October 19, 2012

Industry observers’ collective eyebrows were raised, first, in Jan. 2011 when Guidewire (Foster City, Calif.) announced Nationwide had selected the vendor’s ClaimCenter offering, and then a little higher with last month’s news that the Columbus, Ohio based tier-one carrier had become a Guidewire InsuranceSuite customer. With today’s news that The Hartford will use ClaimCenter to replace multiple legacy systems, it is clear that Guidewire has unequivocally broken the Tier-1 barrier to the implementation of packaged software successfully implemented at smaller companies.

Donald Light
Donald Light, Celent

The Hartford characterized its choice of ClaimCenter to “make significant enhancements to its claims platform to better serve customers and achieve higher quality claim outcomes and greater efficiency overall.” The carrier statement affirmed that The Hartford will replace multiple claims systems currently in use with help from systems integrator Cognizant, a member of Guidewire’s PartnerConnect certified integration partner scheme.

"Today’s announcement by The Hartford represents another step forward for the replacement of legacy core systems in Tier 1 insurers by package systems," comments Donald Light, a Palo Alto, Calif.-based senior analyst with Celent. "Traditionally Tier 1 insurers have preferred to renew or to wrap and extend their home built legacy systems which support large volumes of business. Claims is the area which has seen the most acceptance of package systems, but there are signs of some acceptance in other core areas, such as policy administration, as well."

Counting the Nationwide relationship and Auto Owners Group (Lansing, Mich.; nearly $5 billion in annual written premium), Guidewire now has major implementations at three of the top 18 P&C carriers.

Other core system package software solutions have had success in the top tier (defined as $5 billion in premium and above), such as MajescoMastek’s STG billing solution. In other cases, systems available as packages were more or less built for Tier 1 companies to be marketed as packaged software to other companies. In others still, tier one companies may have implemented software — including Guidewire’s offerings — in a limited manner that correlates better to lower-tier implementations in terms of written premium processed through the system in question.

Karen Furtado
Karen Furtado, SMA
"What’s unique about Guidewire’s solutions is their ability to scale from the most complex business to the most straightforward business,” asserts Karen Furtado, a partner with Boston-based SMA. “Packaged core system vendors typically market either to Tier 1 or Tier 2 — not both. Guidewire has developed software that can be configured to meet the end-to-end needs of any type of customer — that’s their home run.

The Hartford win shows that Guidewire can increasingly compete in the global Tier 1 insurance industry just as effectively as it has with smaller carriers, says Stephen Applebaum, a Chicago-based senior analyst with Aite Group (Boston). “It also marks the readiness among Tier 1 carriers to begin seriously considering an enterprise-wide, single vendor, core system platform strategy, even if it may be sequentially implemented,” he adds.

Karlyn Carnahan
Karlyn Carnahan, Novarica
Taken with the Nationwide announcements, Guidewire’s latest success shows that even the largest carriers are looking for simplicity in their infrastructure, according to Karlyn Carnahan, a San Francisco-based principal with Novarica (New York). “Scalability, flexibility, and the ability to handle multiple lines of business are all challenges that the largest carriers have typically had to address through multiple software solutions,” Carnahan explains.

Aite Group’s Applebaum stresses that Guidewire’s latest win is as much about the maturity of Guidewire as a vendor as for the appetite of the largest carriers for simplified technology environments and a willingness to tap packaged software offerings. He balks at answering whether the development is better characterized as a “David and Goliath” moment or a “David becomes Goliath” moment, but says this latest success has definite consequences for the software market: “The fact that a top tier carrier like Hartford, now embarking on a total business transformation, has selected Guidewire for not one but multiple core system replacements virtually assures that Guidewire will be on the short list of every P&C carrier considering core systems replacement, regardless of size or line of business,” he says.

Stephen Applebaum
Stephen Applebaum, Aite Group
“The factors driving this success go well beyond just product features and functions, architecture, integration and support capabilities, cost benefit calculations and technology competencies,” Applebaum adds. “They go to the very operating philosophy and company culture of Guidewire, the quality and dedication of its people, the fierce focus on customer satisfaction in every sense of the word and the confidence they elicit in their future solution potential that goes well beyond existing capabilities.”
ABOUT THE AUTHOR
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek ...