Skip directly to search

Skip directly to content

 

Buy or Build? A Game-Changing Question in Insurance

 
 

Next Gen Insights | Robert Anderson |
12 January 2022

INTRODUCTION

One question I frequently get asked by insurance companies is if they should buy or build their software applications. I liken this to running a restaurant. You need to answer, ‘Why do people want to eat at your restaurant?’ Is it because of the way you have grown your own herbs, vegetables, and other ingredients? Or is it because of the way you have assembled, prepared, and served the ingredients? Most likely, the answer will be somewhere in between these two extremes. As such, the buy-versus-build question is a good example of a false dichotomy. It’s not either completely buy or completely build, but rather somewhere in between.

THE SWINGING PENDULUM

Some of the larger insurance companies started buying mainframe computers in the 1950s and had to write their own insurance applications. With the creation of COBOL in 1959, it became easier to create their own applications, but there was still a high entry barrier, and instead, many insurance companies continued to rely on paper processes.

In 1962, IBM created a life insurance system called Consolidated Functions Ordinary, whose name I’m assuming had very little input from their marketing department. This application was given to customers when they bought IBM’s hardware. Now, insurance executives could ask, ‘Why are we building our software instead of buying it?’ Packaged software made it easier to level the playing field, but you could never get ahead of your competitors just by using it. And in fact, many large-scale implementations of packaged software were expensive to execute and difficult to implement, which resulted in some of them ultimately failing.

With the advent of cloud platforms, modern programming frameworks, low-code platforms, and better data-handling tools, the pendulum began to swing back towards the build side, but only in part. This time around, insurance companies are building only the components they need instead of full insurance platforms.

REASONS TO BUILD

Agility

With some packaged software, it can be difficult to have the business agility that is required. When you find that packaged software – and not your own business processes – are hindering your ability to react swiftly to market changes, to gain back some agility, you can build your own components, either from scratch or by leveraging a low-code platform.

Functionality

Packaged software covers a majority of the requirements most insurers have. However, there may be times when packaged software can’t meet your needs. In these instances, you might want to build, but only to enhance the packaged software, not to replace it. By building separate components instead of customising the entire software, you can alleviate some of the challenges presented by customisations when the time comes to upgrade.

Competitive advantage

Finally, if a majority of insurance companies is using packaged software, then you will need a way to differentiate yourself in other ways. For example, if the packaged insurance software supports only annual or one-off policies – and you want to offer on-demand or weekly subscription insurance – it may give you a competitive advantage to write a bespoke application to provide this capability.

HOW TO BUILD

Identify what you’re going to build

First, you need to identify what exactly you’re going to buy and which components you’re going to build. For instance, you most likely would not build your own postcode lookup mechanism, but you might want to build your own customer portal. It’s also important to have the future in mind when building, which includes a focus on componentisation, microservices, and connectivity.

Choose the right technologies

Once you know what you’re going to build, you need to know what you’re going to build it with. There are a number of modern technologies that you can choose from: Azure, AWS or Google Cloud, serverless or containers, Python or Go, React or Angular… Additionally, there are a number of low-code platforms you can leverage for some simple functionality. Choosing the right technologies carefully will ensure that they will work together well.

Choose the right partner

Unless you’re an insurance company that was ‘born digital’, there’s a high likelihood that you won’t have in-house expertise in all of the modern development technologies. In this case, it would be wise to get a partner that can help you with your software development and to navigate some of the pitfalls.

SUMMARY

In this article, we’ve explored when and how you should build instead of buy. As the technology lead for Insurance at Endava, I am seeing an increasing trend back towards building, but only for parts of an insurance platform. If you’re looking for a development partner to help you build components of your insurance platform, please do contact us. We would be happy to take your order.

Robert Anderson

Principal Architect

Robert is an enterprise architect with 20+ years of IT experience and Endava’s principal architect for the insurance industry. His focus is on emerging IT trends, specifically those supporting customer experience, and ensuring that business objectives are met through strategic architecture. Robert has a proven track record of driving change through the adoption of best practices and industry standards. In his spare time, he is a photographer and has had his photos published in magazines, newspapers and photography sites around the world.

 

Related Articles

  • 17 December 2019

    Demystifying omnichannel and making it a reality

  • 07 May 2019

    Failure to launch - Why contactless in the US is behind the rest of the world

  • 08 April 2019

    Get Emotional - How Feelings Dominate Decision Making

  • 04 February 2019

    Can a business thrive in the age of continuous innovation?

  • 07 January 2019

    Delivering Business Value at Speed: A Recipe in Three Steps

 

From This Author

  • 21 June 2022

    Intelligent Commercial Underwriting

  • 24 May 2022

    Going Native: Why Cloud-Native Services are Essential

  • 09 March 2021

    Insurance Insights: Cloud Migration

Most Popular Articles

A Payments View on Marketplaces – How to Be(come) Successful
 

Payments | Andy Davies | 23 June 2022

A Payments View on Marketplaces – How to Be(come) Successful

Current Challenges in the Transportation & Logistics Industry
 

Transportation & Logistics Insights | Brian Estep | 22 March 2022

Current Challenges in the Transportation & Logistics Industry

4 Buy Now Pay Later Trends Set to Disrupt the Industry
 

Payments | Annmarie Mahabir | 22 February 2022

4 Buy Now Pay Later Trends Set to Disrupt the Industry

Buy Now Pay Later: Will Regulation Burst the Bubble?
 

Payments | Annmarie Mahabir | 01 February 2022

Buy Now Pay Later: Will Regulation Burst the Bubble?

Platforms: a Blessing or a Curse?
 

Innovation | Andrej Kotar | 28 June 2022

Platforms: a Blessing or a Curse?

Hand in Hand with Artificial Intelligence in the Energy Sector
 

AI | Jasmina Ovcak | 07 December 2021

Hand in Hand with Artificial Intelligence in the Energy Sector

How to Improve Intelligent Energy Storage Systems Using AI
 

AI | Uros Bajec | 05 October 2021

How to Improve Intelligent Energy Storage Systems Using AI

hello! I’m Paul Maguire
 

Meet the SME | Paul Maguire | 20 April 2022

hello! I’m Paul Maguire

Data-Driven Insurance
 

Insights Through Data | Dan Robinson | 28 September 2021

Data-Driven Insurance

 

Archive

  • 28 June 2022

    Platforms: a Blessing or a Curse?

  • 23 June 2022

    A Payments View on Marketplaces – How to Be(come) Successful

  • 21 June 2022

    Intelligent Commercial Underwriting

  • 14 June 2022

    The Future of Supply Chain: What’s Next?

  • 31 May 2022

    The Future of Autonomous Vehicles in T&L

  • 26 May 2022

    hello! I’m Hannah McCarthy

  • 24 May 2022

    Going Native: Why Cloud-Native Services are Essential

  • 19 May 2022

    How to Tackle Legacy – Breaking Down Walls Between Change and Run

  • 17 May 2022

    Advantages of a Yard Management System

  • 12 May 2022

    Are Phones About to Become the New POS Terminals?

  • 10 May 2022

    The Digital Economy is an Upgrade of Smart Cities and Communities

  • 05 May 2022

    hello! I’m Sumita Davé

  • 03 May 2022

    Physical Automation in the T&L Industry

  • 28 April 2022

    zdravo! I’m Andrej Kotar

  • 26 April 2022

    Open Banking in the US

  • 20 April 2022

    hello! I’m Paul Maguire

  • 19 April 2022

    Digital Automation in the T&L Industry

  • 12 April 2022

    How Do Banks Embrace Embedded Finance – Have the Fintechs Already Won?

  • 06 April 2022

    ESG Data Architecture is a Business Imperative – How to Get Started

  • 05 April 2022

    hi! I am Roy Murphy

  • 05 April 2022

    Modernizing the Shipping and Cargo Process

  • 30 March 2022

    The Metaverse Evolution and Learning from the Games Industry

  • 29 March 2022

    Do Androids Dream of Trading Electric Sheep for Digital Wood? An Introduction to Automated Game Design

  • 23 March 2022

    Real-Time Payments in Australia – Why Corporates Should Get on Board

  • 22 March 2022

    Current Challenges in the Transportation & Logistics Industry

  • 16 March 2022

    bok! I’m Sanja Cvetkovic

  • 15 March 2022

    Rapidly Transforming: Healthtech Trends in 2022

  • 08 March 2022

    How to Digitize Warehouses and Distribution Centers

  • 01 March 2022

    Top Challenges in Warehouse and Distribution Centers

  • 28 February 2022

    Tackling CIB Legacy at its Core

  • 23 February 2022

    salut! I am Isabela Buhai

  • 22 February 2022

    4 Buy Now Pay Later Trends Set to Disrupt the Industry

  • 15 February 2022

    salut! I’m Natalia Ciobanu

  • 14 February 2022

    Product-Led Innovation – a Q&A with Joe Dunleavy

  • 01 February 2022

    Buy Now Pay Later: Will Regulation Burst the Bubble?

  • 31 January 2022

    Innovation Will Spur Ireland’s Race to the Top

  • 28 January 2022

    The Value of Digital and Automation in the Product Returns Process

  • 26 January 2022

    Virtually Disrupted? Keeping Pace with Accelerating Customer Expectations

  • 19 January 2022

    The 3 Big Ps in Modern Insurance: Personalisation, Prediction and Prevention

  • 18 January 2022

    An Introduction to Mobility as a Service in the US

  • 12 January 2022

    Buy or Build? A Game-Changing Question in Insurance

  • 12 January 2022

    hello! I’m Paul Willoughby

  • 11 January 2022

    Payment Service Providers 2.0

  • $name

We are listening

How would you rate your experience with Endava so far?

We would appreciate talking to you about your feedback. Could you share with us your contact details?