Question: what is the market penetration rate for cloud services in the insurance sector? The answer is, "Well, it could be higher." Jokes aside, despite the growing digitalization of industries, the pace of cloud adoption is still somewhat slower than expected.
For instance, in Europe, the cloud adoption pace among insurers leaves much to be desired compared to other industries. The report indicates that 29% of insurers have migrated a fifth of their operations to the public cloud, while only 7% have migrated 90% or more.
Why is that? Transitioning from legacy systems to the cloud is challenging primarily due to the question of keeping data protected and sensitive information safe, not to mention regulatory considerations. When discussing the Big Digital Transformation Plan internally, insurance CIOs raise concerns over security-related issues. Not to mention such worries as “What if we lose data due to technical troubles on our cloud provider’s end?” or even “Can it be erased by mistake?”.
Definition, types, and benefits of cloud computing
But what is cloud computing anyway? In short, the technology allows using services like computing, data storage, databases, or software development on a pay-per-use basis. Both applications and data are no longer installed in-house, but are provided as a service, via either a private or a public cloud. This basically means that insurers don’t have to purchase, develop, or maintain on-site hardware and software.
The types of cloud computing are the following:
According to E&Y report, insurers hope to fulfill the next objectives with cloud adoption:
The same report also claims that most insurers plan to move at least 80% of their business to the cloud over the next decade, focusing on the workloads they've already migrated. However, moving to the cloud is one thing, while having an adoption strategy that maximizes the effect of cloud-native services is another.
Decision-makers should familiarize themselves with the technology landscape and understand that the technology offers much more than just taking their data to the cloud. So how can insurers use the cloud while concentrating on more business-related stuff? Let’s find out.
Microsoft Azure or AWS?
There's no definitive answer: both Amazon Web Services and Microsoft Azure have apparent pros and cons, so the choice boils down to the specific requirements of a business. If you need a reliable Platform-as-a-service (PaaS) provider and the Windows integration is mandatory, consider Azure. In its turn, AWS would be preferable if a business needs a powerful infrastructure-as-a-service (IaaS).
When choosing, keep in mind the following aspects:
- Current usage of the CSP;
- Availability of the needed services (mainly PaaS);
- Familiarity with the toolset;
- Vendor lock-in vs. open-source tech support;
- Regulatory/industry compliance;
Both AWS and Azure have a long list of IaaS and PaaS offerings. However, it would be reasonable to say that picking up Microsoft Azure would be advisable for big market players, while AWS is the wise choice for SMBs (primarily US-based ones).
Cloud in insurance: directions
More and more insurers worldwide are already using software-as-a-service (SaaS), platform-as-a-service (PaaS), and other cloud-based computing models. Since 2018, cloud computing has been on the rise. The report by AiteNovarica claims that the percentage of adopters has increased as of July 2021.
At the moment, the majority of insurers resort to the cloud mostly for storage and compute functions. However, other options such as security, APIs, analytics, and AI are considered for future use.
A growing trend in its own right, customer-centricity blossoms with the cloud. The technology helps insurers build strong customer relationships with new clients, retain old ones, and provide more sales opportunities.
It's all about personalization, satisfied customers, and speed. With the cloud's pervasive analytics, customers can get personalized products and services. As customer needs evolve, insurance companies can introduce new business models that drastically improve opportunity conversion rates. Simply put, cloud solutions allow insurers to communicate with customers and get prompt feedback on whatever they want.
The cloud offers significant room for innovation. Insurance companies can try out and deploy new technologies fast. What's more, the technology also allows insurers to cooperate with various vendors in the ecosystem and develop new products and services.
The transition to the cloud offers a wide variety of cloud solutions and apps that allows the smoothing of various business processes. For instance, the Microsoft platform-based solutions can be natively integrated without added costs. Empowered by the cloud, insurance companies can operate on a global scale, bring their business processes to international standards, and use databases on a 24/7 basis courtesy of multiple partner companies from different countries.
Robust cyber defense
So, what about some myth debunking? The cloud is safe if you introduce safety measures, such as thorough logging, restricted access, and the use of VPNs. Any potential threats can be addressed in time if the staff knows how to use security tools and follow best cyber defense practices.
Reduced operating costs
Solutions in the cloud aren't that expensive compared to those deployed on servers internally. This basically means insurers can cut costs on hardware and licenses, not to mention the regular (and costly) support of in-house legacy systems.
Secondly, cloud technology comes with plenty of automation opportunities. Whether you need to streamline business aspects such as claims processing and management, underwriting, or client onboarding, the cloud covers you. With redundant IT-related tasks automated, insurers can focus more on their core business activities and marketing.
The Akvean team of certified Microsoft Azure consultants helps companies from the insurance industry revamp their infrastructure, operational processes, and business applications.
As your trusted technology partner, we will support your digital transformation from A to Z, from strategy to implementation to post-production maintenance. The cloud offers many pros that become especially valuable for insurtech startups with no infrastructure or staff to support their systems.
- Fewer expenses. The cloud allows optimizing the cost-management routine, so you don't have to invest in buying hardware.
- Improved processes. The use of the cloud results in smart underwriting, automated claims processing, and more customized products.
- Accurate insights. The analysis capabilities: fraud, financial performance, customer requirements, solvency, compliance, you name it.
- Convenience. C is for convenience. Insurers can access the cloud anytime and anywhere.
Want an example? Here’s the ARC (Automation, Reliability & Collaboration) project we developed with accūrō Solutions. The solution represents a modern insurance platform that automates the medical bills review and payments/invoices processes.
You may also check our other Microsoft Azure-related projects to see the real value behind cloud adoption.
To sum up
Cloud computing is beneficial for virtually every business domain, including insurance. Fair enough, adoption challenges do exist:
However, digital transformation is possible with the right attitude. This way, insurers should take a pragmatic approach to digitalization and adopt a “cloud-first” mindset, so to speak. Yes, it's easy to overvalue the short-term impact of new technology. However, by measuring the benefits discussed here, both big and small insurance companies can build a fully-operational cloud infrastructure from the ground up.
As a custom insurance software development provider, we can develop solutions to gain higher productivity and increase your business' ROI. Plus, cloud solutions come with convenient access to data and improved customer experience. Contact us today to figure out your next digital transformation step.
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