Should Insurtechs Build or Buy in their Technology Stacks?

By Vinod Singh
Vinod Singh, CTO, Concirrus, asks if insurtechs would be better off building their own technologies or relying on the wider, digital ecosystem.

Is there a ‘third way’ that brings together off-the-shelf and purpose-built technology to deliver a stack that enables impactful digital insurance offerings?

The need to deliver a digital offering within the insurance market has grown exponentially, with CIOs and CTOs facing significant pressure to deliver an infrastructure that is fit for purpose. Many enterprises are looking to build in-house capabilities, but the infrastructure required can take years to develop and can run up millions of pounds’ worth of technology investment.  

On the other hand, off-the-shelf solutions can often result in limited visibility and lack of control once you get under the ‘hood’. So, what is the answer? In this article, we explore the ‘build or buy’ debate and suggest that the third, hybrid option may leap-frog the lead time and reduce investment costs, whilst providing CTOs and CIOs with a technology stack that they can own and that delivers short term impact.   

The war for talent makes the build option problematic for insurtechs

As Nigel Walsh, Managing Director, Insurance at Google, said: “CXOs understand that standing still and maintaining the status quo is no longer an option. While the digitalisation of an organisation and its processes is the aim, numerous questions remain around what digitalisation looks like and how it is best delivered effectively.”

Several years ago, the attraction of a build option was significant as insurance companies sought to design a bespoke response. Given the potential pitfalls of the buy option the temptation to create an in-house capability remains significant. 

However, we are in the midst of an increasingly intense war for talent. The COVID-19 pandemic and the move towards greater digitalisation across all business sectors has created a huge gap between the demand and the supply for developers.  

The developers’ salary expectations have substantially increased, and there are many other business sectors which are seen as more attractive to the available talent, making the build option increasingly difficult to implement in practice. 

The challenge of buying the right solution for insurtechs

External providers provide off-the-shelf solutions, customised to specific industry segments, in which they have taken the time and effort to aggregate and cleanse relevant external data sets, and assess the impact of different risk characteristics.  

For those who favour a buy solution, however, some important questions need to be answered — does the solution cover all scenarios and offer all the necessary interfaces? Often, the answer is that it’s only suitable for core operations. If you have thirty classes of business and even if the 80-20 rules apply, you need to manage all thirty. If the solution delivers for your ten largest classes but not for the other 20, are you better off building from scratch?  

As part of the buying process, it is vital CIOs and Chief Transformation Officers understand the roadmaps vendors have created for the future and how achievable those roadmaps are.  

Commercial insurance is a small industry in the wider business context and as such, there is less attention paid to the products on offer compared to other bigger and seemingly more lucrative business sectors.  

Is there a third technology option for insurers wanting to go digital?

Many CIOs and CTOs are now opting for the third, hybrid option which has the benefit of solving many of the issues which currently beset both the buy and build operations individually.

When opting for the hybrid way, external parties normally partner with insurance firms to effectively create bespoke solutions that enable the insurers to tackle any latent legacy issues and benefit from systems which are fit for future use. 

Such a strategic partnership needs to be built on both flexibility and trust, underpinned by a mutual understanding of what the insurer wants to achieve both in the short and medium term. The hybrid option brings together all the advantages of buy and build — the insurer owns the architecture, but with ongoing support from a professional team. The solution is fully integrated and customised for the insurer’s IT estate, and designed to meet its specific business objectives. 

CIOs and CTOs have been traditionally polarised between two clear options: should we build and operate our digital platform in-house or buy off-the-shelf? The third option brings together the best of both – the technology partner equivalent of an MGA. A managing technology agent that can deliver speed to market, the ability to customise to individual demands, as well as economic advantages of delivering this to multiple parties.

About the author: Vinod Singh is the CTO, Concirrus. He has more than 18 years of experience of architecture, design, development, testing and implementation of large distributed applications in Capital Market domain in Microsoft technologies (.Net, SQL Server, MOM, ESB). Consirrus's  platform empowers underwriters and brokers with new insights and rating factors that help innovate, improve performance, and drive down operating costs.


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