Firms running their businesses on bespoke systems at risk.
A quarter of software systems underpinning insurance transactions are unsustainably expensive to run, maintain and further develop says Michael Graham, Sales and Marketing Director of Sequel.
"Too many firms - brokers as well as carriers - have chosen systems with their hearts rather than their heads and decided to have their own built. These systems are costing a third to a half more than they should be spending and are not sustainable," says Graham. "They've been sold a dream - the notion you can have whatever you want, whenever you want it. This might have been understandable in the past but not in the second decade of the 21st Century. Now that the business of insurance has become increasingly standardised and embraces modern management methods, old-style bespoke systems have become a liability, and in some cases, a downright nightmare.
"Costs spiral for those who have chosen the non-standard route and they are struggling. Over time you need an army to maintain such systems and you have to keep on spending just trying to catch up with current market challenges. And over time bespoke-based firms become increasingly exposed to risk. Control of their software is in hands of the few who wrote it - and they can all too easily disappear," Graham continues.
"There's certainly a trend we're noticing. Firms that have been shackled to the bespoke approach are now looking at their risk exposure associated with, and lifetime cost of ownership of, an insurance system - and it has been an eye opener for them. These brokers and carriers need to be ahead of the market so they can compete, innovate and take regulation in their stride. The majority are realising that money-no-object bespoke systems are not going to be part of the future insurance landscape and are now actively considering the benefits that off the shelf systems can bring. Modern standardised insurance software offers powerful, flexible and compliant systems. By choosing the modern option firms gain the great advantages of having the right tool for the job and making significant savings that can be invested in new business development," he concludes.