Celent: 2008 Insurance Tech Deals Steady Despite Economy

The data may tell a different story once 2009's numbers are analyzed, but insurance deal activity was steady through the end of 2008 across virtually every sector, according to new reports, Insurance Software Deal Trends 2009: Life/Health and Property/Casualty Editions, from Celent, a Boston-based financial research and consulting firm.

Celent collected data on 1,315 deals between insurance carriers and software vendors occurring in 2007 and 2008. Of this total, 63% of the deals involved property/casualty insurers versus 13% for health carriers and 24% for life/annuity carriers. The financial crisis has insurers taking a hard look at budgets, so Celent believes a temporary slowdown in deals may emerge when the 2009 data is available.

Respondents placed 46% of their 2008 deals in the new customer, new revenue category. But on the other end of the spectrum, 41% of the deals fell into the lowest revenue category offered to responding vendors.

In the life/health sector, deal volume generally rose across the period, driven by the document/content management metacategory. However, the core processing metacategory actually shrank over the period, retreating from a high of 30 deals in 2007 to 23 deals in 2008. It is too soon to say whether this is a leveling off of the core systems replacement market, but it is clearly a lull. Celent believes that the constraints of the business case for core systems replacements may be keeping carriers on the sidelines, but based on other data points, such as our annual CIO survey, we could see a resurgence in core systems deals in 2009.

The document/content management metacategory represented 53% of all deals recorded. The life/health deal flow was spread across carriers of all sizes, but deals were surprisingly numerous in the upper tiers considering how relatively few companies there are in this category. Life/annuity/health deal flow was spread across carriers of all sizes, but deals were surprisingly numerous in the upper tiers, considering how relatively few companies there are in this category. For all metacategories combined, Tier 1 and Tier 2 carriers accounted for 56% of all deals analyzed, producing 61% of document management deal flow and 64% of core processing deal flow, while Tiers 3, 4, and 5 accounted for 44%.

The leading life/health core processing vendors in terms of deal volume were: CSC (56%), StoneRiver (13%), InsPro (formerly Atiam) (9%), and Accenture (7%). Leading distribution vendors were iPipeline, with 51% of all deals, StoneRiver with 20%, Vertafore with 10%, and SunGard with 8%. The leading vendors in the document/content management metacategory were Hyland Software (OnBase), with 42% of all deals, HP Exstream with 32%, and EMC Document Sciences with 24%. In the infrastructure and accounting category, leading vendors were SunGard, with 55% of all deals, Pilotfish Technology with 26%, and CSC with 13% of all deals.

In the property/casualty sector, the metacategory winner in terms of deal volume was document/content management, which represented 33% of all deals recorded. But core processing was close behind at 32%. Infrastructure and accounting was next at 20%, while distribution came in at 15%.

Based on their submissions to the property/casualty study, the leading core processing vendors by deal volume were: Insurity (18%), CSC (16%), Guidewire (9%), StoneRiver (9%), InsureSoft (9%), Oneshield (7%), Insurance Systems (7%), and MajescoMastek (5%). The leading distribution vendors were StoneRiver with (37%) Vertafore (32%) AgencyPort (19%), and CSC (7%). The leading document/content management vendors by deal volume were Hyland Software (33%), Vertafore (25%), HP Exstream (15%), EMC Document Sciences (15%), and Acrosoft (9%). The leading infrastructure and accounting vendors were SunGard (40%), Vertafore (19%), StoneRiver (16%), Pilotfish Technology (12%), and iPartners (9%).