There are plenty of red-flag subjects that will spark a great debate in our society. Should Pete Rose be in the Hall of Fame? Was Oswald acting alone? What was Coppola thinking when he made Godfather III? But in the often-staid world of insurance technology, there are three little words that are sure to get the IT staff worked into a lather: Build versus buy.
Not surprisingly, that question sparked some interesting responses when IVANS posed it as part of its Emerging Strategies in Insurance and Technology Survey last fall. The safe route turned out to be the popular route: 45 percent of those responding said that technology decisions were made on a case-by-case basis, and whether they built or bought depended on a cost evaluation conducted at the time of the decision.
Joanne Currier, vice president information systems with Vermont Mutual Group, agrees with the IVANS study. The survey results are consistent with our current philosophy, she said. The rate of change of technology, increased specialized skill set requirements, and accelerated expectations of time-to-market deliverables have forced us to extend our support needs beyond our internal staff, she explained. The reduced risk factors and total cost have also made outsourcing options more appealing for certain specialized projects.
Insurance carriers are comfortable with the quality of the products they can purchase from software vendors, which is reflected in the fact that only five percent of the respondents admitted to building everything internally and managing it themselves.
That goes back to the first question businesses should ask themselves when considering build vs. buy: Is this one of my core competencies? Most insurance companies would probably say software development is not.
But while they may be reluctant to build their own systems, they are also somewhat uncomfortable in outsourcing their entire operation. There may come a day when virtual companies are more than just a fad, but youll have a hard time convincing this industry that its a practical way to go.
So what this survey tells us is that insurers are, for the most part, conservative business people who will try something new (to them) if they can be convinced it works. But you had better have some good examples ready. Thats because most insurers agree that their industry is last among all the financial services in using Internet technology. (Stock brokerages were first, followed by banking, then real estate.) That snails-pace reputation is hard earned, but its something that the industry is proud of as well; 78 percent of those responding described their attitude toward adopting technology as practical with 16 percent using the term conservative.
And somewhere out there is the six percent who described their attitude as aggressive. Think of them as the next generation of insurance people. ROBERT REGIS HYLE