Over the years, we've become accustomed to reporting on merger and acquisition activity among insurance technology companies that seems to come in bunches, but last week's announcements—three major deals in a span of three days—caught many by surprise.
The timing of these three deals was probably coincidental, but there's nothing coincidental about M&A activity among insurance software vendors. People are looking for signs to determine what's next,
The truth, though, is no one seems to know—except for the companies on the lookout for strategic investments and the companies that quietly market themselves to prospective partners as much as they market their companies to prospective clients.
At least one analyst group, Novarica, believes last week's three deals—SAP buying Camilion, Insurity purchasing AQS, and Applied Systems taking over the P&C business of IVANS—are the start of another round of Darwinism within our ranks, although cynics can liken such analysis to weather forecasting. You are going to be right at least some of the time.
But Matt Josefowicz, who co-authored a report with Chad Hersh for Novarica, Insurance Software M&A 2013 Q1 Update, does offer a reasonable explanation for the continued attraction to insurance software vendors.
“Unlike other industries where there's technical oligopoly in which a small group of providers dominates, the insurance industry's software market is still highly fragmented,” he says. “There continues to be significant opportunities for consolidation.”
There can't be any argument with that. Insurance companies in need of new or better technology have never encountered a better time to go shopping. The number of vendor solutions and, most importantly, the maturity level of the software, have never been greater. It is, indeed, a buyer's market.
The move that caught the most attention among many analysts was SAP's purchase of Camilion. Novarica believes this deal may signal a renewed interest by some of the larger technology companies in the insurance technology space. It is hard to believe, but it's been nearly five years since Oracle made its strategic moves to acquire Skywire and AdminServer, points out Josefowicz.
Last week provided a rush of energy for the insurance technology market and for insurance IT departments as well. How these changes play out—as well as the inevitable purchases to follow—is still anyone's guess, but survival of the fittest is something that should be in the back of every technology vendor's mind.
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