Canadian Underwriter
News

Aite Group introduces vendor evaluation framework, p&c insurance transforming


October 18, 2017   by Angela Stelmakowich


Print this page Share

Aite Group has introduced a proprietary vendor evaluation framework that the global research and advisory firm reports will serve as an actionable guide for market participants looking for viable third-party vendor solutions and services.

“I think the biggest problem for financial institutions is getting objective advice on which third-party vendors to choose,” Sang Lee, managing partner of Aite Group, suggests in an email to Canadian Underwriter. “As a lot of the vendors in the financial technology space tend to be private companies, even getting basic information could be tough,” Lee points out.

Developed by the company’s research design and data (RDD) team, the Aite Impact Matrix (AIM) analyzes participating vendors – leading vendors in each financial technology that Aite covers are invited to take part – and identifies market leaders.

Vendor information comes primarily from participating vendors, their clients and additional interviews with potential technology buyers in Aite’s industry network, reports the global firm focused on the financial services industry.

Related: Many companies need to beef up vendor risk management programs: U.S. study

AIM bases its vendor evaluation on four key components:

  • vendor stability – considers, for example, financial stability, risk management and management quality to determine whether or not a given vendor has the basic foundation to compete and sustain its overall market presence;
  • client strength – looks at, for example, both the number and quality of clients to measure if a given vendor’s client base is sufficiently large and diversified to sustain the vendor’s competitiveness and growth;
  • product features – explores, for example, key functionality offered to help identify whether or not the vendor offers enough key features and functionality to remain competitive, as well as measures its ability to meet customers’ business requirements with its out-of-the-box capabilities; and
  • client services – considers, for example, level of support for clients to assess the nature of each vendor’s customer support, level of satisfaction it invokes among customers, and their assessment of this service relative to its cost.

By incorporating many aspects of a vendor’s essential characteristics for success and growth, the matrix will allow “financial institutions to objectively compare potential vendors, cutting through the hype of marketing materials and technical specifications,” notes an Aite statement issued Tuesday.

The vendor evaluation framework “scores vendors against identical criteria and can produce customized recommendations based on specific client needs,” Sarah Fitzsimmons, a senior analyst on the RDD team and one of the framework’s architects, says in the statement.

This can help solve two of the hardest aspects of vendor selection for financial institutions, Fitzsimmons suggests, namely “comparing vendor-supplied data and applying the information to financial institutions’ specific challenges.”

Asked how important vendor evaluation is in light of the change currently unfolding in insurance, Lee tells Canadian Underwriter that the matrix “was really developed with the intention of keeping track of transformative markets, and certainly p&c insurance would be one of those areas.”

The insurance industry, as a whole, “is currently undergoing major technology and systems transformation.”

While different insurance organizations – major carriers, regional carriers, agencies, etc. – “are all going to go at their own pace and down their own path,” Lee reports, comprehensive vendor evaluations can help “support this industry-wide transformation.”

AIM takes into consideration not only basic technology, company strength and customer feedback, but also “digs deeper into the solutions ability to overcome the major business challenges these organizations are facing,” Aite notes.

“It is important to the industry to understand how these solutions can help support their goals as an insurance organization, and how well it can help them to overcome the issues and challenges they are facing today and moving into the future of their business,” Lee explains.

“The AIM framework supports a very methodical, governed and quant-driven approach to vendor selection,” David O’Connell, senior analyst for Aite Group, explains in the company statement.

Beyond enabling system purchasers to quickly identify who they should buy from and why, “they can also evaluate their particular needs and preferences and, quite possibly and smartly, pick the right vendor for them,” O’Connell suggests.

“We definitely see in the debate between build versus buy, more financial institutions are leaning towards the buy option,” reports Lee. “At the end of the day, financial institutions are looking to refocus on their core business and leaving the technology to those specialist vendors that can provide the best possible solution.”

Focused globally, but depending on the specific market being covered, Aite Group reports it has used AIM as part of its work around commercial lending technology market and life insurance policy administrative platform markets.

“We have four more AIM studies that are live right now that will cover markets in retail banking and securities industry,” the company adds.

Related: Effective software vendor selection key to eSignatures benefits, broker forum hears