Barriers to Entry - Insurance Software Development Market
According to KPMG, the two largest barriers to entry in the insurance software development market are the high entry costs and regulatory oversight. Furthermore, data is considered to be is the lifeblood of the new order in the insurance software development market, and the lack of data for any software development company present a major barrier to entry in the market.
High cost of entry
- According to KPMG, the biggest barrier to entry in the insurance software development market is the high cost of entry into the market.
- A 2019 report by the UK government into Lloyds, a global insurance company, shows that it is more affordable for insurers to develop their software in-house than it is for them to purchase the software from third party developers, raising the costs of entry for the newly established insurance software development companies.
- Moreover, the reason why this barrier is so prominent in the insurance software development market is based on the fact that most insurance software development companies will choose to target mid-tier insurance companies, raising their costs due to the developers experiencing more risk indicators as they are targeting individual mid-tier companies rather than demographics of the whole market.
- The second-biggest barrier to entry in the insurance software development market, according to KPMG, is the regulatory oversight.
- The insurance industry is considered to be one of the highest regulated industries globally. This is why a low-code platform is considered to be the optimal foundation for the insurance software development market framework.
- This approach enables "a cross-enterprise approach to IT compliance activities involved in the regulatory oversight of corporate functions. Low-code gives insurers the speed and power to rapidly build applications, the agility to make changes, and oversight to maintain visibility into processes—while controlling IT spend."
Lack of data
- Third, any lack of data spotted in a company that is trying to enter the insurance software development market is projected to "create gaps and cause integration and process flow issues", which is why data is required to be assessed as an end-to-end process.
- Due to the fact that the insurers as an industry lack data, insurance software developers need to be able to provide data, including big data and machine learning, in order to generate models that will help insurers upgrade their outdated business models.
- Additionally, handling data is intricately linked with security issues, and compliance with different security standards when providing solutions to insurance companies can create an additional barrier to entry.