📄Unlocking the value in insurance pricing: Balancing the Build vs. Buy equation
September 15, 2023
Why is the decision to build an in-house solution or buy an existing solution on the market such an ongoing question for pricing teams? Simply put, pricing insurance correctly is a key indicator of success or failure for an insurance company. Determining whether to build pricing technology in-house or purchase an external solution has become an important consideration for internal teams and the decision makers that manage them.
Build vs. Buy: A Dilemma Dividing Pricing Teams
Most insurance pricing teams have strong opinions on whether to Build or Buy pricing solutions, but these opinions are often based on past experience or feeling, rather than being determined through careful research and analysis.
Several long-term trends are impacting the industry and can influence the decision-making process, such as:
- The scarcity of skilled pricing and technical professionals.
- The rapid evolution of technology.
- The intensification of competitive pressure, due to new market entrants.
- Uncertain macroeconomic conditions.
- Remote working and global teams impacting project progress and collaboration.
The Best of Both Worlds
When choosing whether to deploy an off-the-shelf pricing software solution, or to develop bespoke in-house pricing software, there is no ‘one-size-fits-all’ answer. Different scenarios, staffing levels, timescales, objectives and business needs can all influence what the best option may be.
There are advantages and disadvantages for both scenarios. Built solutions offer greater flexibility and the potential to add value and use proprietary techniques. Bought solutions can accelerate time to market and reduce skill and staffing pressures.
The decision-making process should aim to be as impartial as possible and be made on a project stage-by-stage basis, so that efficiencies can be realized, and ROI optimized as part of the product development process. Many insurance pricing teams will find that an optimal solution is a hybrid of both Built and Bought technology.
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