We expect that Claims Processing technology providers will merge with one another (P&C with Health & Life) as well as with Policy Administration technology providers to better serve insurance company customers as insurance M&A continues its rapid pace (See the Chubb / Cigna A&H deal HERE).
One hypothetical M&A example would be Solera (P&C) merging with AthenaHealth (Health) merging with Guidewire (Policy Admin). Such a three-way deal is unlikely, but this type of strategic tie-up makes sense insofar as scale is concerned. A vendor’s ability to scale with customers across the customer portfolio is critical.
- The reason this type of M&A activity has not occurred in previous years is that the margin profiles of P&C claims processors is significantly higher than Health & Life claims processors due to the complete lack of standardization on the Health & Life side. This lack of standardization can be addressed today through machine learning. Policy Admin is another ball of wax. Policy Admin companies carry the lowest margin profile of the three segments.
- The other variable that has changed in recent years is that most of the Technology providers are now owned by private equity. Thus, M&A activity could take place in the form of club deals without punishing a particular vendor’s public equity as so few vendors are public (Guidewire is the only public company of those mentioned above).