The property and casualty insurance industry has become a significant adopter of Software as a Solution (SaaS) technology and continues to see a massive influx of SaaS applications embedded across organizations' business operations. Though these software applications have revolutionized the insurance value chain in many ways, some experts argue that this rapid explosion in SaaS deployment may ultimately do more harm than good, as companies may become overwhelmed by their tools, platforms and the associated costs. Software applications have become much more advanced and a single solution can now include multiple capabilities that span across various business functions.
A post, "Is the Insurance Industry Seeing a SaaS Revolution or a SaaS Sprawl Challenge?" published on the Everest Group blog page, indicates that this SaaS sprawl stems from an abundance of solutions that lead to higher costs. For example, a firm may infuse software applications throughout a claims system, deploying a solution for claims adjudication, subrogation and payment as well as for analytical solutions that read or compile claims data. According to estimates from the Everest Group, insurance companies with over 1,000 full-time employees will use more than 100 SaaS solutions, on average, at any time.
"If you stack all of these [SaaS solutions] together… the spend becomes quite sizable," says Ronak Doshi, a partner with Everest. "And what we're starting to see is it's not just the spend that is becoming sizable. We are also seeing duplication of solutions because these solutions, over a period of time, have evolved to do more."
Insurance organizations may also find challenges in contracts with SaaS providers, potentially being locked into an agreement that could be expensive to leave. Difficulties with integrating systems can also become an issue because of compatibility, causing an information or data silo that forces insurers to spend more on data integration, according to the Everest blog post. As SaaS solutions evolve to include more capabilities that address multiple business needs, it also becomes more common for companies to see an overlap between unique solutions over certain processes – in which case, firms may end up paying for two different applications that include some of the same capabilities.
To prevent or combat a SaaS sprawl, Doshi suggests to insurance companies that they thoroughly review their solutions, along with their functions and costs.
"The first step is to question all of the existing SaaS solutions that you have and see what the alternatives are that are available in your existing environment, before even buying anything," explains Doshi.
The Everest blog post also suggests that carriers provide a strong foundation for how to best approach SaaS applications by creating a well-defined vision to use in collaboration with SaaS providers and educating executives on managing software and potential SaaS sprawl.
Doshi also encourages insurance organizations to re-evaluate digital tools and platforms to determine where and how applications and the associated costs can be reduced by assessing the efficiency, productivity and total cost of operations.
"We now need to do a digital rationalization on the SaaS space, which is primarily around the entire digital workflow and what [solutions] are duplicates, and how I can remove them and what that common platform or common solution is," Doshi adds.
