Wanted: Insurance Carriers to Lead the Charge on As-a-Service

Insurance carriers are torn between two opposing industry factors today:

1.     The need to get greater speed to market

vs.

2.     Historically being intensely risk-averse

Customers have increasing expectations for fast and personalized customer service. Insurance carriers feel the corresponding pressures for new innovative products, delivered quickly. However, due to rampant M&A activity, most insurers have fragmented backend technology platforms, several of which are aging. The sunsetting of old core administration platforms is a top-of-mind concern today, for both P&C and life insurance carriers. Yet, the nature of new investments—digital technology delivered As-a-Service—is where the risk-aversion surfaces and slows progress.

HfS sees a strong business case for the delivery of core operations through a BPaaS model, particularly in insurance, where processes are repeatable and mature, and there is a strong need for greater speed to market. We’re starting to see examples of As-a-Service enabling buyers to launch new products in a fraction of the time it used to take. However, these are few and far between. Several insurers that employ BPaaS delivery said in our HfS 2015 Insurance As-a-Service Blueprint Report that they have yet to see value for their investments in “modern and flexible platforms.” They do not have access to upgrades available to new subscribers.   

BPaaS needs a reinvention for insurance. It should expand from closed block processing to other operational areas such as billing and underwriting. The technical architectures should shift beyond on-premises or single-tenant private cloud deployments. And the business imperatives should move beyond cost savings to achieving speed to market.

• Insurance services buyers were among the first and most aggressive in pursuing platform-based BPO. The progress has almost come full circle now, with other functional areas such as HR (e.g., Workday) catching up and surpassing platform capabilities. Apart from cloud-based delivery, services buyers are increasingly expecting single code bases, with access to updates and new functionality pushed through a multi-tenant deployment and available to use at their discretion. Yet many stop short of committing to As-a-Service beyond a proof of concept. It’s time to move past the toe in the water and plunge into a new solution.
• Service providers’ policy conversion and maintenance type of BPaaS plays are commoditized, and the platforms are not broad or agile enough to effect the change needed in the next few years. As a result, new point solutions are coming to market (e.g., Billing-As-a-Service, Retirements-As-a-Service, and Worker’s Compensation-As-a-Service). We see these from some of the established service providers that are partnering with mid-size software vendors or developing in-house platforms (e.g., CSC, EXL), as well as others like Mphasis and Tech Mahindra that are using As-a-Service as their leading entry point into insurance. Service providers need to keep exploring these gaps in core platforms for point solutions and modernize their own aging platform portfolios.
• Software vendors are realizing the opportunity to deploy over multi-tenant cloud while still offering significant configurability, and will partner with service providers on bundled solutions for a competitive edge.

The bottom line is that the next five years will need strong leadership from service providers, software vendors and services buyers alike to bring the vision for Insurance As-a-Service to life. We expect progressive insurance carriers to pull away from the competition significantly by achieving simplification in their operating models. Service providers have to help them realize these benefits—what we at HfS see as “a genuine blending of people-plus-technology that helps us inch towards an ultimate destination of services value accessible on tap.”