The insurance industry finds itself at an inflection point. Incumbents face rising pressure to digitally transform in order to improve efficiency, boost margins, and deliver seamless customer experiences. At the same time, insurtech disruptors continue to raise the bar for innovation across products, channels, and technologies.
In this environment, a new approach is gaining steam – insurance as a service. By leveraging targeted SaaS solutions from cutting-edge insurtechs, carriers can adopt new capabilities without costly build-outs.
As an industry analyst tracking insurance technology trends over the last decade, I‘ve witnessed firsthand the accelerating adoption of insurance as a service models. In this comprehensive guide, we‘ll explore the drivers, approaches, leading providers, and future outlook shaping insurance as a service in 2024.
What is Insurance as a Service?
Insurance as a service involves insurers accessing critical capabilities on a subscription basis from specialized technology partners. Rather than developing solutions in-house, carriers can leverage insurtech software, infrastructure, and expertise.
Insurtechs provide targeted solutions spanning core processes like underwriting, claims, and fraud detection. Source.
These offerings are cloud-based, enabling insurers to "plug and play" leading-edge solutions into their environments. They allow carriers to experiment with emerging technologies and new approaches without intensive upfront development.
According to a Capgemini report, the top benefits insurers gain from insurance as a service models include:
- Cost optimization – Reduces expenses by leveraging specialized external capabilities
- Speed to market – Faster implementation of new solutions
- Resource optimization – Allows focus on core competencies rather than develop everything in-house
- Scalability – Cloud solutions can scale rapidly to meet business needs
By tapping into insurtech ecosystems, forward-thinking carriers gain a potent strategy for digital transformation.
Why Insurance as a Service is Gaining Traction
Insurance as a service addresses two of the biggest challenges facing insurers today – the need to improve profit margins and rapidly adopt emerging technologies reshaping the competitive landscape.
Pressure to Improve Margins
The insurance sector operates on extremely thin margins. According to McKinsey research, only the top 20% of property and casualty insurers achieve an economic profit. The rest operate at breakeven or loss.
The vast majority of insurers barely break even or operate at an economic loss. Source.
This stark profitability gap drives a constant pressure to optimize operations. Insurance as a service offers a lower risk, faster path to adopt the technologies insurers need to improve productivity and loss ratios. Rather than fund large IT projects, carriers can integrate innovative solutions with minimized upfront investment.
An EY survey of global insurance executives found:
- 89% believe technology will disrupt the industry’s value chain
- 74% are shifting their technology strategy to be more agile and flexible, with a focus on speed to market
This data highlights that technology-driven agility and efficiency have become competitive imperatives. Insurance as a service propels these goals.
Competitive Pressure to Innovate Quickly
In addition to driving operational efficiency, insurers must also rapidly adopt new innovations to stay competitive. Insurtechs keep raising the bar with breakthroughs in areas like IoT, AI/ML, and data analytics.
Incumbents cannot afford a wait-and-see approach as many insurtechs specifically target legacy inefficiencies across underwriting, claims, and customer experience. They must act decisively to integrate the latest technology or risk losing ground.
According to Deloitte, insurance executives plan to increase investment across emerging technologies:
Insurers are focused on adopting AI, IoT, cloud computing, robotic process automation, and blockchain. Source
Rather than attempting to build cutting-edge solutions completely in-house, insurance as a service represents a strategic way to quickly acquire capabilities from specialized insurtechs. Carriers future-proof their operations without significant resource investment.
The demand for technology-driven insurance is also arising from customers. A Novarica survey found:
- 40% of consumers would switch providers for easier digital interactions and self-service
- 72% want mobile apps to manage policies, payments, and claims
- 44% are willing to let insurers monitor driving habits, health data, and home security in exchange for better pricing
Insurance as a service directly addresses these customer expectations through digital solutions.
Key Models for Insurance as a Service
There are three primary frameworks insurers utilize to leverage external partner capabilities as a service:
1. Full-Stack Digitization
Full-stack digitization involves collaborating with an insurtech partner to implement an integrated, end-to-end digital platform encompassing core systems like:
- Product innovation
- Underwriting
- Policy admin
- Claims management
- Billing
- Customer service
The partner provides the technology platform, infrastructure, and specialized expertise to transform these insurance workflows into a modern, consolidated solution.
Full-stack approaches provide maximum optimization but require extensive integration work. They are best suited for smaller insurers or greenfield operations without complex legacy environments.
2. Targeted Process Digitization
In targeted process digitization, an insurer partners with insurtechs providing specialized software solutions for specific capabilities:
- Underwriting automation – AI-driven tools to analyze risk factors and streamline underwriting
- Claims automation – Systems to optimize claims adjudication and settlement through AI and RPA
- Fraud detection – Machine learning models to identify suspicious claims in real-time
- Customer service – Conversational AI and live chat to enhance self-service options
These solutions integrate through APIs into an insurer‘s environment. This flexible approach allows carriers to plug gaps and bottlenecks without a complete IT overhaul.
3. Core Insurance Software as a Service
Some insurtechs directly provide software aligned to the critical functions of risk carriers. Solutions include:
Underwriting software – Data-driven subscription tools for automated underwriting.
Claims software – Claims management systems with automated workflows.
Data analytics – Reporting, insights, and predictive analytics purpose-built for insurance.
These SaaS solutions focus on the unique needs of insurers. Carriers can quickly integrate them to realize focused efficiency gains.
The best approach depends on an insurer‘s specific gaps, resources, and modernization roadmap. But across all models, insurance as a service provides faster access to innovation.
Leading Providers of Insurance as a Service
Many insurtechs now provide solutions aligned to the as a service models outlined above. Here are some of the top platforms:
| Provider | Rating | Description |
|---|---|---|
| BriteCore | 4.1/5 | End-to-end core insurance software for underwriting, policy admin, and claims. |
| RiskGenius | 4.9/5 | AI-powered policy review and claims decision support. |
| Cloverleaf | 4.6/5 | Insurance-focused analytics and reporting. |
| Planck | 4.8/5 | Data cleansing and enrichment for P&C insurance. |
| Ask Kodiak | 4.7/5 | AI-powered chatbot for insurance customer service. |
Insurers are increasingly tapping platforms like these to rapidly integrate specialized capabilities without resource-intensive in-house software development.
Key Challenges for Insurance as a Service
While adoption accelerates, there are some potential downsides for insurers to consider with insurance as a service models:
Integration complexity – Connecting insurtech point solutions into complex legacy environments can require significant API-related work.
Data protection – Carriers must ensure partners meet stringent security and compliance standards when handling sensitive customer data in the cloud.
Vendor dependence risks – Relying on external vendors for critical functions creates business continuity risks if the provider fails. Strong SLAs are essential.
Lack of distinction – Overreliance on external partners could reduce a carrier‘s differentiation in the market. Some unique in-house capabilities are still required.
Insurers must carefully weigh these factors when determining which solutions to externalize through insurance as a service partnerships.
The Outlook for Insurance as a Service in 2024
Based on current adoption trends, insurance as a service models will continue gaining traction in 2024 and beyond. Here are a few predictions:
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Double-digit growth – SaaS insurance software spending will grow over 15% annually through 2025 per IDC forecasts.
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Shift from point solutions to end-to-end platforms – As comfort with cloud and partnerships increases, insurers will seek integrated full-stack solutions.
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Carrier/insurtech collaboration will expand – Co-innovation and partnerships will flourish as insurers tap specialized expertise.
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Insurance as a service for non-core functions will rise – Carriers will leverage SaaS solutions for adjacent capabilities like data/analytics, marketing, and customer engagement to augment core offerings.
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Distributors and brokers will get into the game – Large distributors will provide insurance software and infrastructure as a service for their carrier partners.
I expect this as a service model to become pervasive as technology continues disrupting insurance. Carriers that leverage it judiciously will gain agility and competitive advantage. Those that cling to legacy approaches risk obsolescence.
Summary: Key Takeaways on Insurance as a Service
Here are the key points for insurers to understand about the insurance as a service model:
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It allows insurers to integrate innovative solutions from insurtech partners through cloud platforms.
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Targeted SaaS options provide faster access to new capabilities compared to in-house builds.
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Leading drivers are the need to improve margins and keep pace with technology innovation.
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Full-stack, process-specific, and core insurance SaaS models provide flexibility.
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Adoption will accelerate as insurance rapidly digitizes – presenting opportunities and risks.
By strategically embracing insurance as a service, forward-thinking carriers can drive their digital transformation and harness the next wave of industry disruption.
