Ovum Predicts SaaS (Software as a Service) is Poised to Transform Insurance Industry
June 11, 2015
“Technology laggards”, “slow followers”, “prime for the taking” and a lot of other less-than-kind words have been used in the past few years to describe the legacy providers of all lines of insurance in all parts of the world in regards to their adoption of new technologies. In fact, if you are in the insurance industry, the dire predictions of how digitally adept upstarts are about to eat your proverbial lunch thanks to the cloud, social media, mobile apps and advances in business process automation are going to totally disrupt the market and put your company on life support are likely to sound the boy who cried wolf too often. For this reason the latest analysis from research firm Ovum (News - Alert) is going to provide considerable food for thought.
As the headline says, Ovum’s latest research reveals that the use of SaaS (News - Alert) (software as a service) in the global insurance industry, a finding that is poised to significantly alter the future of how insurance claims are created and processed. What is interesting about the research is that for those who have decried the insurance industry’s less-than-enthusiastic embrace of SaaS (News - Alert), Ovum noted that at least a third of all insurers are fully deploying or trialing SaaS right now. In addition, they observed that despite a “significant minority” of insurers remaining cautious of SaaS (for regulatory, risk and reliability reasons) “there is almost universal agreement among insurance carriers that SaaS will have a significant impact on both the insurance industry and individual insurers within the next five years.”
Things are getting SaaSy
So with almost universal agreement of those interviewed that SaaS will be a market game changer, and sooner rather than later (the next 18 months being a big period of SaaS adoption), Charles Juniper, Principal Insurance Analyst at Ovum has provided three key recommendations for insurers to keep in mind as they begin their SaaS transformations.
SaaS strategies must incorporate benefits beyond just cost reduction. As with so many industries that have already moved to the cloud, the low-hanging benefits of cost reduction have already caught the attention of insurers. However, Ovum believes most cloud strategies in the insurance industry need to more comprehensively encompass the potential for organizational transformation. As Juniper says, “In planning their SaaS strategies, insurers must focus on the transformative role SaaS can have on their organization in the context of wider industry change. SaaS and cloud technology can play a critical role in supporting an insurer’s overall business goals and in supporting its wider ambitions whether that includes new products and services, regional expansion or entering completely new sectors.”
All insurers must plan to adopt SaaS within the next 24 months
“As SaaS becomes increasingly mainstream, all insurers must have a clearly defined and widely internally communicated strategy for SaaS and cloud. For the minority of insurers that do not have some level of SaaS strategy, it must become an urgent priority. They should not wait for the technology to mature further or for remaining issues to be completely resolved, as this delay will significantly reduce the benefits of adoption.”
IT groups should look to evolve towards a “SaaS broker” model
“One of the consequences of SaaS adoption is that the IT function of many insurers will need to undergo significant change in their role and structure, and this is likely to give rise to some challenges in terms of change management. In reaction to this, the IT function of insurers needs to evolve towards assuming a ‘broker’ role, bringing together an insurer’s wider business functions with relevant SaaS vendors – this change in role marks a distinct contrast to the more reactive stance of many IT groups currently.”
The second point about a sense of urgency and the use of the word “must” in regards to having a SaaS execution and not just a strategy plan certainly is an attention grabber. If nothing else you have to admire Juniper’s going out on a limb with this recommendation, and not exactly equivocate on the other two for that matter.
Given that what insurers really need to do is assure they have the functionality they require to achieve operational excellence and competitive advantage, where such functionality resides and how it is paid for would appear to be a matter of insurer choice and not a categorical mandate to go SaaS. As other industries undergoing roiling change have found out in moving to SaaS and the cloud, the path forward needs to be based on unique requirements looked at holistically with the goals being visibility, security, ease-of-use, vendor trustworthiness and ahost of key performance metrics to evaluate.
Yes, SaaS is going to be a part, if not an integral or dominant part of what insurance IT departments will rely on. However, the degree to which it is relied upon really does depend on where one is right now on technology investments, corporate culture, business objectives and a slew of other considerations. Given Ovum’s U.K. home, “cheeky” might be a better term than sassy. But whatever the descriptor the point Juniper is making about the speed at which the insurance industry is being transformed by the accelerating pace of technology and business model innovation cannot be denied. It is not a stretch to agree that a lack of proper investment in what are determined to be the right places will put incumbent suppliers at peril, and the time to act really is now. The good news is that it seems many in the insurance industry have gotten the message.