Sensible insurers are remodeling themselves within the cloud
Some insurers view cloud computing the same way tourists view package tours – an opportunity to take responsibility and contain costs.
It’s a mistake. Cloud computing offers insurers far more than just cost and efficiency levers. It has the power to transform their businesses.
Accelerating to the cloud is likely to play a critical role for insurance companies. Carriers moving critical applications and critical workloads to the cloud can grow and adapt their business quickly. They can also accelerate the digital transformation that is so important to their business by using digital technologies to unlock new revenue streams, increase competitiveness and build resilience. At the same time, they can significantly reduce costs.
Savvy insurers are already using the cloud to transform their businesses.
Some far-sighted insurers have already seen opportunities to use cloud computing to transform their business. We found that around 10 percent of insurers have started reinventing their business with cloud services. Guardian Life, Allianz and Berkshire Hathaway company THREE Insurance, for example, are all building cloud-driven businesses.
About a third of the insurers I meet are modernizing their applications by switching to software-as-a-service (SaaS) offerings from providers such as SAP, Oracle, Workday and Salesforce. Almost a quarter of insurers seem to be migrating established applications to the cloud. Only a few network operators use the PaaS (Platform-as-a-Service) offers for key functions such as claims management.
Most insurance companies that have traveled to the cloud have chosen to work with one of the three major service providers: Amazon, Microsoft or Google. Some have chosen a combination of service providers. The majority of carriers, around 90 percent, are at least experimenting with cloud offerings.
Early adopters who are heavily involved in the cloud are already withdrawing from their more reluctant colleagues. You start to generate significantly higher income. Our research has shown that some insurers who moved early and bravely to the cloud are on track to double their revenues between 2015 and 2023.
Many network operators recognize the benefits of expanding the use of cloud computing. As I mentioned in my previous blog post, many of them are wary of moving critical applications and complex workloads to the cloud. One of the barriers holding them back is their huge investment in legacy applications. Some insurers still have important home-grown applications in Cobol. Such old “technology debts” are not easy to overcome. Rewriting older applications is likely far too expensive and disruptive for most organizations. Alternatively, moving to off-the-shelf solutions can be costly and complex.
Insurers have another choice: they can use a cloud-ready approach to migrating critical applications. You can work with multiple providers to migrate to a hybrid mix of private and public cloud platforms. This opens the way for a smooth increase in the use of cloud services while ensuring that the core systems are not compromised. This enables insurers to maximize the value of their capital investments while moving applications from their legacy technology to their new cloud environment.
All organizations should consider these cloud migration lessons.
Migrating critical applications and complex workloads to the cloud must be part of a comprehensive business transformation strategy. Such a shift goes well beyond technology. It is likely that almost every facet of an organization is affected.
Every insurer needs to adapt its own business transformation strategy to help migrate its applications and resources. Much will depend on the company’s current technology architecture and the extent of its modernization and digital innovation. However, our experience with cloud migration has highlighted some “best practice” approaches that all organizations should consider. They include:
- Move non-core applications and features to SaaS in the cloud.
- Restore scalable, high-volume features on IaaS platforms.
- Build a cloud-based data infrastructure to leverage data analytics, artificial intelligence, and machine learning.
- Replatform applications to take advantage of the growing range of cloud-native software solutions and tools.
- Use PaaS offerings from major cloud service providers to develop advanced products, manage data and provide AI-powered services.
- Decouple legacy technologies to improve agility and reduce data processing requirements.
- Once a roadmap has been agreed and migration priorities defined, you can move quickly to maximize business value and reduce costs.
In my next blog post, I’ll discuss the three key components of a successful cloud strategy – cost control, digital transformation, and business growth. In the meantime, take some time to look at the links below. They offer a wide range of insights into how companies can get the most out of the cloud.
The cloud imperative for insurance (PDF)
Considerations for an Effective Cloud Strategy (blog post)
Cloud services and solutions
Cloud migration services and strategy
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