Early Indicators 2023 Q1 — New Market Entrants Drive Public Coretech Deals
How does P&C core platform buying activity in 2023 compare to prior years?
This is a quarterly update to Coretech Insight’s ongoing review of public coretech deals, which now incorporates 277 public announcements from 2015 through the first quarter of 2023.
After a slow start, demand returned to normal levels during the first quarter of 2023. However, some market leaders have been noticeably absent.
Overview
A few key questions are ever-present in the minds of coretech buyers and vendors.
What is the demand for coretech platforms? Is it stable? Increasing? Decreasing?
Are any significant new trends or patterns emerging?
How are buyer priorities changing?
With the first quarter of 2023 behind us, we have a first (quarterly) glimpse of public coretech deals this year.
Analysis
Figure 1 below plots core platform announcements in the first quarter of 2023 and the preceding years through 2015. Annual totals over the prior years ranged from a high of 41 to a low of 28 announcements. There was a noticeable (but not unprecedented) drop during the pandemic in 2020, a return to normal levels in 2021, and then another drop in 2022. Deals in 2023 started slow, but then increased over the quarter and returned to the pre-pandemic norm.
Figure 1. Public P&C Core Platform Selections, 2015 - 2023
Source: Coretech Insight, April 2023
Note: These totals do not reflect all new system selections. We estimate these cover 30 to 40% of all selections from P&C insurance carriers or MGAs/MGUs during these years. Although not a complete accounting of all deals, these announcements are valuable as public, verifiable records. See “A Note on Methodology” below for more details.
Figure 2 below plots monthly highs, lows, and averages for public coretech deals from 2015 - 2019 (five “normal” pre-pandemic years). Monthly deals for 2022 are plotted with a black dotted line, and deals for 2023 are plotted with a solid red line. This chart shows lower demand during the second half of 2022, with below-average monthly deals beginning in June of 2022, and a return to the norm in the first quarter of 2023.
Figure 2. Monthly P&C Core Platform Selections, 2015 - 2023 Q1
Source: Coretech Insight, April 2023
Within the composition of these deals, we see key trends continuing, as shown in Figures 3 through 6 below.
MGAs/MGUs and startups represent a sizable and growing subsegment of coretech buyers. (See Figures 3, 4, and 5.)
Cloud agile platforms continue to make inroads in the market with buyers who require speed and flexibility. (See Figure 6.)
Figure 3. P&C Core Platform Selections by Premium Tier
Source: Coretech Insight, April 2023
Figure 4. P&C Core Platform Selections by Insurer Type
Source: Coretech Insight, April 2023
Figure 5. P&C Core Platform Selections by Deployment Objective
Source: Coretech Insight, April 2023
Figure 6. P&C Core Platform Selections by Solution Type
Source: Coretech Insight, April 2023
While new public coretech deals returned to a normal level in the first quarter of 2023, the vendors making these announcements reflect changes that first became evident in 2022. Table 1 below tracks annual public deals from 2015 through 2022 compared with Q1 in 2023.
Table 1. P&C Core Platform Selections by Vendor and Premium Tier, 2015 - 2023 Q1
Source: Coretech Insight, April 2023
As Table 1 shows, some well-established vendors that were prominent in past years did not “make it on the board” in 2022 or in the first quarter of 2023. In contrast, some vendors that have more recently entered the P&C core platform market with multitenant and cloud agile platforms have announced an increasing number of new deals. Origami Risk, in particular, has been active with new deal announcements, securing the second-largest number of new public deals in 2022, and four of the nine public deals in the first quarter of 2023.
Implications
Although total new public deals in 2023 Q1 returned to pre-pandemic levels, nearly half of these deals were secured by only one vendor (a relative newcomer). The overall picture continues to be that of a buyer’s market, with buyers enjoying more negotiating power and seeing more flexible terms. These results also hint at the beginning of a “changing of the guard” among market leaders in P&C coretech.
While well-established vendors continue to enhance and roll out new releases of their core platforms, many are hampered by technical debt and challenged by the need to support, upgrade, and migrate customers on older, on-prem versions. On-prem upgrades and cloud migrations are not small endeavors; they are often equated with full system implementations. Some vendors face the need to care for multiple subsets of customers on different, older platforms they have acquired. Customers living through these challenges are often frustrated, and these experiences can fuel disappointment that drives interest in and opportunity for new platforms.
New market entrants have the advantage of fresh technology free from legacy burdens. It’s tempting for insurers to look to new platforms with leading-edge technologies as silver bullets that will solve all their frustrations with existing systems. However, these new platforms have their own challenges. Those with limited production deployments often lack industry experience and the functional depth necessary to address the many arcane requirements found in different tiers and across operations in various LOBs and jurisdictions. Unwary buyers risk trading aging system limitations and technical debt for a fresh-faced vendor that does not yet support (or even fully understand) fundamental insurance business requirements.
Over the next three to five years, we will see a race between these two groups:
Incumbent vendors with a deep understanding of industry requirements working to modernize their platforms and move their existing customers to new versions.
New market entrants with fresh, flexible tech working to learn industry requirements and build out functional support in their platforms.
History favors new market entrants over incumbents during transitions like these, but there will be winners and losers in both groups.
To succeed in this market, buyers and vendors must remain grounded in business value. Successful vendors will stay focused on the insurers they are best suited to serve, clearly show how they solve their problems, and present their current and planned technology solutions through the lens of how well they unlock quantifiable business value.
A Note on Methodology
This research is part of Coretech Insight’s ongoing review of press releases (PRs) from P&C core platform vendors announcing the selection of or go-lives with their core platform or at least one core module (policy, billing, or claims) by US or Canadian customers. The PRs reviewed for this research covered coretech selections made from 1/1/2015 through 3/31/2023 and featured on vendor websites and/or reported on by various wire services and news sites such as Business Wire, GlobeNewswire, PR Newswire, Insurance Innovation Reporter, and PropertyCasualty360.
Our objective with this review is to track buying activity and trends among insurance carriers and MGAs/MGUs. From the initial set of PRs we excluded:
PRs with no information on the timing of vendor selection
PRs on customers that are not P&C insurance carriers or MGAs/MGUs (such as life insurers, TPAs, self-insureds, and government entities)
For this 2023 Q1 update, we reviewed a total of 277 PRs with sufficient information to determine the timing of platform selection and track customer characteristics such as size, type, and deployment objective.
Sharp-eyed readers will note minor differences in prior year data in these findings vs. earlier updates. During the course of our ongoing reviews, we periodically identify additional PRs from prior years and incorporate these into our analysis. These additions have not impacted overall trends or conclusions.
This review did not evaluate implementation timeframes or success rates — its focus was on the number and characteristics of selection decisions announced via press releases to gauge market activity and buying trends.
These public announcements do not reflect all new system selections during this time period. For various reasons, such as client confidentiality, a conservative approach to promotion, or even a lack of marketing resources, vendors often do not publicize new client wins. We estimate these press releases cover 30 to 40% of all new P&C core platform selections from P&C insurance carriers or MGAs/MGUs during these years.
Although not a complete record of all deals, these announcements are valuable because they provide a public, verifiable record with details jointly approved by buyers and sellers. They represent a high-quality (and consistent) sample of activity in the P&C core platform market.
Jeff Haner is the founder of Coretech Insight, an independent advisory firm.
Coretech Insight provides research, frameworks, and insights focused on matching P&C insurers with ideal coretech providers so that, together, they can be wildly successful.
Jeff has served in senior IT, advisory, and marketing roles with Deloitte, Oliver Wyman, NJM Insurance Group, Gartner, and BriteCore. While with Gartner he authored the Magic Quadrant for P&C Core Platforms. Jeff’s experience as a customer, analyst, and vendor provides a unique perspective that cuts through the noise and finds ideal matches between insurers and coretech solution providers.
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Contact Jeff at jeff.haner@coretechinsight.com