Early Indicators 2024 Q3 — Uncertainty Drives Coretech Buyers to the Sidelines
This is an update to Coretech Insight’s review of publicly announced coretech deals, which covers 316 announcements from 2015 through the third quarter of 2024.
The number of publicly announced deals for the first three quarters of 2024 set a new low for the past decade. Coretech vendors have experienced significantly decreased demand and extremely long sales cycles in 2024.
Note: This article was revised October 24, 2024 to incorporate new PR data and revised or corrected premium tier rankings for deal announcements in years 2016-2018, and 2021.
Overview
There are a few key questions ever-present in the minds of P&C coretech buyers and vendors.
What is the demand for coretech platforms?
Are any significant new trends or patterns emerging?
How are buyer priorities changing?
To date, 2024 has had the lowest number of new deal announcements for any year over the past decade, including 2020. The most pronounced drop has been with smaller insurers between $25M and $100M in direct written premium (DWP).
Analysis
Figure 1 below shows core platform selection announcements from 2015 through the third quarter of 2024. After a post-Covid resurgence in 2021, there has been a downward trend in each subsequent year. There have been 14 public announcements over the first three quarters in 2024, a 33% year-over-year decrease from total announcements in the first three quarters of 2023.
Figure 1. Public P&C Core Platform Selections, 2015 - 2024 Q3
Source: Coretech Insight, October 2024
Note: These totals do not reflect all new system selections. We estimate these public announcements 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 Note 1. Methodology below for more details.
Figure 2 below plots announced deals for 2024 with a solid green line against a benchmark of monthly highs, lows, and averages for publicly announced coretech deals from the five “normal” years of 2015 through 2019, prior to 2020. The number of publicly announced deals in 2024 has tracked with prior lows or set new lows for all months except two. In June there was a spike in the number of deals that returned to the monthly average. In August, the single announced deal was consistent with historically low activity in that month.
Figure 2. Monthly P&C Core Platform Selections, 2015 - 2024 Q3
Source: Coretech Insight, October 2024
Deal size has also been smaller in 2024. Figure 3 below shows there were only two announced deals with insurers of $1B DWP or greater. Over two-thirds of the announced deals in 2024 have been with startups or insurers with less than $200M DWP.
Figure 3. P&C Core Platform Selections by Premium Tier
Source: Coretech Insight, October 2024
Digging deeper, Figure 4 below shows the number of 2024 announced deals against averages for 2015 through 2023 using more granular tiers. This view shows how the number of deals is below average across the board, with the exception of one announced deal among larger insurers over $5B in DWP. Most announced deals in 2024 have been with insurers below $500M DWP, which is normal. However, there has been a noticeable dearth of new deals with insurers between $25M and $100M DWP.
Figure 4. Q1-Q3 P&C Core Platform Selections by DWP Tiers vs. Averages
Source: Coretech Insight, October 2024
As Figures 5 and 6 below illustrate, publicly announced deals in 2024 have continued to focus on traditional legacy modernization over new products, greenfield implementations, and startups. Buyers have favored well-established vendors with either modular or all-in-one P&C core platforms.
Figure 5. P&C Core Platform Selections by Deployment Objective
Source: Coretech Insight, October 2024
Figure 6. P&C Core Platform Selections by Solution Type
Source: Coretech Insight, October 2024
Table 1 below tracks publicly announced deals on a vendor-by-vendor basis from 2015 through the third quarter of 2024. The deals shown for 2024 reflect the pullback across the board. Deals with insurers above $100M are concentrated with just two large, well-established vendors, Guidewire and Origami Risk. The other five vendors that announced deals worked with buyers at startups or smaller insurers, below $100M DWP.
Table 1. P&C Core Platform Selections by Vendor and Premium Tier, 2015 - 2024 Q3
Source: Coretech Insight, October 2024
Implications
In prior updates for 2024, we commented on recent industry challenges, growing vendor viability risk, and the likelihood of increased mergers and acquisitions among coretech vendors. We highlighted concerns about economic weakness (see Note 2) and uncertainty from a chaotic US presidential election season with a highly polarized electorate. In addition to US domestic concerns, international tensions have led to supply chain disruptions and increased risk of conflict.
Under these conditions, many coretech buyers (and many other buyers and investors) have moved to the sidelines. They’re in “wait and see” mode until the outcome of the US presidential election is resolved, there is more clarity about US domestic and international policy, and more certainty about the state of the economy going into 2025.
The decision to wait on the sidelines is understandable. However, this time of uncertainty can also be a time of opportunity for buyers who stay in the game. Many coretech providers will be more responsive and flexible due to lower sales and rapidly approaching fiscal year-ends. While it is essential, as always, to be diligent and exercise caution – see Early Indicators 2024 Q2 for recommendations regarding vendor viability and contingency plans – buyers are in a historically strong position to negotiate favorable terms as 2024 comes to a close.
Note 1. 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 were published from 1/1/2015 through 9/30/2024 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 2024 Q3 update, we reviewed 316 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 may note minor differences in prior year data with each update of our findings. During our ongoing reviews, we periodically identify additional information and 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 wins. Some vendors wait until after successful go-lives (which may be years after selection) before they promote new clients. 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.
Note 2. Sample Economic Forecasts
“The Conference Board Economic Forecast for the US Economy,” The Conference Board.
“United States Economic Forecast,” Deloitte.
“Weekly Global Economic Update,” Deloitte.
“U.S. Quarterly Economic Forecast,” TD Economics.
“Global Economic Prospects - June 2024,” World Bank Group.
Jeff Haner is the co-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 coretech 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