Cloud-based SaaS core system software is enabling life insurers to shift their CapEx to OpEx. Mr. Pravin Budhdev, FINEOS, Vice President of Sales, Asia looks at some of the shifts that are enabling the long-term sustainability of this model.
During the last Singapore FinTech Festival, one of the topics that was abuzz was the entry of regional life insurers into the newest market in Asia that opened to foreign insurers – Myanmar. Apart from other interesting facts that form a part of such a discussion, something that caught my eye was a technology-enabled factor. Many of these life insurers were moving IT systems to the cloud and, more recently, taking this into higher risk areas of venturing into core systems.
One of the benefits is they were able to free up their capital to be invested into areas that were capital-intensive, rather than tying it up in IT systems. The way they were able to do it is by transforming an erstwhile CapEx model to an OpEx model, taking advantage of cloud.
Part of this released capital helped in moving into a new market like Myanmar. Further, they were also able to take advantage of implementing the core system for this market on cloud, again avoiding the CapEx for IT systems.
This is not a one-off story. A recent survey of insurers by research and advisory firm Novarica showed two interesting trends among life insurers, who are galloping now to catch up in adopting new technology. The majority of the transformation budget of life insurers was being poured into digitising systems and moving CapEx to OpEx as more systems move into cloud.
Today, we have sort of a ‘perfect storm in the cloud’. A few years back, cloud technologies were at a disadvantage from affordability, robustness and security perspectives. Moreover, when one considered the spectrum of insurance core systems availability in the cloud, one drew a blank.
The perfect convergence that is toppling the tables in favour of cloud today is the reversal of those parameters already mentioned. Giving this a shot-in-the-arm, some pioneering insurance core system developers have made their software available in the cloud.
This transformation is at a highly adoptable level today, for the first-time enabling life insurers to move their core system spend from CapEx to OpEx, in fact into a truly SaaS (software as a service) model.