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Claims Solutions: 'Buy It In' or 'Grow Your Own'?

Rob Say, Professional Services Consultant, FINEOS

Here’s a question; Insurance is fundamentally a mechanism for transferring risk – how can you apply that expertise in a claims solution decision?

I’ve recently been involved in a number of discussions in the London Market on the solution choices between ‘grow your own’ and ‘buy a product’ (and here’s the disclaimer; I’m not a disinterested party!)  Right now I’m focused on uncovering hidden complexities in the handling of distributed claims and defining product solutions that address that complexity.

The London Market is a highly evolved syndicated insurance market that caters for a wide variety of specialised risks and coverage. Along with the long history there is a significant level of heritage investment and non-trivial business interfaces (ECF2 – I’m looking at you).  Working with a variety of syndicates there’s also a great depth of knowledge and expertise spread across multiple individuals and teams – all of which needs to be teased out to get the right claims solution.

For the Claims Management business the solution is not just the system that supports the business process; it’s the continuous delivery of the service, it’s knowing that you can adapt to new lines of business or that market regulation changes can be accommodated in the system; and that in 5 years you’ll still be driving new value from your systems.

Growing your own solution from scratch means taking on the risk of getting all of these things right and of addressing any issues that arise. It’s a long-tail risk, you design & build now – and issues may materialise long after ‘completion’.  Grow Your Own is not fundamentally ‘wrong’ – but it needs to be correctly assessed, costed & underwritten. Think of it as equivalent to a Captive Insurer model.  If you have the market & business knowledge and the technical skills AND you have the expertise to extract one and deliver with the other then it could well come out on top.

The alternative is to transfer some risk – to effectively take out an insurance policy; and that’s where a product based solution comes in. The product will have the market support, it’s already captured the core business requirements, it has the configurability, the support and performance that you need – and the provider is standing behind it and covering that long tail of risk to your core business functions.

If you’re changing your business and planning on implementing solutions to support that: Which risks are you going to carry within your organisation? And where‘s your insurance?