How cloud-enabled digital products, services can address technology challenges
Legacy technology has been a persistent drain on the economics of insurance, in an industry that has been historically slow to evolve. Policies written decades ago, some in the programming language COBOL and sitting on mainframes, have remained on the books as long-tail exposures. Only in the last decade has the industry moved to action, with a major acceleration in the past 18 months.
Due to COVID-19, we’ve witnessed a once-in-an era re-platforming of global businesses, and insurance has been no different. Amid heightened customer expectations and pressures on the workforce and supply chains, the pandemic led to many insurers rapidly advancing their digital transformation programs.
Cloud has been at the core of helping insurers address their legacy technology challenges and respond to the demands of the pandemic. New cloud-enabled digital products and services have created new experiences and value beyond traditional offerings. It has helped connect the home-based workforce and enabled business continuity and recovery. The pandemic has turned cloud from an aspiration into an imperative for insurers.
Despite this, cloud continues to be a value-based discussion in the boardroom. And, the economics of moving to the cloud are compelling – Accenture’s Cloud Readiness report found that insurers who migrated to automated operations on cloud saw IT run costs drop approximately 30 percent.
However, as we emerge from the pandemic and look to the future, the case for cloud must be elevated beyond the limitations of IT savings, to how insurers can use it to address their biggest business challenges.
The new insurance customer
COVID-19 is likely to have lasting impacts on customer behavior in the way they view, buy and assess insurance. With insurers having taken great strides to digitize their offerings during the pandemic, these customer expectations will only further compound and expectations will remain heightened.
To meet the demands of customers while growing revenue, insurers need to move beyond risk indemnification and reimagine insurance through continuous customer engagement.
This means putting AI and data at the heart of decision making, and only strong support for cloud migration and a data-driven culture will make this vision a reality. Cloud can give insurers the infrastructure they need to create customer-facing innovations that reimagine usage and behavior-based insurance offerings.
Cloud transformation for revenue growth
In insurance, there is a strong correlation between cloud transformation and revenue growth. Those who lead in software-as-a-service, platform-as-a-service and adoption of cloud-native applications tend to have higher revenues. And with global insurance revenues expected to grow $1.4 trillion over the next 4 – 5 years according to our Insurance Revenue Landscape 2025 report, accelerating in the cloud now can offer a competitive advantage.
Powering the future workforce
During the pandemic, insurers have seen how cloud solutions powered the remote workforce, and home working arrangements will likely continue to some degree in the future. However, our latest workforce research found a disconnect between what employees want and what their employers want in terms of days in the office. Fortunately, cloud-based workforce analytics can offer insights both in office and remote settings to respond to hardships that affect career opportunities, performance, and morale.
The green cloud
Environmental, Social and Governance is being elevated on the corporate agenda across every industry, including in insurance. The cloud offers insurers the opportunity for sustainability benefits, from more energy-efficient infrastructure, better server utilization rates and greater workload flexibility – leading to energy reduction and carbon emission reduction.
The secure cloud
New cyber threats are emerging daily, increasing in frequency and sophistication – and legacy platforms are no match. Data breaches and cyber-attacks, including ransomware, are threatening the security of insurance systems, operations, and customer trust. Public cloud platforms have matured and now offer stronger controls than on-premise solutions with security and compliance measures.
The cloud journey
We believe CIOs need to follow four principles to realize the value of the cloud, beyond IT savings, addressing their biggest challenges. The cloud journey will differ for each insurer depending on their existing technology architecture and their maturity state in modernization.
1. Accelerate the cloud transformation in an elevated, well-structured approach.
Begin with the business challenges ahead of technology challenges to help accelerate cloud transformation and build a data-driven culture.
2. Realize value in existing industry platforms; recognizing that cloud perfection doesn’t have to impede cloud progress.
As leading insurance core platforms such as Guidewire, ALIP and Duck Creek are on their own cloud journeys, insurers using them can benefit and accelerate their cloud transformations. Their cloud capabilities can help insurers stay on top of technology advancements and adapt regular improvements to their core systems.
3. Strategize the cloud ascent based on leading indicators that the time has come to go big.
Events that signal it’s time to go big may emerge quickly from an internal organizational push, from external market pulls, or from both directions at once. And insurers are seeing indicators that the time to go big has come, with cyber threats and security breaches on the rise, a shifting revenue landscape and the customer-led need for digital distribution.
4. Optimize a coordinated, programmatic cloud journey
Insurance CIOs are looking for opportunities to diversify beyond one cloud provider for their in-house infrastructure and technology needs. However, having multiple clouds operating around the enterprise and managing an optimized multi-cloud environment are not the same.
Overall, cloud will be both transformational and disruptive in the post-COVID-19 world, offering savvy insurers improved scalability, efficiency and security.
Cloud adoption strategies may be nuanced depending on the insurer’s size, market position, or book of business, but the need to migrate to the cloud is universal. Insurers must ascend quickly in their cloud transformations to gain a true competitive advantage.
Access the full report here.
