Insurance industry suffering from fragmented software landscapes: Ovum


With many insurers lacking integrated core software systems, instead relying on landscapes that are fragmented, inflexible and costly to manage, the industry is at a competitive disadvantage and vulnerable to compliance failures and new, more digitally-savvy competition, says a new report from Ovum, sponsored by SAP SE.

More than 40 per cent of insurance carriers currently use at least 11 different core operation platforms. While 42 per cent of insurance companies see an ‘integrated channel’ model as the optimal architecture to support a growth strategy, digital customer front-end software systems remain isolated from the core operations environment. It’s not going to be an easy fix either – 46 per cent of carriers need at least two years to implement the ideal ‘integrated channel’.

“Core operations environments in use today are simply not up to the challenges facing the industry – whether that comes from powerful new entrants, agile start-ups, or not being able to respond to changed customer expectations. This leaves many established insurers exposed to real competitive threats,” said Charles Juniper, principal analyst, financial services technology, Ovum.

The primary consequence of the shortcomings of core operations environment is currently that insurers are unable to comply with regulatory requirements (cited by 29 per cent), but this is expected to shift to poor customer experience over the next two years.

Among Asia-Pacific insurers, the ability to launch new products and respond to market opportunities is seen as the most important goal of core operations modernisation projects. The research also showed that Asia-Pacific insurers are willing to bet on the cloud in order to achieve an “integrated channel” and transform their core business models, with 19 per cent moving towards the majority of core processing being performed on the cloud within the next 24 months.

This compares with only 10{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09} of North American and 12 per cent of European respondents.

“Ovum believes that insurers, if they have not done so already, urgently need to include SaaS and cloud technology as key elements of any core operations modernisation plans…. At the very least, insurers need to be implementing SaaS-based core operations ‘proof of concept’ projects now to deliver organisational benefits in the near-term, and to develop the technology skills and experience to address potential issues such as regulatory compliance,” said the report.

The full report can be accessed here.

Leave a Reply