Insurance Software: Should You Buy or Should You Build?

Insurers exploring their software options are asking themselves the (potentially literal) million-dollar question: should we buy or build our company’s software apps? Unsurprisingly, there’s no clear one-size-fits-all answer, so let’s explore your options and help guide you in the right direction.

To keep up with disruptive insurtechs, you may be asking yourself whether your company should buy or build its technological innovations. This question is a good starting point in your efforts to remain competitive, but to make the best choice for your organization—and, ultimately, your customers—you need to go deeper and find company-specific answers to several more questions, such as:

  • How will the tech solutions we’re considering impact our core business?
  • How will these innovations differentiate us?
  • Do we have the resources, time, and budget to build solutions in-house?
  • In the event of failure, do we have a reliable support system in-house?
  • What kind of service level agreement (SLA) does the tech we’re thinking of buying have?
  • Is the solution scalable?

As you work your way through these questions, you’re likely to find the answer to the main question in a kind of middle ground—buying industry-specific tech, building company-specific solutions, and harmonizing them to function as a well-oiled virtual machine.

A short history of insurtech

Our retrospective on insurance technology kicks off with IBM software called Consolidated Functions Ordinary (CFO). Launched in 1962 and bundled with IBM hardware, CFO may have had a soporific name, but it offered insurers substantial time and cost savings. Prior to the software’s release, major insurers had the option of building their own applications on mainframe computers. While doing so, they routinely underestimated programming time and costs, which made up the bulk of computer system installation expenses, ranging from “one-third to two-thirds the cost of equipment rental.”1

With the introduction of CFO, buying software seemed to make more economical sense than building it. However, insurers soon realized the time and cost savings came with a price—the software leveled the playing field so smoothly it eliminated opportunities to gain a competitive advantage. To make matters worse, insurance software packages were complex beasts that were terribly challenging to implement and eye-wateringly expensive to execute.

As we fast-forward to the age of cloud computing, advanced technological frameworks, low-to-no-code platforms, and improved tools for data monitoring, managing, and analysis, we’re seeing a tendency to go back to building. Only now we’re not seeing the development of comprehensive insurance platforms; insurers are now developing specific platform components. Savvy companies are hiring external teams to handle this task, as their internal IT teams do what they do best and support the core business, rather than innovate or build new businesses.

Why you should (partially) build

Leverage Your Ecosystem

You have a strong and trusted brand, defensible customer relationships, and their mindshare—use all that to your advantage. You can take a fast follower approach and leverage the early adopters in your ecosystem to learn what innovations will create value for them now and in the future. Based on your findings, you can build apps that will benefit your customers and your company’s bottom line.

Stay agile

Software packages can hamper your company’s agility, allowing competitors to outpace you. If the tech you buy is keeping you from adapting to shifts in market wants and needs, building proprietary components from the ground up or on the foundation of a low-code platform can help you regain agility and meet new customer requirements.

Share corporate insights

Nobody knows your industry, where it’s heading, and how it can best serve customer needs than you. The innovations you build implicitly share these corporate insights, as they validate your deep understanding of customer needs and how to satisfy them. In this context, the apps you develop also help establish your company as an industry leader.

Customize more effectively

As IBM’s CFO software demonstrated, insurance technology providers build solutions that cover requirements you share with your competitors. In some cases, you may need features suited specifically to your company and its customers. To meet this need, you could build components that complement purchased software, rather than fully customizing or replacing it. This approach not only helps you differentiate your products and services, it also allows you to upgrade your system without having to contend with obstacles that often come with full customization.

Gain a competitive advantage

As we mentioned above, building proprietary components of your insurance software system can help you stand out from your competition. For instance, you could develop a custom app to give your customers on-demand or subscription insurance options to supplement software that only supports annual policies.

How to build insurance software

Know what you want to build

To start, determine what software you’ll buy, then decide which components you’ll need to develop. For example, you may want to create a customer portal tailored to meet specific customer needs. During the planning stage, be sure to future-proof your innovations so you can scale and upgrade them, and connect them with emerging tech when it comes time to do so.

Choose your tech wisely

Now that you’ve got your development plan, decide what you’ll build your solutions with. You have a vast array of tech stack options available to you, such as Cloud Providers, Back-End, Front-End, Design Tools, API Frameworks, Mobile, Web and IoT and how they work with your current IT infrastructure, or if your innovations will operate outside of your current technology environment, so be sure to consult with your IT team. You can also leverage low-code platforms for simple functionality. Most importantly, make sure you’re selecting technologies that play nice together.

Pick your partner

Chances are your insurance company isn’t a digital native. After all, you’re an insurer, not a tech company. While your in-house tech experts are great at supporting the business, their capabilities and capacity to innovate are probably quite limited. Fortunately, you can look outside your company to find a partner that specializes in developing solutions that can help you capture market share away from insurtechs that are disrupting your industry.

U+ can help your insurance company become a leader in innovation

The U+ Method can efficiently and effectively lead the development, implementation, and improvement of innovations in any sector. To date, we have used this method to bring 90+ products to market, creating over $1 billion in value for Fortune 1000 companies, including major insurers such as Swiss Re and AXA Insurance. Our success stories in this space include an online insurance product for Société Générale and a complete stack revamp for Columbia Insurance Group.


  1. Gordon Goodwin, "Technical Developments in EDP—Programming Methods," Proceedings of IASA. 1960, as quoted by JoAnne Yates, MIT Sloan School of Management, Application Software for Insurance in the 1960s and Early 1970s.

Let's talk about Insurance Software: Should You Buy or Should You Build?