North American insurers embracing SaaS, exploring Gen AI for competitive edge

North American insurers embracing SaaS, exploring Gen AI for competitive edge | Insurance Business Canada

Technology

North American insurers embracing SaaS, exploring Gen AI for competitive edge

Report highlights technology trends amid increasing adoption

Technology

By
Jonalyn Cueto

North American insurers are embracing software-as-a-service (SaaS) platforms to enhance their speed and agility in response to evolving policyholder demands and rapid technological changes, according to a report by the Information Services Group (ISG).

The report highlighted the increasing adoption of SaaS platforms as insurers seek to innovate products and integrate advanced technologies to overcome the constraints of outdated IT systems.

The ISG report noted that many insurance companies are replacing or augmenting legacy systems to remain competitive in a rapidly changing market. These legacy systems, which have served the industry for decades, are now seen as barriers to efficiency and innovation.

Dennis Winkler, director of the insurance industry at ISG, emphasized that insurers who have transitioned to modern IT infrastructures and SaaS platforms are realizing significant improvements in their operations.

“Outdated systems are holding North American insurers back,” Winkler said. “Those that have moved decisively to modern IT infrastructure and SaaS are unlocking their full potential.”

The ISG report identifies several trends shaping the insurance industry in North America. One key trend is modularizing core systems and processes as microservices. This approach allows insurers to achieve better product customization and integration with agents’ systems.

Additionally, life and retirement insurers are increasingly integrating new and legacy technologies through APIs, which has facilitated the introduction of process automation and enhanced customer experiences.

The adoption of SaaS platforms is particularly aggressive in the property and casualty insurance sector. Larger insurers often maintain their older systems while using SaaS for new policies, whereas smaller companies have largely transitioned to SaaS solutions.

According to ISG, this shift is driven by the need for faster product rollouts and improved efficiency, especially in light of inflation and the rising costs associated with natural disasters.

Generative AI (GenAI) is another area of experimentation for North American insurers, although its use is currently limited to pilot projects. The report suggested that GenAI could significantly boost efficiency and productivity throughout the policy lifecycle if integrated into core workflows.

Jan Erik Aase, partner and global leader at ISG Provider Lens Research, highlighted the potential of AI in transforming insurance operations. “AI as a whole has a significant potential to improve insurance operations,” Aase said. “Modernizing core systems is the first step to enable AI adoption, so providers are helping insurers get started on that transition.”

The report also mentioned the challenges of integrating modern technology frameworks with legacy systems. Insurers often face extensive hard coding and other complexities when migrating to cloud-native software. As a result, many companies opt to run new and old systems concurrently, particularly when migrating existing policies is deemed too risky.

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