Guidewire announced today that it will acquire EagleEye Analytics, the first major insurance technology vendor M&A of the year. Insurance technology vendor M&As were hot at the beginning of last year, but have cooled off at the same time that more startup technology companies have entered the market. What does this all mean for carriers? INN reached out to Donald Light, director of Celent's North American P&C Practice, to take the temperature of the insurance technology market.
INN: Why has Guidewire opted to expand into the analytics realm through purchasing EagleEye?
Donald Light, Celent: Guidewire continues to expand its “full-suite” offering. Beyond core policy, claims, and billing; it wants to be the one-stop value creation center for its current and future clients.
INN: What can we infer about what insurers are looking for from software vendors based on this acquisition?
Donald Light, Celent: Few if any insurers today can ignore product, pricing, underwriting, and fraud mitigation advantages created by analytic solutions. The largest insurers will continue to buy and build their own solutions. Not-quite-as-large, and midsize insurers will often look to their existing vendors to provide analytic (and other capabilities) -- fewer vendors to manage, few throats to choke.
INN: There seem to be competing trends toward consolidation of insurance technology vendors and, at the same time, increased startup activity. How do you interpret this phenomenon?
Donald Light, Celent: Right now existing vendors and start-ups really exist in separate realms. Current vendors have products, customers, and cash flow. Start-ups have none of the above, but want to cross over. A few (maybe very few) will.
INN: Many insurtech startups are built around analytics; are they looking to be folded into an existing heavyweight or grow independently?
Donald Light, Celent: The insurtech startups are almost all owned by [venture capitalists] (VCs), some of which are insurer-owned. VCs want to monetize their investments through IPOs or being acquired. I’ll bet the vast majority of successful VC exits will be through the acquisition route.
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