Unless something disrupts the process, typically the rich get richer and the poor get poorer. Isn't that how the saying goes? Well, the same can hold true in insurance: Traditionally, top-tier insurers have the revenues, investments and access to capital needed to acquire and implement modern and leading-edge technologies and business solutions. They also have the big marketing budgets to make certain everyone knows their brand and all of their insurance offerings, from products to service.
So, where does that leave the smaller or niche insurers trying hard to compete?
While there is no single silver bullet that levels the playing field across the board, using a Software-as-a-Service (SaaS) implementation and deployment model can help. SaaS allows insurers to transform internal core solutions with ease. Plus, it creates an underlying technical environment that provides for a more nimble company. As a result, smaller insurers absolutely can compete with larger industry players.
SaaS allows insurers access to current insurance solutions and technologies without the capital investments and overhead involved in buying and maintaining new systems. Much like renting an apartment or leasing a car, in a SaaS situation insurers are paying to use leading insurance software. Further, the software is often run on a robust hosted environment, as opposed to an insurer's servers, and backed by service level agreements (SLAs) that mean there's one less headache to worry about. Once contracts are signed, expectations are set and trust levels are established between vendor and insurer, IT departments can rest easier, knowing they can quickly leverage cutting-edge expertise, knowledge and capabilities to their advantage.
By now, most insurers are familiar with the basic tenets of SaaS, which uses out-of-the-box capabilities, templates, industry interfaces and more to streamline upfront costs and reduce the typical time required to implement modern core insurance systems. SaaS also gives insurers a pricing model that has certainty and predictability built in on a monthly basis, something critically important for small, start-up or niche insurers. Moving from a fixed to variable cost model, as well as creating price and cost certainty and predictability, can help with planning and financial stability. Not to mention, there are reduced risks.
Beyond cost, the SaaS model provides flexibility and agility for insurers while offering significant business value. Insurers have access to leading business and IT professionals, which can help maintain manageable staff levels. Plus, SaaS software and hosting environments typically incorporate industry best practices. Most importantly, however, SaaS provides a future-ready platform that helps insurers quickly compete regardless of their size or focus.
In an increasingly competitive market with changing customer expectations and demands, time-to-market pressures for new products or services are fierce. Couple that with fast-paced technology changes--from mobile, telematics, social and more--and insurers are struggling to juggle it all, let alone secure the funding and resourcing required. As such, SaaS models are an increasingly attractive and viable option to the traditional on-premise, upfront cost model. As noted in recent industry research, there is a decreasing appetite among insurers for high, initial license fee agreements and customized implementations, making SaaS models more attractive. This especially is true for insurers with new start-ups, greenfield markets or niche units.
There are, of course, choices to be made. Most likely, smaller insurers will not have the appetite for implementing every new solution via SaaS. However, this even a partial move toward an overall SaaS model allows insurers to focus on the unique qualities that differentiate their companies in the market and expand their capabilities in areas that will make the most impact on the bottom line, and their customers.
So, what's the downside to SaaS? It's hard to say. While a house might increase its worth over time, a new car loses value the moment you drive it off the lot. There are many factors to take into account when making a new solution decision; pricing, deployment, operations, maintenance, upgrades and staff skills are but a few areas to consider.
While larger insurers likely will maintain a strong financial and marketing advantage, other insurers--whether small, niche, regional or start-up--can use SaaS to bolster their business capabilities. By enhancing agility and flexibility, and by focusing on key differentiators to create or build upon a growing and loyal customer base, SaaS can help insurers better prepare for the future. But, the best part of all is that through a cost-effective platform, they not only can level the playing field, they can raise the bar.
About the author: Denise Garth is the executive vice president of strategic marketing and industry relations, and global head of market strategy for Innovation Group North America. She can be reached for further comment or information via email at [email protected].