Build Vs Buy - Are we really still talking about it?

When I joined the insurance industry, almost embarrassingly, back in 1972, there was virtually no technology; well not strictly true, there was my old trusty Odhner Pinwheel Calculator which I used as an actuarial clerk to calculate life policy surrender and conversion values. Of course, we did have a computer that required a huge room to accommodate it. More vivid, however, was the memory that the whole of our 200,000 policy, main file was held on punched cards. These were marched around the office in metal trays on a big trolley, such that staff from various departments could take turns to have access to them. You could pull out a card and examine the punched holes in it and, hey presto, you could tell that last month’s premium had really been paid! Such sophistication.

 

Compare the manufacturing industry, when even 200 years ago, the world had already seen its first truly “standardised part” assembly process. Not the Model T Ford, which came over a hundred years later, but military rifle manufacture, whereby custom building of each nut screw and bolt for each individual rifle finally gave way to pre-built components, assembled together en masse.

 

Since then, industrial mass production manufacturing techniques have become the norm, without exception but for the luxury goods market. Contrast that against progress in insurance technology development whereby, as recently as the late 1970’s, there was still very little pre built, componentised insurance processing code. At that time I spent a few years as a COBOL programmer, automating premium processing within my own company. The only standard subroutines then available just took the labour out of validating date fields everything else had to be hand crafted.

 

Here and now in the late noughties, finally, we can say we have arrived. There is, at last, a wide variety of best of breed componentised insurance processing function commercially available in the market. In that 30 year period, insurance specialist software companies have invested hundreds of millions in developing truly configurable insurance processing components which now work in a standard computing environment – SOA, XML, .net etc.

 

So why, oh why do I still hear accounts of Insurance Companies thinking they are different and thinking they are better placed to build their own?

 Taking into account good business strategy and core competencies, it just doesn’t make sound business sense now. Insurance Companies are good at writing Insurance and software development should arguably be left to the technology sector.