When it comes to software, the property and casualty insurance industry has been living in the past. Many insurers rely on clunky, decades-old proprietary legacy systems that lack sophistication and often lead to overpayment on claims and customer attrition. As insurers look to shore up operational efficiency and data integrity, IT spending on core software applications is set to grow to nearly $11 billion by 2020 from $8 billion in 2015, according to research firm Gartner. Guidewire Software (GWRE) has emerged as the global leader in replacing these legacy systems with its full-feature core application suite, which manages claims and the entire policy life cycle.
Guidewire’s applications are scalable to the largest insurance organizations in the world, and its suite is deployable either on premises or in the cloud. The company has doubled its customer total since 2012 to 260, with 162 customers live. Chief competitor Duck Creek had just 31 live customers at the end of 2014. Guidewire models its pricing based on the amount of premiums written and processed over its applications and has relationships with more than 25 of the roughly 55 global Tier 1 insurers, yielding a strong recurring revenue base.
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Rodney Nelson does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.