Has Buy KO’d Build?

The "buy or build" conundrum remains central to many technology decisions made by insurers.

A new report from New York-based Novarica delves deep to examine the pros and cons of in-house development. The report, "Buy vs. Build in Insurance Core Systems," notes that the broad trend is for insurers to buy more and build less. “Although neither buy nor build can be all things to all carriers, the current trend has shifted significantly in recent years,” the authors, Novarica Principal Chad Hersh and analyst, insurance Kimberly Markel, write. “The packaged solutions market for insurance has expanded greatly in the last 10 years.”

Indeed, given the ongoing profusion of configurable vendor offerings and the improving interoperability or best-of-breed solutions, making the case for in-house development has become harder.

“It is becoming increasingly difficult to justify building as more and more packaged solutions become available to buy while existing ones grow better every year,” the report states.

Nonetheless, a case can still be made, especially for ancillary, non-core systems. In-house development may in some cases impart a competitive advantage and save carriers on licensing fees. Moreover, a custom build can be tailored to fit existing infrastructure and staff.

Accordingly, the authors expect this discussion to be ongoing. “Although valid reasons to build are limited, the debate over buying versus building continues.”