The insurance technology vendor world keeps making news, most recently with the announcement that Fiserv will sell a majority share in its insurance businesses. While the news came too early to validate arguments that Oracle's and EDS' recent moves would heat up vendor consolidation, it does reinforce the notion that investors have confidence that insurance companies will continue to spend liberally on technology.

In this case, the investors were not a large technology firm but a venture capital company. Trident IV, a private equity fund managed by Stone Point Capital, will invest approximately $540 million to gain a majority interest in Fiserv's insurance businesses.

More than a reaction to changing market conditions, the Fiserv/Trident IV deal represents an attempt to focus resources. Following its $4.4 billion acquisition of CheckFree, Fiserv is focused on consolidating its e-banking, payments and billing and related businesses. While retaining a very large minority interest, Fiserv can continue to benefit from what have been its insurance businesses while transferring their management to Stone Point, a company which specializes in the insurance industry.

"Fiserv's leadership has sold part of the group but not all of it because they believe in where the business is going and want to participate in that growth," comments Eddie Jones, Fiserv senior vice president of marketing and product management. "However, they have big issues on their plate and see the opportunity to bring in Stone Point Capital for their intense insurance experience. Bringing that kind of focus to the insurance business is seen as a big positive."

Insurance customers will now be dealing with an entity known as Fiserv Insurance Solutions Inc., but Jones notes that the company will rebrand in the near future.

The commitment of Stone Point/Trident IV, like that of Oracle, HP, et al., demonstrates the vitality of the insurance technology market and should bring further value to the industry. When it comes to particular customers of particular vendors, especially small customers of small M&A vendor roadkill, results may vary. However, on balance, entities pouring resources into competing for insurance customers is likely to do customers good.

"I see the stronger players, those which have the resources and wherewithal, adding benefit to the industry by providing depth of solutions, hopefully investing heavily in R&D and reducing the number of vendors insurance IT executives need to deal with," says Bill Jenkins, CIO of Penn National (Harrisburg, Pa.).

"Needless to say , these benefits depend on the acquiring company's long term strategy and philosophy. If they see such acquisitions as 'fast money' or as a 'cash cow' and do not look to enhance or invest in the future, they will end up reducing the number of competitors and could stifle completion and innovation," Jenkins adds. "Overall, I believe the benefits of the 'strong' outweigh the
negatives."

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