Build vs Buy? Which Approach is Best For Group Insurers?

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74% of insurance executives are planning to increase their investments in AI. Yet, as the urgency to integrate grows, insurers face a critical decision: build custom solutions in-house or buy third-party platforms.??

The choice between building your own custom insurance technology solution or purchasing the product can critically impact your insurance business. It's not just about technology - it's about positioning your insurance company for future success in an evolving market.?

The Case For Building?

Increased Customization?

One reason why carriers build rather than buy their own technology is the need for customization. Insurance companies often have unique processes and requirements that insurance technology vendors can't easily accommodate. For example, a group insurer offering pet insurance could build a feature that allows real-time communication with veterinary clinics for quick verification or treatments.?

Customization allows carriers to tailor the software to their needs, ensuring it aligns perfectly with their business processes and objectives. However, this route requires a substantial investment of time, money and resources.?

Intellectual Property Ownership?

Building your own insurance technology enables complete control over your software stack's infrastructure, development, maintenance, and updates. Everything is done when your team wants it to be. Your company owns the intellectual property, allowing you to adjust the technology as your business expands and evolves.?

Limitations?

The three main challenges for building custom insurance technology software are time, money, and resources. The total costs of ownership, initial development, and ongoing maintenance and support costs significant dollars that carriers might not want to spend.?

Additionally, creating software solutions from scratch takes a long time. Bringing the solution to market may take some time compared to implementing technology from a third-party vendor. Long wait times can impact your insurance company's ability to respond to market changes.?

Lastly, insurers need a full multidisciplinary team that includes backend developers, business analytics, UX and UI designers, front-end developers, testers, DevOps teams, and project managers. Finding and hiring employees with the skill sets to build and maintain the software throughout its lifetime can be very costly and difficult.?

The Case for Buying?

Typically, carriers have to decide whether to buy a best of breed software or an integrated do-everything solution also known as the best of suite when looking to implement new technology.?

Best of breed technology systems combine components that each focus on a separate core business function. This means the system is considered the best available option for its specific purpose. For instance, your policy administration software could be from Vendor A, underwriting system from Vendor B, and billing and insurance claims from Vendor C.? This enables the best-in-class specialized software for each function and they need to be integrated.?

Best of suite systems provides many applications encompassing different functions, a common database, and also provides a consistent interface since it comes from the same vendor. In this scenario, your policy administration, billing, and claims system would all be from the same vendor.?

So which is the better solution? There is no right answer. It will depend on your organization’s needs. Both are popular but companies choose to go for one over the other based on what works best for them.?

Best of Breed?

Explore New Capabilities & Functionality?

Best of breed means that no insurance technology can ever be a "one stop shop". Instead, this approach entails purpose-built systems that offer specialized functions. This means that insurers would have to buy separate software from multiple vendors for each application area.??

The tighter focus on one core function means that best-of-breed systems often cover more areas of the problem than you need the tool to solve. For example, some carriers may opt for a best in breed underwriting system because of the highly specialized risk assessment tools and analytics that underwriting requires.?

Easier Updates?

A stand-alone best of breed insurance software solution addresses a specific core business function, which in itself may be quick to implement.? System updates to that product, such as security patches or adding additional features can usually be rolled out with minimal effect on other systems unless the new features affect the other core systems requiring coordination of these changes.?

While the best of breed approach provides the most functionality, a downside is that most carriers might have a plethora of unique pieces of tech to deal with. Every individual piece of technology has unique interfaces and management needs that have to be looked after. For insurers that leverage this approach, IT staffs will be much larger and the individuals will be more technically deep in their respective fields.?

Best of Suite?

Simplicity??

The best of suite approach involves selecting a comprehensive software suite or package from a single vendor that offers a wide range of applications and modules to address various needs across the organization. For example, since policy administration is a critical and complex function that requires integration with multiple departments (underwriting, sales, billing, etc.), a suite may ensure seamless operations.?

The advantage of a best of suite approach is that the modules are designed to work together seamlessly, and integration is typically smoother. This can lead to more efficient operations and a consistent user experience across the organization.?

Less Risk Exposure?

Risk exposure is less with the best of suite. An integrated insurance software suite acts like an umbrella bringing together all functions related to the insurance domain. This has the additional benefit of making data management much easier since it is centralized. Since the database is not siloed, it gives real-time visibility and enables AI and automation more easily.?

For example, a carrier might choose a best of suite solution for claims processing because claims involve a lot of coordination with policy data, customer information, and financial data, so having a claims system integrated with policy administration can be highly beneficial to data management.?

With a best of suite approach, you get what you see. There may be areas for customization, but often you accept what it can do and what it can’t do. This simplifies management and has no specialized knowledge or special skill sets are often required.?

To Build or to Buy??

Choosing to build or buy insurance technology is a critical decision for your organization. The complexities within the group and employee benefits insurance industry, along with the rapidly evolving nature of technology, make this decision particularly challenging.?

In the insurance technology space, staying competitive requires making informed decisions about whether to build custom solutions or buy third-party systems. Building offers more customization and control but demands significant time, resources and money. Buying provides quicker implementations and the expertise of specialized vendors but may limit flexibility. Success hinges on careful evaluation of business needs, costs, risks, and ensuring strategic alignment between technology choices and long-term goals for agility and innovation.