Cloud Migration – Revamping the Insurance Industry

Oct 31, 2022

Key Highlights:

• Cloud migration entails delivering maximum benefits with minimal effort and costs.

• Adopting the cloud decreases infrastructure complexity and improves agility while fulfilling compliance needs.

• A cloud adoption strategy optimizes the benefits of existing core platforms and helps insurers gain value.

In today’s world of digital transformation, the growing usage of digital tools & services and the corresponding surge in data generated from various digital interactions has made technology adoption crucial for insurance carriers. Once full-fledged IoT and Big Data are in place, can you imagine the amount of data to be stored and computed? Then how will insurers manage such a massive amount of data? In this regard, cloud technology has emerged as an excellent opportunity, with leading carriers already using it to serve customers faster, better, and more efficiently. However, the insurance sector has been slow in embracing cloud migration due to a few challenges. A report highlighted that 38% still use outdated mainframes, legacy development environments, languages, techniques, etc. and a majority of them are still saddled with virtualized, on-premise infrastructure.

Cloud Migration Challenges Faced by Insurers

• Security Concerns:

Many insurance carriers are hesitant to move to the cloud because of security concerns. They worry that their data will be less secure in the cloud than it is on their own servers.

• Compliance Issues:

Insurers are required to comply with regulations that stipulate where data can be stored and how it can be accessed. They might be hesitant, and migrating to the cloud may not be an option for them.

• Complexity & Time:

Carriers are still depending heavily on outdated mainframes, legacy development environments, and old-school techniques & languages. Moreover, the majority of them are still burdened with obsolete on-premise infrastructures.

• Cost:

Although the upfront cost of migrating to the cloud may be cheaper than maintaining on-premises servers, the long-term costs can be higher. This is because you typically pay for cloud services on a pay-as-you-go basis, which can add up over time.

• Lack of control:

When you reserve data in the cloud, you are relying on the cloud provider to keep your data safe and secure. This can be a problem for insurance companies that like to have complete control over their data.

Cloud-Based Solutions

The insurance sector, dealing with high volumes of sensitive documents and data, should be at the forefront of integrating cloud technology into its existing legacy ecosystem. According to research by McKinsey, the impact of the cloud on the insurance industry will be $70 billion to $110 billion by 2030 — that is the top fifth position of all sectors analyzed.

Cloud migration enhances the operational efficiency and performance of insurance carriers by efficiently ensuring data accessibility and security. It’s not limited to just that. There’s more to it. Cloud is way beyond just infrastructure. Insurance businesses are now exploring various levels where the cloud can do wonders. From infrastructure to the platform to process, the cloud expands its opportunities far and wide, enabling insurance core system businesses to enhance ROI and soar high.

Additionally, cloud technologies drive client-centricity with data unification that enables products and services to reach the market faster. Also, cloud-based collaborative tools allow insurance advisors to respond to queries on products and services around the clock and from anywhere.

Thus, a cloud-based strategy for insurance core system organizations can decrease operating expenses, enhance productivity, improve client satisfaction, and unlock new opportunities for further business growth.

How can Insurers Benefit from Cloud Adoption?

Rapid Time to Market.

New business features, capabilities, and products can be more rapidly developed, tested, and launched in the cloud than in traditional ecosystems. For instance, if a global P&C insurance company adopts a cloud-based policy administration platform, it will help them to bring new products and services to market within a few months.

Reduced Costs. 

Cloud technologies facilitate flexible operating models and enable better asset utilization. This leads to a more profitable usage of existing revenue pools and helps insurers access opportunities that were previously not economically viable for them. For example, if an insurance company develops a “cloud-native” record-keeping solution, it will improve efficiency, durability, and scalability – all at reduced costs. Also, by moving to the cloud, insurers can reduce their need for on-premises infrastructure and IT staff. This can drive significant cost savings.

Economies of Scale. 

Unlike on-premises data centers, the cloud can quickly scale up or down as per requirement. Cloud provides the compute power that is necessary to entirely understand and make use of large data sets, like millions of claim data points.

Access to Advanced Technologies through cloud services. 

Advanced cloud technologies enable insurance companies to generate insights that previously demanded intensive resources to develop. For instance, if an insurance company shifts all its servicing to the cloud to use a host of cloud-native tools, it enables them to serve smaller clients than it could before. Costs per call reduce because agents are far more productive when they depend on completely automated “transactional interactions,” like the usage of advanced interactive voice response, chatbots, and self-service tools. Due to this, client satisfaction increases, and agents can now spend more time with consumers on more complex issues.

Data Analysis.

The insurance sector collects a lot of data continuously. Cloud makes it easier to analyze and compare the data for correct decision-making. Moreover, statistical proofs help insurance modernization organizations to launch better products as per client needs and tap newer markets.

The Future of Cloud

Cloud adoption is the driver of digital transformation in the insurance sector. Insurers who are moving quickly to embrace it will acquire a competitive edge that others may struggle to achieve. Cloud adoption in the insurance domain is here to stay. From being cost-effective, scalable, and easy to deploy to eliminating IT backlog and simplifying data access — the cloud offers a plethora of benefits to insurers that help them grow their business and meet the ever-evolving client needs.

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