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By Mark E. Ruquet,

Insurers can expect competition to remain intense for policy-administration systems without a major vendor to choose from in the near future, says Celent, a major consulting service.

In a 20 page report, “Deal Trends in Property/Casualty Policy Administration Solutions: North American Edition 2010,” Celent says insurers are served by 52 vendors offering 55 policy-administration system solutions, making it a highly competitive marketplace.

“The market for policy-administration systems in North America should remain reasonably strong for several more years,” says Donald Light, senior analyst with Celent’s insurance group and lead author of the report. “The features, functions, and usability of a broad range of packages will continue to present strong price, value and risk metrics to many insurers.”

The report notes that there were 229 deals for policy-administration systems during a two year period, 2009 and 2010. Celent says it estimates the level of “deals will increase slowly” from 117 this year to 127 by 2014.

The majority of these deals are small, approximately $2 million; that includes licenses, maintenance and out-of-pocket expense from the carrier to the vendor or third party implementation firm.

The majority of the purchasers are small carriers. A total of 45 percent were carriers with under $100 million in premium, while 3 percent of the purchasers were on the high end with $5 billion or more in premium.

The report notes the reason for this imbalance is that larger carriers are more apt to build their own systems or adapt their legacy systems for continued use.

With the expected competition, Celent recommends insurers have a “clear understanding” of their goals and strategies in why they are purchasing the system. The consulting service also says it is important to have a clear understanding with whom they are dealing with.

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