Cloud Technology Enables Small Insurance Carriers To Compete With The Larger Carriers

Date:   Thursday , October 13, 2016

In a traditional insurance systems project, companies spent significant time and resources acquiring software and hardware, installing the system, customizing the platform to fit their needs, building interfaces with third party providers, and testing and launching the system. Then, they needed to continually apply resources of staff, time, and money to maintain and upgrade the platform.

In contrast, cloud-based insurance business process management built on Software as a Service (SaaS) frees insurers from these tasks. SaaS solutions are fully configured and pre-integrated-ready to use in a fraction of the time of traditional installation projects and with a pay-as-you-go pricing model that any company can afford. These solutions are not stripped-down offerings: today\'s SaaS insurance systems go beyond the core of policy, billing, rating and claims to deliver all the ancillary functions required for true end-to-end insurance processing. This allows small and mid-sized insurers in particular to level the playing field with larger carriers, to respond quickly and nimbly in a rapidly evolving insurance marketplace, and to gain competitive advantage over their peers.

The advantages of cloud-based insurance business process management solutions fall into five key areas:

1. Low-Risk of Deployment, High Speed-to-Market

Traditionally, deploying insurance systems has been a major undertaking, requiring an army of internal staff and external consultants and many months or even years of customization, integrating, and installation of the platform. Long project times and significant customization significantly increases risk, and the annals of insurance project history are filled with stories of failed implementations.

In contrast, with cloud-delivered solutions there is nothing to install. Pre-built, pre-configured, and pre-integrated capabilities in SaaS solutions eliminate the risk of installation failure and allow carriers to see and test system functionality before they commit. On-demand, cloud-based systems also minimize risk by requiring no upfront capital outlay for new infrastructure or licensing fees, allowing insurers to \"try before they buy.\" Once an insurer is using a cloud-based insurance process management solution, the vendor assumes all the risk and responsibility associated with ongoing maintenance and upgrades.

Additionally, using SaaS enables insurers to quicken their speed to market. Cloud-based systems can be rolled out in a fraction of the time of on-premise systems, requiring only configuration to reflect a company\'s unique rates and rule parameters. By delivering software solutions faster than insurers can typically deploy them in-house, cloud allows companies to bring new products and services to market quickly and respond more nimbly to competitive pressure.

2. Lower TCO to Free Capital

Insurance companies spend about 5 percent of their written premium on IT systems. In addition to up-front licensing costs, on-premise installations require both initial and ongoing investment in the infrastructure to house the software and data on-site. On-premise insurance software requires multiple servers dedicated to housing applications and data. It requires investment in monitoring and testing tools, backup, disaster recovery, and networking, as well as potential investments in added physical and virtual security. In addition to hard-dollar hardware costs, these servers require space, utilities, and IT staff to maintain them.

Cloud-based solutions turn insurance process management into a regular, predictable operational expense. Rather than require large capital outlays, cloud allows insurers to pay as they go with a cost structure that scales up or down to the needs of their business. On-staff IT resources are no longer required to keep the infrastructure up and running, and companies can free up data center space and reduce cooling demands.

By moving to cloud, insurers can reduce their IT spend to 2 percent or less of their written premium. They achieve a significantly lower TCO over time and free capital to be used in other strategic areas.

3. Focus on Insurance, Not IT

The traditional insurance software model requires companies to focus significant resources on infrastructure, including establishing development, test, and production environments. Insurers need to commit staff and pay consultants to handle tasks related to system design, configuration, integration with internal and external systems, testing, tuning, and launch. These activities continue with on-premise systems due to maintenance and upgrade demands.

With insurance process management solutions delivered via the cloud, the task of deploying applications is handled by the provider. This allows an insurer\'s IT department to focus on higher-value activities that support business goals and frees internal resources to focus on core competencies and business-critical tasks.

4. Eliminate Upgrades and Maintenance Tasks

Traditional on-premise systems installation comes with high ongoing maintenance costs. In fact, Gartner estimates that the annual cost to own and manage traditional on-premise software applications can be up to four times the initial purchase price. One a system is live, resources are needed to maintain the production environment and ensure uptime. Disaster recovery, failover, and business continuity needs to be continually addressed.

With SaaS-based insurance process management, an insurer\'s IT staff no longer needs to test and install patches, manage upgrades, adapt to new APIs from third party vendors, monitor performance, ensure high availability, and so on. Instead, SaaS providers manage the entire upgrade process, new releases, and changes to APIs. This not only frees staff to focus on higher-value tasks, but also guarantees that a company will be always working on the latest and most updated version of the software.

5. Enhance Business Continuity and Disaster Recovery Strategy.

Traditional disaster recovery and business continuity practice involves buying and maintaining redundant hardware and storage that resides in a remote environment. In addition to the capital investment, this process requires regularly replicating production data on the recovery systems and keeping software in sync.

Cloud-based solutions provide built-in disaster recovery and business continuity capability. Also, cloud providers bear the burden of keeping up with technological changes as well as evolving security and compliance requirements. Critical systems are continually maintained and data is secured from both a physical and technological perspective without any additional cost to the insurer.


For insurers, the advantages of cloud-based SaaS solutions add up to remarkable speed-to-market advantage. By leveraging insurance process management solutions delivered via the cloud, companies can apply their limited resources to writing business and responding to opportunity, rather than maintaining applications and hardware. Cloud solutions allow insurers to throw off the shackles of legacy systems, level the playing field with the largest carriers, and gain access to the right technologies and rich functionality that will increase their competitive advantage and grow their market share.