For insurance firms, SaaS modernizes fragmented, monolithic technology stacks

The Situation: Worldwide, decades of growth, acquisitions, and technology evolution created stacks of legacy technology, impacting insurance firms’ user experience and customer engagement. Redundant processes, workflow, data, and reporting have proliferated, creating bottlenecks, reducing customer satisfaction, and making it difficult for an insurance firm to offer new products or services. Today, the most important investment an insurance firm can make is modernizing systems inhibiting business value creation.

Investing in new software modernization is about improving how your firm delivers value to its customers

Adoption of software is on the rise in insurance. The HFS OneOffice Pulse Study, H2 2021, a survey of Global 2000 firms, indicates 34% of insurance firms are accelerating application modernization initiatives. The vast majority of these are front-office tools meant to enable their teams and partners to operate in a cloud-centric model with secure, web-first, and mobile form factors.

For insurance firm executives, the primary driver for investment isn’t the excitement about new technologies; rather, it’s the recognition that a poor employee experience is costing them money. It doesn’t take much to quantify a loss in revenue opportunities by looking at reports on claims resolution turnaround time, the underperformance of cross-selling additional offerings, or even new client on-boarding. A quick analysis often shows many of the issues can be traced to their teams’ tools to get their job done.

Unfortunately, the CIO is burdened by business leaders lamenting the layers of applications, processes, and data-entry points that create the bottlenecks limiting their success and lowering client satisfaction. Yet, they can’t fix these by updating decades of federated systems and customized software across solutions.

Instead, their goal is to deliver better experiences through software that is easier to use for getting to the right, contextualized product and customer information the first time, often resulting in conversations with their technology teams and services partners. At this point, the CTO must consider that more custom code may not be the correct answer. SaaS solutions may offer the solution needed at a fraction of the pain to adopt.

Adopting a SaaS-based front office creates opportunities for customer-driven innovations in insurance

CIOs should reduce and optimize code rather than invest in more custom code or integration across multiple applications and databases. And while they might need to retain some back-end systems, the front office should be taking advantage of off-the-shelf solutions that are easier to train, support, and deploy. Exhibit 1 shows that savvy insurance CIOs adopt SaaS to address all of these.

Exhibit 1: Insurance respondents focus on improving business value; adopting SaaS to replace legacy and custom applications improves support and data integration

Sample: HFS OneOffice Pulse Study, H2 2021, Global 2000 firms, n=600 (all) n=67 (insurance)
Source: HFS Research, 2022

Two large insurance firms briefed HFS on how they tackled these issues. We learned these firms made teams more efficient by modernizing existing tools with SaaS, improving their employees’ and customers’ abilities to get the information they needed to process claims, introduce new products, and adapt to an increasingly virtualized workforce.

Exhibit 2 shows that deploying SaaS solutions improves how individuals work together to solve problems and benefits product and process innovation. For example, as more teams work with real-time, accessible data, the resulting efficient information flow allows them to respond to customer needs. In addition, having access to correct information on a client or product makes it easier to deliver value and identify where bottlenecks are and how to address them. The result is better employee retention, more effective customer engagement, and more accurate data—all essential for an insurance firm.

Exhibit 2: SaaS is a tool that supports innovation by improving the usability and access to information needed to get the job done

Sample: HFS OneOffice Pulse Study, H2 2021, Global 2000 firms, n=600 (all) n=67 (insurance)
Source: HFS Research, 2022

Expect your services partners to bring SaaS and a cloud-native mindset as part of their solutions

The complexity of the average insurance firm’s systems drives the need for a thorough evaluation of software code, workflows, and data to determine the extent of rearchitecting they require. By using automated discovery and assessment tools covering core systems architectures, APIs, databases, and workflows, two firms worked with their partner to determine which legacy systems they could retain. They then decided where microservices or COTS SaaS solutions were best suited to replace existing front-end systems.

Modernizing with SaaS and microservices solutions by combining industry knowledge with SaaS partner relationships halved the time required to process claims. From a technology support perspective, more than 2 million lines of custom code were replaced, cutting support costs. Adopting COTS SaaS to provide a better employee user interface reduced duplication of work processes by more than 50% and improved decision time by 10%. One client estimates its modernization initiative equated to a savings of over $2 million annually in processing time and effort.

The Bottom Line: As insurance firms accelerate modernization efforts, they should seek partners that can bring domain expertise, SaaS partnerships, and software modernization capabilities.

Insurance firms are saddled with high technology costs, often resulting in the redundancy of data and workflows. This drives up the costs of technology teams tasked with supporting the business while driving down the experiences of employees and customers. Identifying the friction points between the back and front office systems and then modernizing these where the most value for the customer can be measured delivers advantages for all.