Custom core system builds still happen surprisingly often. They fell out of fashion during the competitive vendor landscape of the early 2000s, but implementation challenges and improved carrier software development expertise are generating increased interest in the custom build.
Buying is often a compelling option: insurers can thoroughly evaluate systems, forecast costs, and focus on customization rather than system design. What’s more, building systems is what vendors do for a living, so they’re well-versed in engineering and implementation best practices as well as software support. Custom insurer builds, by contrast, tend to be complex and have a high chance of disappointment.
That being said, there are some legitimate reasons to consider a build. Some lines of business are so unique that there may be no market alternative, and carriers may be able to gain an advantage by building rather than buying. Insurers can also maintain greater control and avoid vendor lock-in.
Organizational maturity in software engineering is essential for success in large builds, which often requires a fundamental shift in the role of IT. One way to ensure readiness for a build is an evaluation of IT and broader organizations for the capabilities, maturity, and related experience needed to deliver a large build. Dimensions assessed should include engineering practices, Agile, QA, testing, delivery automation, technology and architecture, and product management. Enterprise readiness, company culture, and track record across comparable initiatives will also inform the decision to build or buy.
Should carriers choose to build a custom system, they can mitigate risk by leveraging off-the-shelf software components like frameworks, platforms, and tools to avoid building too much from scratch. Another approach is to seek a co-development partner, i.e. a software vendor, consulting firm, or staffing partner.
Novarica’s recent brief, Insurance Core Systems: Buy or Build? provides more information on reasons for and against custom core builds as well as key capabilities that IT organizations need to ensure a successful build.
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