Build vs Buy: Reimagining the path to value
5 minutes
When it comes to pricing transformations, the foundational decision of whether to build or buy is often a defining moment for insurers.
Pricing Transformation: Why insurers are reimagining the path to value
Across the insurance industry, transformation of pricing and actuarial functions has emerged as a priority. The motivations are clear: enable actuaries to collaborate more closely with underwriters, equip them with the right technology to price accurately and profitably, and empower teams to develop, maintain, and deploy pricing models at pace.
However, these ambitions can rarely be realized without rethinking both the actuarial-underwriting operating model and embracing modern technology. Today, artificial intelligence (AI) is no longer just a buzzword—it’s powering real world use cases that are reshaping how actuaries work every day.
The True Cost of Making The Wrong Choice
Each year, insurers invest millions in pricing technology transformation. Some opt to build solutions in-house, while others turn to third-party vendors. Increasingly, it’s not a binary choice. The market now offers a spectrum of options, each with different levels of configurability and integration.
Finding the right solution is not a simple process, and often depends on the complexity of the problem scenario you’re trying to solve for. For instance, at hyperexponential, we’ve supported insurers in evaluating hx Renew, our pricing and underwriting platform, against hundreds of evaluation factors, highlighting both the sophistication of today’s evaluation processes and the growing pressure to get this decision right.
The Hidden Costs
Total cost of ownership is often underestimated. Insurers must weigh not just initial investment, but also ongoing maintenance, integration, upgrades, and the “hedging” costs associated with technical debt or unexpected issues. Time to value is critical: what’s the opportunity cost of delayed delivery or slower model deployment? And, crucially, what’s at stake if nothing changes?
Speed to Impact
Ongoing maintenance often demands more time and resources than expected. Internal projects may overlook the unplanned effort required for fixes or integration. Underestimating this is a common pitfall for those new to managing complex technology products. Internally, it’s essential to ask: what are your team’s other priorities, and how likely are delays?
From a vendor standpoint, the configurability and interoperability of a platform are essential. How quickly can a solution deliver meaningful results? Research by Elixirr suggests that a “build” approach can take 3–10 years, whereas a “buy” route can generate impact in just 1–2 years.
Efficiency, Delivered
While building internally may promise greater control, today’s leading platforms offer extensive customization and integration capabilities—delivering impact and freeing up IT resources for higher-value work. Portfolio management and data enrichment tools can now streamline workflows and multiply efficiency.
Our experience shows up to 70% of hx Renew’s value comes from capabilities beyond the core rating engine.
Optimization: Expertise Matters
More customization doesn’t always deliver more value. As Elixirr notes, “Constant access to software experts is pivotal to success.” In-house builds often limit access to a wider breadth of expertise, increasing risk and lowering the odds of long-term success.
Avoiding Tunnel Vision
A narrow focus—such as building just the pricing engine—can mean overlooking critical adjacent capabilities. True value comes from a holistic approach, encompassing data ingestion, model management, governance, document generation, and simulation tools. Failing to anticipate future requirements risks building systems that quickly become unfit for purpose.
Regardless of whether you build or buy, establishing and controlling the scope of your project is essential. It’s not uncommon for large-scale transformation projects to spend years battling unforeseen challenges, wonky legacy tech integrations and infrastructure issues. Aligning on a clear brief, scoped tightly enough to deliver core value quickly but built with adaptability and flexibility in mind, is critical to successful transformation delivery.
A Framework for Smarter Decisions
Leading insurers rarely spend less than a year evaluating pricing solutions—and with good reason. Selecting the right solution to achieve your target operating model is mission-critical. We routinely see evaluation matrices spanning over 100 factors.
Discipline is what separates years-long projects that never launch from those that deliver tangible results in months. A robust evaluation approach includes:
Strategic Planning & Business Case Development
Every transformation starts with a clear, evidence-based business case:
Define drivers of change
Quantify inefficiencies
Assess risks
Gather requirements across all stakeholders
Describe the target operating model and future-proofing needs
Clearly outline roles, responsibilities, governance, and model ownership
Market Intelligence & Vendor Exploration
Success depends on understanding both available solutions and potential partners. This is about finding a platform and vendor aligned with your operational reality and strategic aims. Build a comprehensive set of evaluation criteria, considering:
Rating development environment
Capabilities for handling complex algorithms
Version control and rater management
Integration with core systems
Flexibility for underwriters
Performance and scalability
Rigorous Evaluation
Move from first impressions to hands-on validation. Narrow your vendor list, focus on finalists, and prioritize:
Detailed evaluation criteria
Demo outcomes and alignment
Due diligence and pilot testing
A disciplined, multi-stage process is the key to selecting a platform that truly aligns with your objectives and delivers long-term value.
Build vs Buy: A Strategic Analysis
Choosing between building in-house or buying a third-party platform is a pivotal decision. It means weighing not only upfront costs, but also long-term capability, total cost of ownership, risk, and dependency.
Building in-house can offer control, but often at the expense of speed, flexibility, and future innovation.
Buying leverages vendor expertise, R&D, and market insight, accelerating time-to-value while reducing operational risk.
The market has decisively shifted away from “build everything” towards strategic partnerships, with vendors recognizing that maintaining a competitive edge increasingly relies on leveraging best-in-class technology.
The Bottom Line
There’s no one-size-fits-all answer. The right path for your pricing transformation isn’t about choosing “build” or “buy” - it’s about running a rigorous, evidence-based process that brings every factor into view.
The market is moving quickly. Insurers who invest the time and discipline up front - challenging assumptions, evaluating rigorously, and stress-testing solutions - are the ones who unlock real value, both today and as their needs evolve.
