated, insurance-specific tools and engines.


Insurers and IT providers do not always consider the full scope of solution offerings required to best address the business needs in each capability area. An understanding of the various categories of offerings and how they can be combined for increased value is important for managing the business and competing with strength. There is a clear trend toward decoupling monolithic offerings to make it easier to integrate systems across the value chain, including the data, applications, and tools needed to support each capability area. Data and analytics are at the nexus of the shift of IT solutions.

For insurers, this deeper insight is critical for honing the strategic planning process and for improving the operational side of the business. This means finding a way to understand fully market directions, know the customers’ wants and needs and be able to respond quickly to how they behave, use and manage existing and new channels, quickly adapt products, and more efficiently manage claims. The ability to provide deep analysis is no longer just a “nice to have” internal capability. Many insurers are beginning to wake up and realize while they were sleeping, their competitors aggressively have leveraged the proliferation of new, innovative offerings that now are available from new and increasingly sophisticated IT solution providers.

Karen Furtado and Mark Breading are partners at Boston-based SMA Strategy Meets Action. This article is adapted from their research note “Supporting the Wave: IT Solution Provider Landscape.” They can be reached at Kfurtado@strategymeetsaction.com and mbreading@strategymeetsaction.com. SMA Research is available at www.strategymeetsaction.com/our-research.

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