Pol­icy sys­tems take to the cloud

Hosted en­vi­ron­ments and SaaS ser­vices make mul­ti­ple PAS de­ploy­ments more prac­ti­cal for in­sur­ers.

Digital Insurance - - POLICY ADMINISTRATION - By El­liot M. Kass

In what rep­re­sents a tip­ping point for the highly con­ser­va­tive in­sur­ance in­dus­try, most new pol­icy sys­tem de­ploy­ments have be­gun tak­ing place in the cloud. Al­though new PAS im­ple­men­ta­tions rose sig­nif­i­cantly dur­ing 2017, on-premise de­ploy­ments fell to their low­est level in seven years, ac­cord­ing to re­search by Strat­egy Meets Ac­tion. They were sup­planted by cloud-based de­ploy­ments, which this year will ac­count for an as­ton­ish­ing 59 per­cent of new core sys­tems, up from 31 per­cent of new sys­tems in 2015. While this is an in­dus­try-wide trend, SMA notes that it is es­pe­cially marked among smaller in­sur­ers with un­der $250 mil­lion in pre­mi­ums.

“Cloud de­ploy­ment is quickly be­com­ing a fun­da­men­tal re­quire­ment for dig­i­tal trans­for­ma­tion,” ex­plains SMA part­ner Karen Fur­tado. “To­gether with real-time an­a­lyt­ics, the cloud lets in­sur­ers con­sume large quan­ti­ties of both in­ter­nal and ex­ter­nal data, and in­creas­ing cloud adop­tion is part and par­cel of mak­ing the most of new dig­i­tal tech­nolo­gies.” “An in­creas­ing num­ber of in­sur­ers are will­ing to con­sider im­ple­ment­ing pol­icy sys­tems in the cloud via a Soft­ware-as-aSer­vice (SaaS) model,” agrees No­var­ica’s Martina Con­lon. “The line be­tween cloud host­ing and SaaS has grown in­creas­ingly blurry.” The SaaS model is one of two dif­fer­ent types of cloud de­ploy­ments that in­sur­ers are us­ing for their new PAS sys­tems. Both ap­proaches are in­creas­ingly pop­u­lar, but the pre­ferred op­tion is a sin­gle-ten­ant cloud en­vi­ron­ment that hosts

data from only one in­surer. With SaaS, data from mul­ti­ple in­sur­ers is pro­cessed within the same cloud en­vi­ron­ment. In­sur­ers are turn­ing to cloud de­ploy­ments for their pol­icy sys­tems to con­trol costs, take ad­van­tage of best-in-class com­put­ing fa­cil­i­ties, gain greater scal­a­bil­ity and to stay cur­rent with new soft­ware up­grades and APIs as they be­come avail­able. When speed-to-mar­ket is a pri­or­ity, cloud-based PAS so­lu­tions can be rolled out far more quickly, af­ford­ing in­sur­ers a fast track for launch­ing new prod­ucts or en­ter­ing new mar­ket seg­ments. Cloud-based sys­tems can also stream­line the adop­tion of new, datain­ten­sive tech­nolo­gies, in­clud­ing an­a­lyt­ics, ar­ti­fi­cial in­tel­li­gence and the In­ter­net of Things. These ad­van­tages have made it eas­ier for in­sur­ers to de­ploy more than one PAS, notes Fur­tado, with the shorter im­ple­men­ta­tion times prompt­ing

them to de­ploy mul­ti­ple sys­tems to ad­dress their as­sorted prod­uct re­quire­ments and di­verse lines of busi­ness.

Trade­offs

The fly in the oint­ment may be the trade­offs that come with a cloud-based ap­proach. “The newer PAS so­lu­tions have been de­signed for the cloud from the ground up and have flex­i­ble tech­ni­cal ar­chi­tec­tures,” con­curs Deloitte Con­sult­ing’s Amy Sher­man. “But they are also miss­ing a lot of the func­tion­al­ity that tra­di­tion­ally has been in­cluded with a pol­icy ad­min sys­tem.” Cloud-na­tive sys­tems, she says, gen­er­ally con­sist of an un­der­ly­ing data model that sup­ports pol­icy ad­min­is­tra­tion. But for ad­di­tional func­tions—such as billing or claims—the pro­gram usu­ally needs to be in­te­grated with an­other point so­lu­tion for that set of fea­tures. For the most part, Sher­man adds, these best-of-breed so­lu­tions have been brought to mar­ket by smaller ven­dors that only of­fer the one prod­uct, and she ac­knowl­edges that the

“From a tim­ing stand­point, some­times it sim­ply doesn't work for a car­rier to synch up its en­ter­prise PAS with a new prod­uct that they are try­ing to get to mar­ket.”

Karen Fur­tado, SMA

car­ri­ers who de­ploy them are tak­ing a risk by “plac­ing a bet on an up and com­ing provider,” While Sher­man sees many ad­van­tages to the best-of-breed ap­proach—es­pe­cially for midrange and larger in­sur­ers—she con­cedes that “There's some safety to be gained by go­ing with a ven­dor who sup­ports a full suite of ap­pli­ca­tions.” On the other hand, she ar­gues that even larger car­ri­ers can only ab­sorb so much new func­tion­al­ity at one time. If it takes them one or two years to im­ple­ment a new PAS, by the time they are ready to add ad­di­tional func­tions, new prod­ucts and tech­nolo­gies from other ven­dors will have al­ready reached the mar­ket, and “A best of breed ap­proach gives them much more to choose from.” More gen­er­ally, Sher­man says, the suc­cess or fail­ure of a new PAS de­ploy­ment de­pends less on whether it's a best-of-breed so­lu­tion or part of a suite and much more on the in­surer's strat­egy for pro­vid­ing “faster, bet­ter, cheaper in­sur­ance.” When im­ple­ment­ing any PAS so­lu­tion, she points out, “The car­rier has to avoid sim­ply repaving the cow path.”

Some of the newer PAS so­lu­tions al­low for ready in­te­gra­tion with dif­fer­ent tech­nolo­gies and can be re­con­fig­ured within sec­onds to sup­port a given in­surer's spe­cific re­quire­ments. But to re­al­ize the full ben­e­fits of these ca­pa­bil­i­ties, Sher­man says, the car­rier has to have a care­fully thought-out busi­ness strat­egy. “It sounds ob­vi­ous,” Sher­man ad­mits, “but there are very few in­sur­ers who take the time to work through what they re­ally need from their sys­tems. Such ef­forts,” she adds, “re­quire a great deal of or­ga­ni­za­tional for­ti­tude.”

Karen Fur­tado SMA

Martina Con­lon No­var­ica

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