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Insurers spend most on core processing software

Celent concludes that core processing deals accounted for the largest spending by insurers on software in 2011/2012
Celent concludes that core processing deals accounted for the largest spending by insurers on software in 2011/2012

Core processing software deals accounted for the largest spending by insurers for software in 2011 and 2012, according to a new report.

Celent, a research advisory unit of the management consulting firm Oliver Wyman, New York, discloses this finding in “North American Insurance Software Deal Trends 2013.” The report is based on 1,475 software deals between insurers and software vendors that occurred in 2011 and 2012. Of the total collected by Celent, 64 percent of the deals involved property/casualty insurers and 36 percent involved life/annuity/health insurers.

Celent records that 1,475 software deals were inked between January 1, 2011 and December 31, 2012. Infrastructure and financial software deals nabbed the largest share at 36 percent. Core processing deals came in second at 27 percent (compared to 33 percent in the last report).

Distribution and document/content management software deals represent an additional 22 percent and 15 percent, respectively, of the total.

“While infrastructure and financial deals lead in raw volume, they tended to be smaller deals with existing customers,” the report states. “Although vendors only closed half as many core processing deals infrastructure and financial deals during the time period, the core processing deals were primarily with new customers.

“And, since core processing deals typically are very costly, Celent concludes that core processing deals accounted for the largest spending by insurers on software in 2011/2012,” the report adds.

Property and casualty insurers increased to 66 percent of total deals from 62 percent in 2011 and 2010, Life/annuity insurers accounted for 28 percent of the deals. Health insurers garnered the remaining 8 percent.

By customer relationship type, the software deals broke down as follows:

● 38 percent—existing customer, but new product.

● 27 percent—existing customer, related product or version.

● 35 percent—new customer.

The report observes that on premise solutions remain the most popular method of deploying software, accounting for 69 percent of the software deals tracked. But software as a service grew its market share this year to 27 percent from 14 percent last year.

Hybrid solutions combining on premise and software as a service account for four percent of software deals.

 

 

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