To buy or to build? It's a question sometimes in insurance technology.

Every now and then insurance businesses consider building their own policy admin solution. Crazy idea? Director Simon Fenn offers his advice.

To buy or to build? It's a question sometimes in insurance technology.

By Simon Fenn, Director, Pancentric Digital

My headline advice on building your own insurance software is think twice - in fact, think more than twice.

It's a bit like that old campaign warning about pet ownership. "A dog is for life, not just for Christmas". Software development is a long term endeavour.

The shine of tech entrepreneurship can soon fade when the full reality of designing, building and maintaining complex software sets in.

Software development cannot be done off the side of your desk. It will consume time and resource - for years. At worst, it can distract you from your core business.

Of course, the cynics will say, I'm bound to say that. I have an insurance software solution to sell. But ask around; most will say to be wary. The warning is valid.

In the interests of balance, a fuller set of considerations is set out below. 

Reasons to build

  • Customisation: If your insurance business has unique requirements or processes that cannot be easily accommodated by off-the-shelf software, building a custom solution may be the way to go. This allows you to tailor the software to your exact needs. That said, agile providers like Go-Insur are worth talking to.

  • Competitive advantage: Building your own software might give you a competitive advantage if you can develop features or capabilities that are superior to what's available in the market. But beware - a gap today may be filled tomorrow. Do your homework before investing significant time & money. And again, explore deals with agile providers, they may be willing to flex their roadmap. 

  • Intellectual Property (IP), long-term control: Building your own software means you have full control over the development, maintenance, and updates. You own the IP and can adapt the software as your business evolves. But beware of the realities below. 

Building realities

  • Cost: Building complex, custom software is expensive, not only in terms of initial development costs but also ongoing maintenance and support. 
  • Time: Developing software from scratch can be time-consuming. It may take longer to bring your solution to market compared to buying and configuring 'off-the-shelf'. 
  • Team: Good software demands more than a backend developer or two. Add Business Analysis, UX, UI, Frontend, Testing, DevOps, Project Management. A good proportion of this resource must be available for the lifetime of the software, not just for the first release.
  • Continuity of resource: That developer you managed to find at the start of your tech project. Year 3, suddenly they're not available. Where does that leave you? 
  • Security and regulation: Insurance is highly regulated and information security is critical. You need rock solid solutions for these aspects. The unglamorous bit.
  • No code/low code: Much talked about but not a walk in the park. You still need a diverse and extensive team and strict regimes to deliver robust, working software. 

Reasons to buy

  • Time-to-market: Buying insurance software off-the-shelf or through a vendor can significantly reduce the time it takes to implement a solution. This can be crucial if you need to launch quickly, test and learn, prove a business case.

  • Cost-efficiency: Purchasing existing software can be more cost-effective than building from scratch, especially if you consider the development, testing, and ongoing maintenance costs.

  • Expertise: Software vendors have domain expertise and the experience of many implementations. The good ones will add value, get you further more quickly. 

  • Scalability: Agile software solutions are designed to scale with your business, allowing you to expand without significant disruption and re-platform costs. Not all vendors sit in this camp. Do your homework. Shop around.

Buying realities

  • Customisation limits: Off-the-shelf software may not fully meet your unique needs. You may need to compromise on certain features or processes. You may need to change some processes, but this can be a good thing. 
  • Licensing costs: While buying off-the-shelf will be more cost-effective upfront, ongoing licensing fees can add up over time. Look for transparency with vendors, understand the long term costs. Also explore success/growth models - some vendors may be prepared to consider this.
  • Vendor reliance: You'll depend on the vendor for updates, support, and maintenance. If the vendor goes out of business or discontinues the software, it could be disastrous. Agree how these scenarios will be handled with the vendors.

Hybrid option

In some cases, a hybrid approach can make sense.

Start with an off-the-shelf solution, keep it simple (we always advocate a Minimum Viable Product [MVP]) prove the business case and then build custom modules or integrations over time to address specific needs.

Again, some agile vendors may support long-term strategies like this.

Bottom line, think twice and get advice.

If you want to chat, get in touch with our consultancy team.

MGA Trafalgar partners with Go-Insur

01 December 2023

Specialist MGA Trafalgar Marine Trades (TMT), part of Pen Underwriting's new Marine division, is partnering with Go-Insur, Pancentric's PAS solution, to provide online quote & bind for Commercial products in the Oil & Gas sector and more widely.