The market for core system replacement will heat up over the next two years in both the US and Europe, according to a new report, "A Global View of Policy Administration Systems: The 2007 Overview" from Celent, a Boston-based financial research and consulting firm.
Key findings of the report include:
• Insurers in the US and Europe differ in their policy administration system approaches. In the US, building a policy administration system has become extremely rare, while assembling one from components (e.g., claims, policy, billing) has become increasingly common. In Europe, large insurers have a preference for frameworks while midsize insurers prefer a single end-to-end solution. There is also a fair number of insurers in continental Europe who prefer to build custom (bespoke) solutions.
• Deal sizes in Europe tend to be larger than in the US market because deals are typically for more components in Europe. General insurance solutions have increased in price since 2005, reflecting the higher price points of the entrants. The average deal in 2007 is between US$1 million and $2 million. In the life insurance sector, average first year total cost of ownership is $2 million to $5 million, although there are several solutions available at a lower price point.
• The fastest growing segment of the market in all regions is for full, end-to-end suites that are componentised so that carriers can choose one, some, or all of the components from a single vendor, now or later, with a minimum of integration hassles.
• The growth in worldwide demand for policy administration systems in 2008 and beyond looks to be excellent. Celent expects the market in both Europe and North America to continue to grow over the next two years. Total spending on policy administration solutions for the regions covered in the report will peak at US$1.7 billion in 2009 and start to tail off slightly in 2010.
• For the P/C market, the continued influx of impressive, modern systems–for personal, commercial, and/or speciality lines–will continue to keep prices low and force established players to improve their offerings.