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Core Technology for Policy and Claims

“The shift of applications and infrastructure to the cloud can free up budget dollars for investment in change and innovation initiatives aimed at influencing top-line growth.” -Deloitte

In the 1997 personal finance best-selling book Rich Dad Poor Dad, Robert Kiyosaki argues that many people too often mistake assets for liabilities and vice versa. Assets uniquely add to income while liabilities increase expenses. For the wise, assets create an income stream; that’s not to be confused with common investments like the family home, which act more like expenses given the required monthly mortgage payments. Similar to homeowners, insurers need to ask themselves whether their core technology systems truly act as the assets they are meant to be.

Historically, insurers have invested in homegrown, heavily customized back-end systems and infrastructure that have been seen as essential to business outcomes. While they certainly are critical for the policy, billing, and claims administration functions they serve, the increasing costs associated with their maintenance have them looking much more like liabilities than the assets they are meant to be. Many insurers face challenges associated with costly legacy maintenance, including the skilled IT labor to perform the updates, patch, and implement security required. Further, outdated software versioning, incompatibility issues, data silos, and compliance shortfalls add to the overall cost.

Deferring the cost of ongoing maintenance is not to be overlooked as a significant strain on the business. According to Deloitte, “The value of routine software support and maintenance cannot be underestimated nor should the risks associated with allowing the core administration platforms to lag and fall out of release support. The past will eventually catch up with those who have neglected to maintain current applications. The costs to upgrade or replace systems increases exponentially after as few as three years of software neglect.”

Given the heavy cost of maintenance that accompanies traditional on-premises and associated private cloud-hosted systems, it’s no surprise that SaaS cloud platforms are widely recognized as one of the more transformative technologies available. Some even go so far as to say that the cloud is the most significant tech trend impacting P&C insurers today. In the quest for the best use of IT budgets, insurers are exploring the strategic need for a fundamental shift in their IT operating models and cost structures.

Fueling top-line revenue growth

When evaluating core platforms, it is critical to know and understand in advance the long-term total cost of tech ownership. When comparing cloud delivery options, the net present value of a SaaS subscription is generally lower than other private cloud options because the SaaS provider virtually eliminates the cost of maintaining software. Beyond the face value in cost savings for maintenance expenses, IT budgets unstrapped by legacy system care can focus on innovation that directly impacts revenue generation. 

Innovation investments can allow CIOs to contribute directly to top-line growth. But because today’s innovation investment can become tomorrow’s operational expense, it’s critical to understand in advance the long-term total cost of ownership of investments in innovation.” - Deloitte 

Multi-tenant SaaS cloud platforms go beyond table stakes cost savings

According to IBM, the real differentiator for core technology is not necessarily the systems themselves, but rather what the insurer can accomplish with them, including launching innovative products, quickly entering new markets, or improving service levels. 

Multi-tenant SaaS models are particularly adept at maximizing insurer value. For one, they help shift system costs from fixed to variable, allowing the utmost in flexible scalability as the organization grows. The multi-tenant SaaS cloud platform also adds value through common tenancy. The cost for new developments and innovation is shared by all tenants. All tenants have the latest developments, upgrades, and feature enhancements, and all benefit from the updates, upgrades, and new features developed — no tenant is left behind. 

In the end, however, the choice of a cloud platform is about an insurer’s expected business outcomes. Multi-tenant SaaS platforms enable insurers to:

  • Deliver on objectives faster and with a lower cost of ownership
  • Simplify and streamline infrastructure and core insurance processes 
  • Enable the core itself to become one part of a broader infrastructure integrating front- and back-office elements, sharing data, and eliminating silos
  • Scale operations to address business risks and opportunities such as dips and spikes in demand for products and services and to manage costs where capacity is not required to limit the bandwidth used on off-peak days, months, or seasons 
  • Create application programming interfaces (APIs) that make it easier for insurers to incorporate plug-and-play, segment-specific functionality onto a more general cloud foundation 

The quest for the best use of IT budgets is enabling insurers to go beyond the table stakes cost savings and efficiencies to accelerate their digital transformation, leverage data and technology, manage talent, engage employees in the digital journey, and stay relevant to customers and insureds. 

To read more about selecting the right cloud platform, download our eBook detailing the critical differences between various cloud technologies.
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