Research shows that 47 percent of insurers have invested in cloud technologies, or plan to do so over the next three years, to improve operational efficiencies.
North American property and casualty (P&C) and life insurers have accelerated their adoption of cloud solutions to access new and disruptive technologies, and differentiate themselves to their competitors. Industry analyst firm Novarica estimates that more than 70 percent of carriers are now using the cloud.
As insurers move toward the cloud, there has been much debate over which type of cloud solution is best—public, private or hybrid. We believe the clear winner is the public cloud. The advantages it offers insurers include:
- An infrastructure–as–a–service (IaaS) platform.
- Insurance-specific solutions.
- Underwriting and risk profiling.
- Intelligent automation (IA) for claims processing.
- Devices connected to the Internet of Things (IoT) for monitoring risk.
Neither the private nor the hybrid cloud is able to match these advantages. Both suffer more service disruptions and slower recovery—resulting in more downtime—as well as less flexibility, longer provisioning lead times and higher costs.
The public cloud also offers insurers a number of opportunities:
Improve speed to market
With escalating pressure to the business to reduce the time to market for new products and services, carriers find that insurance-based cloud computing solutions can deliver enhanced IT agility and shorter project implementation times. Cloud services can help insurers:
- Quickly deploy and test new technologies, features and capabilities.
- Collaborate within their ecosystem of alliances and strategic vendors to develop new products and services.
For example, using a cloud-based benefit enrollment system, insurers can automate the enrollment process to validate eligibility and support real-time pricing. This provides customers with a more convenient and personalized experience when they shop for benefits.
Reduce capital expenditure
Since the cloud is generally offered “as a service”, insurers can move to cloud-based operations without the large capital expenditures associated with the implementation of in-house, proprietary solutions. Also, cloud-related costs are usually treated as operating expenditures, which are more predictable and more manageable.
Reduce operating and maintenance costs
Cloud-based solutions can be less expensive than those deployed on in-house, back-end server systems. They can also drastically reduce costs for licensing, hardware and the maintenance of complex legacy systems. In our experience, insurers that migrate to the cloud can expect significant savings in their total cost of ownership.
Accelerate business growth
Cloud-based solutions can provide insurers with improved social listening and higher conversion rates to the “opportunity to sell” phase through targeted campaign management, as well as improved opportunity and lead engagement models. This can generate higher cross-sell, upsell and retention rates. The cloud can also improve customers’ claims experiences by enabling better communication and service.
Potential to expand globally
As insurers look to expand their global presence, cloud solutions can improve flexibility and standardization across geographies. For industry start-ups, public cloud innovation opens doors for growth aspirations, while for larger insurers, it offers a platform for expanding into new markets more quickly and with less risk.
Our research indicates that 33 percent of insurance respondents are already investing in, or plan to invest heavily in cloud-based technologies to improve their operational efficiencies, and almost half (47 percent) are planning to do so over the next three years. Insurers not planning to embrace the cloud risk being overtaken by their competitors.
To learn more, download Making Cloud a Business Asset.