In the last two years, software-as-a-service (SaaS) technology has established significant inroads into the normally cautious global insurance sector, with at least one-third of all insurers adopting it. SaaS adoption is now poised to move beyond horizontal support functions and become increasingly embedded in core insurance functions. However, concerns around compliance, reliability, and building a robust business case linger, slowing the potential impact of SaaS on the insurance industry.
A recent Ovum study shows that the level of SaaS adoption among insurers is remarkably consistent across both the life and non-life sectors. Larger insurers have slightly higher adoption levels, driven by greater deployment opportunities across their larger application ecosystems.
Unsurprisingly, early SaaS uptake has been for horizontal and collaborative-focused functions, with the majority of insurers’ email, backup/archive, and business continuity systems now being supported by SaaS. More significantly, SaaS is increasingly being adopted to support activities that have traditionally been seen as core and business-critical. The top-three core functions for which insurers are starting to use SaaS are policy administration, regulatory compliance, and customer services. Enthusiasm for SaaS is strongest among carriers in North America and Asia-Pacific, with over one-third expecting to significantly increase spend on SaaS in the next 18 months.
However, the difficulty of developing a business case in support of SaaS is a one of several barriers to wider adoption, and this is an issue in all the regions surveyed. A strong element of any business justification for SaaS to date has been the potential operational cost saving. This has gained strong traction in an environment focused on reducing IT spend.
Less emphasis has been placed on the more intangible but strategically more important benefits, such as improving the ability to launch new products, enter new markets, add new processing capacity, and respond quickly to market opportunities.
Ovum believes that issues with business case development will be overcome in the next two years, particularly as the Ovum survey revealed a positive correlation between insurers that are already significant adopters of SaaS and those that expect to see a significant increase in spend over the next 18 months. This suggests that early adopters in the sector are increasingly confident with the technology and are realizing a broad range of business and cost benefits, which are accelerating adoption within the organization.
The Current and Future Role of SaaS in the Global Insurance Industry, IT0004-000417 (December 2014)
Charles Juniper, Senior Insurance Analyst, Financial Service Technology
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