Early Indicators 2024 Q2 — SMB Carriers Remain a Bright Spot within Historic Lows for P&C Coretech Deals
Overview
The first half of 2024 had the lowest number of new deal announcements for any year over the last decade, including 2020. The decline in announcements occurred at the top and bottom of the market, with a significant drop in new deals with both larger insurers over $1B direct written premium (DWP) and smaller insurers under $100M DWP. In contrast, deal announcements with SMB carriers in the middle of the market (between $100M and $1B DWP) and startups have continued at a normal pace in 2024.
Analysis
Figure 1 below shows P&C core platform selection announcements from 2015 through the second quarter of 2024. Annual totals over the prior nine years ranged from a high of 41 to a low of 26. Over the past two years since 2021, we have seen a downward trend that has continued into 2024. At only 11 public announcements, the number of 2024 deals is less than 60% of the norm.
Figure 1. Public P&C Core Platform Selections, 2015 - 2024 Q2
Note: These totals do not reflect all new system selections. We estimate these public announcements cover 30 to 40% of all selections from P&C insurance carriers or MGAs/MGUs during these years. Although not a complete accounting of all deals, these announcements are valuable as public, verifiable records. (See Note 1 Methodology for more details.)
Figure 2 below plots publicly announced deals for Q1 and Q2 in 2024 with a solid green line against a benchmark of monthly highs, lows, and averages for public coretech deals from the five “normal” years of 2015 through 2019, prior to 2020. This chart shows how the number of publicly announced deals in 2024 tracked with the lows for all months except June, when there was a return to the average.
Figure 2. Monthly P&C Core Platform Selections, 2015 - 2024 Q2
There have been fewer deals announced with large carriers in 2024. Figure 3 below shows only one deal with an insurer with DWP greater than $1B. In most prior years, there have been a half dozen deals or more with insurers in the largest tier, with announcements occurring throughout each year.
Figure 3. P&C Core Platform Selections by Premium Tier
Digging deeper, Figure 4 shows the number of 2024 announced deals against averages for 2015 through 2023 using more granular tiers, with ovals indicating gaps. This view reveals that the number of deals has dropped not only with the largest carriers, over $1B DWP, but also with the smaller carriers, under $100M DWP. In the middle, unlike the high and low ends of the market, the number of announcements with SMB carriers between $100M and $1B DWP has continued at normal levels in 2024. Announcements with startups, which have increased in recent years, are also at an average level.
Figure 4. Q1-Q2 P&C Core Platform Selections by DWP Tiers vs. Averages
As Figures 5 and 6 below illustrate, publicly announced deals in 2024 have continued to focus on traditional legacy modernization over new products, greenfield implementations, and startups. Buyers have favored well-established vendors with either modular or all-in-one P&C core platforms.
Figure 5. P&C Core Platform Selections by Deployment Objective
Figure 6. P&C Core Platform Selections by Solution Type
Table 1 below tracks publicly announced deals on a vendor-by-vendor basis from 2015 through the second quarter of 2024. The deals for 2024 reflect the pullback at the high and low ends of the market, and show how the SMB carriers in the middle (with more easily managed levels of risk vs. resources) have demonstrated a pragmatic focus on legacy modernization with well-established vendors.
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Table 1. P&C Core Platform Selections by Vendor and Premium Tier, 2015 - 2024 Q2
Implications
In our last update for 2024 Q1 (Early Indicators 2024 Q1 — Public Coretech Deals Set New Quarterly Low) we commented on how established vendors are in a better position to navigate recent market challenges, such as fewer deals, industry layoffs, and reduced access to capital. We reviewed recent mergers and anticipated increased mergers and acquisitions over the next two years.
Over the past few weeks in July 2024, the US political process has been roiled with historic violence, scandal, and uncertainty. The second half of 2024, with a heated presidential election in the fall, has the potential to be turbulent. Behind the drama and disruption of political theater are concerns about economic weakness in the second half of 2024 and 2025 (see Note 2 Sample Economic Forecasts).
Many coretech buyers will pause on “big bets” with new systems until there is more clarity about the future. This will put even greater pressure on weaker vendors. Given these circumstances, we reiterate our earlier recommendations which emphasize the importance of buyer due diligence and contingency planning.
Recommendations for Insurers Seeking a New Core Platform
Jeff Haner co-founded Coretech Insight, an independent advisory firm, in 2022.
Coretech Insight provides research, frameworks, and insights focused on matching P&C insurers with ideal coretech providers so that, together, they can be wildly successful.
Jeff has served in senior IT, advisory, and marketing roles with Deloitte, Oliver Wyman, NJM Insurance Group, Gartner, and BriteCore. While with Gartner he authored the Magic Quadrant for P&C Core Platforms. Jeff’s experience as a coretech customer, analyst, and vendor provides a unique perspective that cuts through the noise and finds ideal matches between insurers and coretech solution providers.
Contact Jeff at [email protected]
Note 1. Methodology
This research is part of Coretech Insight’s ongoing review of press releases (PRs) from P&C core platform vendors announcing the selection of or go-lives with their core platform or at least one core module (policy, billing, or claims) by US or Canadian customers. The PRs reviewed for this research were published from 1/1/2015 through 6/30/2024 and featured on vendor websites and/or reported on by various wire services and news sites such as Business Wire, GlobeNewswire, PR Newswire, Insurance Innovation Reporter, and PropertyCasualty360.
Our objective with this review is to track buying activity and trends among insurance carriers and MGAs/MGUs. From the initial set of PRs we excluded:
For this 2024 Q2 update, we reviewed 312 PRs with sufficient information to determine the timing of platform selection and track customer characteristics such as size, type, and deployment objective.
Sharp-eyed readers may note minor differences in prior year data with each update of our findings. During our ongoing reviews, we periodically identify additional PRs from prior years and incorporate these into our analysis. These additions have not impacted overall trends or conclusions.
This review did not evaluate implementation timeframes or success rates. Its focus was on the number and characteristics of selection decisions announced via press releases to gauge market activity and buying trends.
These public announcements do not reflect all new system selections during this time period. For various reasons, such as client confidentiality, a conservative approach to promotion, or even a lack of marketing resources, vendors often do not publicize new wins. Some vendors wait until after successful go-lives (which may be years after selection) before they promote new clients. We estimate these press releases cover 30 to 40% of all new P&C core platform selections from P&C insurance carriers or MGAs/MGUs during these years.
Although not a complete record of all deals, these announcements are valuable because they provide a public, verifiable record with details jointly approved by buyers and sellers. They represent a high-quality and consistent sample of activity in the P&C core platform market.
Note 2. Sample Economic Forecasts
Co-Founder at ClaimMentor | Revolutionizing Claims with AI
4 个月Jeff Haner Thank you for sharing these valuable insights. I must admit, I'm surprised by the emphasis on vendor economic viability and the need for full transparency about financials. Has this been a widespread challenge in our industry? The points about developing contingency plans and securing access to data and platform source code are particularly intriguing. If anyone has experiences or examples to share, it would be incredibly helpful to understand how pervasive this issue is and how we can collectively address it.