The Insurance Industry’s Digital Dilemma
Let’s face it, modernization in insurance is no longer optional. The velocity of change, from AI platforms to cloud-native policy admin systems, is relentless. But how insurers modernize? That’s where things get murky.
Caught between the promise of innovation and the burden of legacy systems, leaders are staring down a deceptively simple question:
Should we build this ourselves or buy it from a vendor?
Unfortunately, the answer isn’t so simple. Behind this one decision lies a tangled mess of constraints—resource limits, talent gaps, tech debt, and executive expectations.
And without a thoughtful strategy, many insurers are left with a half-baked hybrid: tech that’s too custom to upgrade, too generic to wow, and too costly to maintain.
Start with Strategy, Not Shiny Tools
Before you even touch a tech stack or RFP, step back and ask:
- What is core to our competitive advantage?
- What’s a commodity we can outsource or streamline?
Here’s the rule of thumb:
Build when the process is core to how you compete.
You’ll want tight control, deeper customization, and long-term ownership.
Buy when the process is non-differentiating.
No need to reinvent the wheel. Use best-in-class solutions, integrate quickly, and move on.
This shift from tech-first to strategy-first is what separates thriving digital insurers from the rest.
When Does Building Make Sense?
Let’s dig deeper. You should consider building when:
- You need high configurability to match a unique business model.
- The solution needs deep alignment with internal workflows or user experiences.
- You want to own and evolve the capability over time.
- You’re protecting proprietary IP or business logic.
- You require agility beyond vendor roadmaps.
Example: If your underwriting process is a secret sauce that wins you deals, building allows you to preserve that edge and evolve it over time.
When Should You Buy?
On the flip side, buying is the smart move when:
- You need speed to market—like launching a digital claims portal fast.
- You want out-of-the-box integrations and tested workflows.
- You’re prioritizing security, compliance, and scalability.
- You have limited upfront budget for development.
- The capability isn’t a core part of your value proposition.
Example: Email platforms, HR systems, or standard claims intake modules? Just buy them. No need to DIY what won’t drive competitive advantage.
Common Pitfalls in Build vs. Buy
Even smart teams fall into these traps:
Build by Default
IT teams love control, but often underestimate the cost and complexity of maintenance. One custom tool today becomes tomorrow’s tech debt.
Buy Too Broadly
Executives get seduced by vendor demos, only to realize later that overlapping features and shelfware clutter the ecosystem.
Over-Engineered MVPs
Instead of a quick test with low-code, teams build massive systems that take months to validate.
Short-Term Wins, Long-Term Lock-In
Buying may solve pain quickly but can limit future agility, especially if you’re tied to rigid vendor roadmaps.
What High-Performing Teams Do Differently
Here’s how leading insurers approach this smartly:
Architect the Ecosystem First
They zoom out and understand their entire tech landscape, focusing on integrations and experience—not just individual tools.
Align IT and Business Early
Forget handoffs. Cross-functional collaboration from Day 1 leads to faster, better-aligned outcomes.
Ask the Tough Questions
Before diving in, they ask:
- “Do we really have the talent to maintain this?”
- “Is this innovation… or tech theater?”
- “Can we prototype with less commitment?”
These teams don’t just digitize, they strategize.
Use This Simple Framework
Here’s a cheat sheet to cut through the noise:
| Question | If Yes… | If No… |
| Will this directly impact how we compete or differentiate? | Build | Buy |
| Do we have internal talent to develop AND maintain it? | Build | Buy |
| Can we get to market 5x faster with a vendor? | Buy | Build |
| Will the vendor’s roadmap align with our growth? | Buy | Caution |
| Do we need to pivot often in this space? | Build | Buy |
No framework is perfect, but the clarity this brings? Game-changing.
What It All Boils Down To
Modernizing your tech isn’t about chasing trends—it’s about making disciplined, high-impact decisions.
Insurance companies that win in this next wave will be the ones who:
- Create clear frameworks for build vs. buy decisions
- Resist shiny-object syndrome
- Stay agile without giving up ownership
In a world overflowing with tools and vendors, your edge comes from discernment, not deployment.
FAQs
Q: Isn’t building always more expensive?
Not necessarily. While upfront costs may be higher, building can reduce long-term licensing fees, vendor lock-in, and give you more control over innovation.
Q: What if our internal tech team is small?
That’s a strong signal to prioritize buying for non-core functions—and focus your dev team on areas that really drive differentiation.
Q: Can’t we do a hybrid?
Absolutely. Many insurers succeed with a “composable” strategy—buying foundational tools and building the differentiators around them.
Ready to Make Better Tech Bets?
If you’re navigating your next modernization wave, remember: building and buying aren’t opposites, they’re options on a spectrum.
Make your choices with clarity, intent, and alignment—and you’ll avoid regret while gaining a real strategic edge.
