This issue of ITA Pro is focused on the future; specifically what we see happening in the insurance technology space in the next five to 10 years. What follows is
my contribution to the conversation, as usual focused
on core-systems issues.
A Cloudy Outlook
At a recent IASA session an audience member asked
the panel I was on how much longer his company
should wait to gain maximum feature/function benefit
from acquiring a new policy administration system.
The implied question was: What is the next big thing and what
will we miss out on if we buy now?
The general response from both vendor and carrier panelists
was policy administration systems have matured to the point
where changes in the next five to 10 years will probably be incremental rather than fundamental so there is nothing big to wait for.
I generally agree, but one thing which is absolutely going to happen
and is already underway is the move to the cloud. For the purposes
of a general conversation like this we can talk about Software as a
Service (SaaS) and cloud deployment as one and the same trend.
The cost of acquisition is still too high for core insurance
systems. The subsequent implementation not only costs too
much but also takes too long. One way of reducing these costs
is to purchase and deploy in the cloud. All the recently arrived
vendors in our vertical are offering cloud/SaaS solutions. Interestingly, the most successful current core-system vendors do
not all provide cloud or SaaS options, suggesting that the next
wave of vendors may be arriving in our market.
Of course neither cloud nor SaaS matter much to the end user.
These are deployment options, which offer financial and facilitation
benefits rather than functional upgrades, but for a small to medium-sized carrier a multi-tenant, cloud-based solution may be the
financial difference between acquiring a new system or not.
The deployment of cloud-based solutions will also create
financial pressures on the current license-based vendors. It
seems inevitable that over time—especially as we get past the
perceived privacy and security issues involved—cloud deployments will become the default option.
In this sense cloud technology is a game changer and a
major market-disrupter. The cloud may also change the ways
vendors price and sell their solutions. The advantage for the
carrier is a pay as you go arrangement which minimizes the tra-
ditional upfront cost of software acquisition. The advantage for
the vendor is they create a reasonably predictable and continu-
ous revenue stream, obviating the boom and bust finances that
result from upfront license fees.
Big Foot(print), and Getting Bigger
What will the insurance carrier business community get out of ven-dor-written core systems over the next five to 10 years? The obvious
answer is more. More functionality both in terms of breadth and
depth. One development I have watched in recent years has been
the constant growth in scope and depth of vendor solutions.
The core insurance functions—policy, billing and claims—have
long been table stakes in this competitive market, but now we increasingly see document management solutions, product content,
data warehousing, and imaging and workflow capabilities are
moving onto the list of commonly available core system features.
The newer wave of functional extensions includes a major
push into mobile deployment, the customer deployment of
configuration studios and ever broader integrations with
third-party data sources. Given the relative maturity of back
office system functions and the need for core systems to create
competitive advantage, the focus now is more on the support
and facilitation of the sales process.
An instance I recently heard of is what one vendor calls
Automated Underwriter Investigation—the ability of an
underwriter to initiate an Internet search for information on a
prospective insured at the click of a button, and receive, analyze,
and store relevant information.
Another question which is worth considering is what the carrier
community will be focusing on in the next five to 10 years with
reference to core systems. If we look at the past few years the
dominant activity has been core systems modernization—the
Five Predictions for Insurance Technology
Here’s what the insurance industry can look forward to in the year 2020.