The insurance industry is undergoing a significant technology makeover, and the most prominent trend right now is the migration to cloud. In fact, according to Novarica’s latest “Insurer IT Budgets and Projects” report, 63% of insurers are looking to expand the migration of their applications to the cloud in 2019.
It took awhile for IT managers at insurance companies to be comfortable relinquishing control over data and applications. They’ve traditionally favored on-premises systems, making them solely responsible for maintaining the solution and all its related processes.
However, over the years, insurers have come to realize they are spending too much time and money in acquiring and supporting hardware and software. While “leasing” seems less ideal than “buying” for some insurers, SaaS cloud-hosted solutions offer similar experiences to on-premise without the hidden management and maintenance costs, and often come with a lower risk of security vulnerabilities. These solutions mitigate the chance carriers’ core system processes such as policy decision support, claims, and billing may become compromised due to poor or overlooked system maintenance issues. With so much data analysis and processing involved in day-to-day internal operations, a small issue can quickly snowball into a much larger problem.
A cloud-hosted solution typically is hosted by a service provider, allowing insurers to access those resources as much as they want at any given time. This means bypassing system maintenance, upgrades and avoiding costly IT backlogs. SaaS creates a much more agile environment to reap all the benefits of a digital overhaul with almost none of the infrastructure headaches.
Another reason insurers are flocking to the cloud is the rising demand from customers for flexible solutions that can cater to their ever-changing needs. In technology-driven industries, companies must be able to test products freely and observe performance, while avoiding the burdensome costs of iteration. A cloud SaaS environment stimulates this capability for insurers, allowing them to scale up and down as needed at no extra cost. Tech companies, including insurtechs, often adopt a test-and-learn approach to their business and insurers must do so as well to even the playing field. This is one of the reasons that on-premise private cloud options aren’t as ideal, because companies often sacrifice size and scalability in exchange.
Bypassing the risks and costs associated with on-premises systems seems like decisive victory for SaaS cloud deployment. However, only insurers who work with SaaS providers that are adept in the nuances of the commercial insurance space and boast reliable enterprise-grade cloud infrastructures will stand to gain the edge needed in this competitive space.
Insurers interested in learning more details about the benefits of a cloud-hosted SaaS solution can read my recent eWeek feature on the subject.