Three massive targets for a successful cloud technique
The cost advantages of cloud services are often considerable. However, when combined with initiatives to fuel growth and accelerate digital transformation, the returns can be spectacular.
A comprehensive cloud strategy enables insurers to achieve not just one but three key business goals. It will accelerate growth, drive digital transformation, and also reduce costs.
All too often, insurers are satisfied with just one of these goals. It’s usually cost control. But they miss the big picture. They underestimate how scaling their cloud services can change their business and bring benefits across the company. Before insurers move forward with their current cloud agendas, they should stop and review that they are on the right track to get the most benefit from their service providers.
Missed opportunities can lead to disappointment. Our research shows that two-thirds of companies that have ventured into the cloud have not achieved the expected benefits.
Sure, the savings that cloud services can generate are often substantial. However, cloud initiatives are most likely to be successful when they are determined as part of a well-defined long-term technology and business strategy.
The cloud offers significant cost savings to some insurers.
We found that nearly 60 percent of insurers cite cost savings as the primary benefit of cloud computing. Other benefits such as the rapid provision of IT resources (44 percent), greater flexibility (38 percent), and the ability to scale technology applications and resources (32 percent) are way ahead.
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According to our research, some insurers can see significant cost savings since moving to the cloud. You have achieved combined ratios of well below 95 percent and expense ratios of around 20 percent. These values are well above the industry averages for P&C or life insurers. In addition, these industry leaders have been able to use their savings to shift some of their technology spending from maintenance to innovation. For example, they have cut their “ongoing” costs from 75 percent of their IT budget to 65 percent while increasing spending on “change” initiatives from 25 percent to 35 percent.
These benefits are impressive. However, when combined with cloud-based initiatives to fuel growth and accelerate digital transformation, they can get spectacular. Insurers moving their most important applications and critical workloads to the cloud can reduce their technology spending and improve spending control. At the same time, they can use the on-demand capabilities of cloud services to modernize their processes and develop strategic growth initiatives. The following figure shows how a global insurer is using the cloud to go way beyond cost savings. The company is also benefiting from rapid digital transformation and aggressive business growth.
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Insurers should leverage the advanced digital technologies that large cloud providers are offering their customers to overtake often cumbersome operations like product distribution and claims handling.
The cloud can deliver significant operational improvements.
The sophisticated data analysis and artificial intelligence (AI) tools offered by cloud service providers enable insurers to better understand and anticipate their customers’ needs. Carriers can also measure the success of new sales initiatives by producing quick and accurate metrics such as cost of sales, renewal rates, strike rates, customer service costs, number of digital touchpoints, and retention levels.
Claims processing is a significant expense for insurers. However, many airlines have been reluctant to revise this facet of their organizations. They are often cautious about disrupting this important business function or changing the complex legacy technology that often aids its operations. However, the rise of remote claims processing teams and new case law practices are giving insurers the opportunity to look back at their claims processing operations. You can benefit significantly from using data analytics systems to gain insights into customer behavior and market sector trends, and using machine learning solutions to sort and evaluate claims.
Cloud services can help new businesses grow.
Carriers can also leverage the flexibility and agility of cloud services to accelerate the growth of their new business initiatives. They can quickly refine their business models to meet, for example, the rapidly changing needs of small businesses, leisure businesses, and property management companies following the COVID-19 pandemic. Greater agility will also allow insurers to accelerate new products that address risks related to business interruption, income protection and cybersecurity.
With access to an extensive suite of cloud services and resources, insurers can create robust, secure and affordable ecosystem offerings. This ability will become increasingly important in the growing digital economy. It will enable carriers to grow their revenue through much more effective marketing and sales in sectors outside of the traditional insurance industry such as healthcare, wellness and home security.
In addition, far-sighted insurers can use cloud services to respond to urgent social and economic changes around the world. The decline in asset ownership, the rise of the gig economy, sweeping changes in transportation, and growing environmental concerns call for a new generation of risk management solutions. Cloud-based services that use technologies like the Internet of Things, quantum computers and augmented reality will become increasingly important.
In my next blog post I will discuss why it is important for insurers to align their business goals and technology needs with the products and services of their cloud providers. It’s about a lot. Until then, check out the links below. They provide a lot of insightful information on how businesses can maximize the benefits of on-demand cloud services.
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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