Insurance systems M&A has suddenly heated up with three significant announcements this week: Insurity's acquisition of AQS, SAP's buying Camilion, and Applied Systems announced intention to acquire IVANS' P&C data exchange business. The first two reflected the importance of core systems to industry modernization; they also had in common the emphasis on ISO automation capabilities for commercial business, along with other significant industry themes — such as the importance of vendor scale and the carrier appetite for componentized suites. However, the Applied Systems/IVANS announcement deserves to be heard above the core systems market buzz.
News of SAP's planned acquisition of Camilion came hard on the heels of Insurity's announced acquisition of AQS, bespeaking a developing trend, suggests Donald Light, the Palo Alto, Calif.-based director of Celent's Insurance Group's Americas Property/Casualty Practice.
"'Click, click, click' — that’s the sound of more formerly independent policy administration vendors dropping into the product portfolios of larger solution vendors," Light jests. "[Yesterday's] announcement by SAP of its intention to acquire Camilion is another significant move—following rapidly after Insurity’s acquisition of AQS on Tuesday."
With the benefits come challenges, Light adds, stressing that SAP will need to communicate its plans for integrating Camilion into its existing product set. As in the case of Insurity's AQS acquisition, SAP will pick up Camilion’s North American base of insurer policy administration clients, giving the vendor a foundation for additional policy admin or end-to-end sales, Light notes. He draws attention to the more significant similarity:
In both cases, the acquirer is getting certain capabilities that augments what they already have. Significantly, both SAP and Insurity emphasized the ISO automation capabilities of their respective acquisitions—which will strengthen their commercial lines capabilities.
Novarica principal Karlyn Carnahan notes industry demand for vendors to support ISO products and implies that Insurity's and SAP's moves in that direction will increase pressure on other vendors to develop ISO capabilities. "The ability for insurers to quickly and easily extend base ISO products with proprietary product features without coding or help from a vendor could prove to be a significant differentiator for a carrier," she comments. "Those vendors who enable that speed-to-market and agility are likely to rise higher on a carrier’s short list of potential options."The occurrence of back-to-back core systems acquisitions naturally resulted in excitement across the industry, but the Applied/IVANS transaction is the more important by far, insists industry observer Chet Gladowski of Chet Glad Enterprises. Neither AQS nor Camilion are significant players, he argues: AQS failed to sign any new customers between Jan. 1, 2010 and June 30 2012; Camilion has only nine live implementations and hasn't seen a new win since the first half of 2012.
By way of contrast, Applied Systems is a dominant player in the agency automation space and will now have policy, billing, claims and reinsurance data from all carriers to/from competing agency systems, Gladowski argues. "Think about it — data to and from all agency systems will now move through Applied Systems," he says. "I wish I was a fly on the wall at the other agency system vendors today. I'm sure that they have many questions and concerns."
IVANS independence obviated certain security and privacy concerns and conferred a kind of third-party impartiality to its industry role, in Gladowski's analysis. Under the aegis of Applied Systems, IVANS assets could take on a newly competitive character, he suggests. "There are many products and services Applied Systems could generate through this data, giving Applied Systems a unique and dominant competitive advantage," he says. "I'm certain that we will hear assurances from Applied and IVANS but the question will come up."