We regularly focus on the benefits of technology to the insurance market, this week we want to ask a different question; “could insurance products eventually be modeled on the software as a service and cloud computing models?”
Software as a Service
The days of buying applications on disk and then installing them and then rebuying them are pretty much done. That’s because manufacturers (including Microsoft) are all moving to Software as a Service models.
The reason they are making the move is because it makes so much sense for everybody involved in the use of software. You can now take a single month’s license for something like Adobe’s Creative Suite – use Photoshop etc. to create a lovely new logo and then cancel the license. That’s a big cost saving on buying a license for all those Adobe products that would be used for a one-off project.
Then there are critical applications for insurers like SchemeServe; here you license the product and upgrade or downgrade as you need more or fewer licenses. This is a great way of dealing with seasonal upswings (or downswings) in business without having to buy a bunch of licenses that you don’t need all year long.
Cloud Computing
The reason everyone’s moving to the cloud is because it takes the “software as a service” model and extends it to “hardware as a service”. If you need a ton of computing power for an hour a day (for example when you’re calculating the day’s takings) why should you pay for that power for another 23 hours a day? Rent it instead.
What about those times when you suddenly have a rush of business and need to process more applications for your products than normally? Rent the space for that time period only – then close it (and the cost of it) off until you need it again.
Insurance Products as a Service
You could take the flexibility of these models and apply them to insurance. Here are a couple of examples; you have a customer who pays for car insurance and part of that payment is for protection against theft. They need that protection when the car is out of their garage. When they are parked in a security controlled and monitored car park in their apartment block – they don’t.
What if the client could touch a button on their smartphone and turn that portion of their insurance off – every time they came home?
Conversely; many people with home insurance would be happy with a substantial discount on their premium if they switched off theft protection every time they were in the house. It’s far less likely that they will be burgled during the day when the whole family’s at home – so why should they pay for cover?
These models may be a touch simplistic but they do point the way to a higher level of customer satisfaction. Insurance that meets the customer’s exact needs in the here and now – is likely to bring happier customers than insurance that meets general needs, some of the time. We wonder how long it will take before the first ultra-flexible “insurance as a service” packages hit the market?
I think the answer to your question is yes, insurance products eventually could be modeled on the software as a service and cloud computing models. In fact you could argue that some products already are; e.g. Travel Insurance can be purchased annually or per individual trip. However, I believe that serious thought should be given to the question of ‘Should insurance products eventually be modelled on software as a service and cloud computing models?’. This of course depends on the product as insurance products vary considerably.
I love the sound of this topic itself and it would be a breakthrough revolution if this could actually happen and I believe it definitely will. Turning off your theft insurance when the car is in the garage, not needing home insurance when at home and more such as these. I believe there is serious innovation required in Insurance products and a SaaS kind of model could definitely spur a radical change among insurance products. Though the regulatory norms can always be a dampener, I seriously feel it is not long before we could start seeing Insurance products being offered on such models.