P&C insurers favor cloud for core system transformation
Policy administration systems (PAS) replacements and expansions remain top of mind for property/casualty insurers. Carrier goals include: advancing business intelligence and analytics capabilities, improving customer and distributor service, and increasing operational efficiencies. In order to reach these goals, insurers are investigating and considering the impact of several trends upon core systems: the increase of SaaS/cloud, the rise of InsureTech, advances in microservices, and compliance requirements around new payment methods.
Increasingly, insurers are willing to consider or implement core PAS in the cloud through a Software-as-a-Service (SaaS) model. The adoption of cloud for ancillary services has risen in the insurance industry, and within the past few years the trend has expanded to include core systems as well. These numbers are expected to rise even more now that some high-profile Tier 1 insurers are migrating to a cloud model.
While insurers may not be moving their core books over to the cloud from the mainframe, Novarica expects that 50% of insurers will license a PAS for new books of business though a cloud-based or partially cloud-based approach within five years. Many vendors and insurers are using different but overlapping definitions for hosting and SaaS as the line between the two grows increasingly blurry.
As the majority of IT budgets are dedicated to PAS and the surrounding core components, insurers need to keep these trends in mind when considering PAS providers from the increasingly rich vendor market. While challenges still exist with conversion and with managing overall project risks, insurance carriers are realizing benefits in efficiency of operations, improved functional capabilities, and better data management, which are often cited as drivers for PAS replacements and expansions.
Our most recent Novarica Market Navigator, Property/Casualty Policy Administration Systems, provides detailed profiles of 42 vendor solutions with information on each of the vendors’ capabilities, technology, and market position to help insurer CIOs understand their options in the marketplace.
This blog entry was reprinted with permission from Novarica.