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Berkshire Hathaway Specialty Insurance
Berkshire Hathaway Specialty Insurance

Insurers 'ditch one-stop-shop providers for niche specialists'

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Insurers are opting to select an array of expert technology suppliers instead of relying on a single general provider, insurance consulting firm Xceedance says.

Insurance firms are cherry-picking “best of breed” experts in specialised niches, the Boston-based consultancy says, a trend which means IT teams are becoming a strategic driver for governance, compliance and data security.

“Companies are increasingly seeking specialist providers because they recognise one size doesn’t fit all anymore, given more sophisticated insurance consumers and the need for insurance systems to keep pace with rapid market changes,” Xceedance VP and Country Manager Australia Stephen Browne said.

“Insurers can leverage innovation by letting go of the traditional procurement model and becoming more agile.”

The experience, price and delivery offered by niche specialists are attracting insurers which would rather operate with a number of operators that are exceptional at what they do than stick with one general supplier as they may have in the past.

“There has been a bit of a seismic shift in that direction,” Mr Browne tells insuranceNEWS.com.au. “Procurement contracts now allow for these sort of things. It’s just a better market to operate in.”

Customer interface, data analytics, actuarial pricing models and claims management are some areas specialists are sought.

The new procurement trend means IT teams are no longer just a support function for insurers but a strategic driver in reducing both organisational and cyber security risks.

Arno Franz, Partner at technology research and advisory firm ISG, says mature insurers are adopting overarching service agreements that incorporate multiple providers. These include clauses such as shared compensation if failures occur.

He likens the insurer’s role to that of the conductor of an orchestra and says that as IT team leaders assume a more strategic role, CIOs must have robust processes to manage service providers.

“Organisations are now developing an ecosystem of service providers,” Mr Franz says. “The cloud has facilitated more specialised service offerings.”

While this creates a more complex environment, insurers are happy to take the risk of managing multiple suppliers because it improves their service integration and management, he says.