The rise of cloud computing has been one of the most transformative technologies of the past several decades. According to research firm Gartner, public cloud services spending will increase from $313 billion in 2020 to $482 billion in 2022. Further, by 2026, it will exceed 45 percent of all enterprise IT spending, up from less than 17 percent in 2021. There’s no doubt that cloud adoption will continue to increase.
Covid-19 drove that “cloud-first adoption policy” across many sectors, including the financial services and insurance industry. According to one study, today’s insurers and their CIOs (chief information officers) now embrace cloud infrastructure strategies, while they were “highly skeptical” of cloud computing just five years ago.
Since 2018, the number of insurers using the cloud has increased from 70 percent to more than 90 percent. Insurance companies can leverage many benefits from cloud adoption. Those benefits — and their key challenges and risks — are explored in this article.
Cloud Computing Use Cases for the Insurance Industry
Cloud computing’s impact on the insurance sector extends to various crucial areas.
- Data analysis and risk assessment. Cloud technology empowers insurers to harness vast amounts of data for more accurate risk assessment. It facilitates sophisticated data analysis, allowing companies to make informed decisions based on predictive analytics and machine learning algorithms.
- Enhanced customer experience. Cloud adoption enables insurers to provide seamless, personalized customer experiences. Through cloud-based platforms, insurers can offer accessible self-service options, streamline claims processes, and tailor products to individual needs.
- Operational efficiency. Cloud-based solutions facilitate the automation of repetitive tasks such as claims processing and underwriting. This improves efficiency, reduces the margin for errors, and enables quicker response times.
- Scalability and flexibility. Insurers can scale their resources based on demand, reducing over-provisioning costs. This scalability allows for a more agile response to market changes and varying customer needs.
- Security and compliance. Cloud providers often invest significantly in security measures. While data security remains a concern, cloud platforms offer robust security protocols and compliance measures, which can be tailored to meet industry-specific regulations.
What Are the Benefits Driving Cloud Adoption in Insurance?
Historically the insurance industry had been slow to adopt cloud technology; now that’s changing. First, the cloud provides “anywhere, anytime access,” supporting business continuity for any organization. Shifting to the cloud helps firms to adapt to changing work environments and meet evolving business (and customer) needs.
Cloud technology also improves resiliency and supports collaboration among team members who are geographically dispersed. It reduces manual efforts, improves processes, drives greater operational efficiencies, and creates more opportunities to deliver better customer experiences.
Some other critical benefits of the cloud for insurers are listed below.
Increase Infrastructure Agility
Insurance organizations can modernize and optimize their legacy, on-premises infrastructure by adopting a cloud-first adoption policy. A cloud-based infrastructure, with its easy deployment, allows insurance teams to develop and roll out new products or applications more quickly and achieve faster time-to-market.
In the long term, the cloud is the key to modernizing enterprise application platforms and helping insurance companies implement digital transformation programs successfully. (To no surprise, a survey from EY found that for 61 percent of respondents, digital transformation is the primary trigger for cloud adoption.)
Traditionally, insurers have over-allocated computing and IT resources to handle sudden spikes in demand. This practice frequently results in waste and increased costs. In contrast, the cloud’s elastic, scalable architecture is flexible. As business needs change, insurers can scale these resources up or down while controlling costs and eliminating resource waste.
Accelerate Innovation and Enhance Customer Experience
Modern insurance buyers demand digital solutions, fast answers, and customized offerings. For 80 percent of consumers, brand experiences are as critical as the products. Legacy, on-premises infrastructure needs to be more agile to support these modern customer needs.
The cloud already has that agility. By moving to the cloud, insurers can speed up innovation and offer meaningful digital experiences to improve customer satisfaction and build loyalty.
According to one survey, respondents reported a 27.4 percent average reduction in IT infrastructure cost per user after moving to AWS (Amazon Web Services). With cloud-based solutions and SaaS platforms, insurance companies can save the hardware and data center costs associated with on-premises IT infrastructures.
Moreover, pay-as-you-go pricing cuts your up-front capital expenditure (capex), while ongoing operating expenses (opex) are transparent, predictable, and easier to control.
Further, the cloud helps automate several routine insurance processes, such as customer enrollment, claims management, and underwriting; that reduces operational costs even more.
Improve Operational Efficiency
In the cloud, insurance companies can leverage artificial intelligence (AI) and machine learning (ML) technologies to streamline many business processes and workflows, such as lead qualification, underwriting, claims processing, and policyholder services.
The cloud lets insurers leverage big data to provide more accurate risk predictions when underwriting a policy, and to process claims more quickly, which reduces fraud. You can also develop more personalized marketing experiences for customers and identify new cross-sell opportunities.
In addition, insurers can analyze customer data in the cloud to gauge intent and sentiment, eliminate or reduce manual processes, and ultimately delight customers with personalized and timely insurance offerings.
What Are the Challenges and Risks of Cloud Adoption in Insurance?
According to EY’s survey, data security is one of the critical risks in the cloud; 59 percent of respondents identified it as their most serious concern. Other common concerns around cloud adoption for insurers include:
- Compliance risk;
- Regulatory risk;
- ‘People risk,’ especially around lack of internal knowledge, skills, and capabilities.
Insurers also worry about the risk of non-compliance with the European Union’s General Data Protection Regulation (GDPR) and other country-specific or regional laws. Respondents were also concerned about the risk of “vendor lock-in,” where a business is forced to continue using a product because switching to another cloud service provider is expensive.
You can identify such risks early with a detailed cloud risk and security assessment. This assessment can help insurance firms to establish a robust cloud risk management framework to avoid the risks of cloud computing.
Many insurance companies also worry about internal challenges that could slow down or hurt cloud adoption, such as:
- Technical challenges, including rewriting app architecture and interoperability issues;
- Cultural change and resistance to change;
- Persistence of legacy systems;
- Continued dependence on business-critical non-cloud systems.
Many insurers need help to estimate the future total cost of ownership of migrating to the cloud, while others have concerns about cloud performance, availability, and latency. All these challenges keep insurers from adopting a potentially beneficial cloud-first policy.
To eliminate such challenges and assure smooth, seamless cloud migration, first understand the business needs driving the need for the cloud. Insurers must:
- Design a cloud strategy and create a detailed migration plan;
- Identify teams, roles, and responsibilities to manage the migration and post-migration activities;
- Identify all relevant data security and privacy regulations;
- Establish a comprehensive governance structure;
- Identify all key performance indicators (KPIs) to measure cloud performance;
- Train staff on best practices to make the best use of the cloud.
It’s also crucial to understand the different cloud models and identify the model that best suits the insurance company’s and its customers’ needs.
What Are the Top Cloud Solutions in Insurance
Cloud computing has redefined insurance industry business models and changed how insurance is bought, sold, and used. This journey to the cloud starts by selecting the right cloud services provider and platform.
The three most popular public cloud providers are below.
Amazon Web Services
AWS is the world’s top public cloud provider. By moving your on-premises applications to AWS, insurers can:
- Quickly launch new digital customer experiences;
- Deliver personalized insurance products and services;
- Modernize existing core systems or implement more agile core systems;
- Leverage data to better identify risk and improve underwriting processes;
- Quickly respond to regulatory changes.
Microsoft Azure is another good choice for insurers looking to distribute their computing tasks across cloud-based resources. With Azure, insurance companies pay only for the resources and capabilities they need and use without having to deploy, manage, and upgrade hardware.
They can also extend on-premises resources with cloud capacity, run workloads faster and more frequently, and leverage cloud-scale data analysis to make better decisions.
Google Cloud for Insurance
Google Cloud enables insurers to leverage data analytics capabilities at scale to gain critical insights for better business decisions. You can also use Google to:
- Better predict and manage risk;
- Deliver better customer experiences to drive retention;
- Lower costs and increase customer satisfaction with a conversational AI-based contact center;
- Reduce security risk with Google Cloud’s Risk Protection Program;
- Calculate and simulate risk at scale, real-time, or on-demand without building a server farm.
What Is the Future Of Cloud Computing in the Insurance Industry?
Cloud computing promises transformative change for the insurance sector. Cloud technology will refine data analytics, using AI and machine learning for precise risk assessment and personalized offerings. This innovation will elevate customer engagement, enabling seamless interactions and tailored services.
Additionally, blockchain integration with cloud platforms will revolutionize insurance processes, ensuring transparency and expediting claim settlements. Collaborative cloud ecosystems will drive innovation among insurers and startups, while enhanced security features will fortify data protection amid evolving regulations.
Overall, the future landscape of cloud computing in insurance embodies innovation, customer-centricity, and heightened efficiency, addressing challenges while fostering a secure digital environment poised for substantial industry growth.
Schedule a Demo with ZenGRC About Cloud Security
The cloud offers numerous benefits for insurance firms looking to modernize legacy infrastructure. At the same time, insurers understand how important it is to secure the cloud and manage compliance risks.
Fortunately, RiskOptics ZenGRC‘s integrated risk management platform allows for managing these risks and minimizing their impact.
ZenGRC enables cybersecurity and risk managers in insurance organizations to manage risk, compliance, audit, governance, and policies from a single, centralized source of truth. The automated workflows and insightful reporting features enable insurers to manage tasks with optimal visibility.
Learn how ZenGRC can help ease the burden of data exfiltration detection by scheduling a demo today. That’s worry-free compliance and incident response planning — the Zen way.