COVID-19 reinforced cloud as an imperative for insurers
COVID-19 drove the pivot to remote work over the course of days. As the crisis plays-out, and insurers must sustain remote operations for sales and service, it is clear that many were not prepared with the cloud solutions that they, their agents and their customers needed.
While this latest disruption turned a spotlight on the industry’s lack of cloud readiness, it comes as no surprise. In our Cloud Readiness Survey report a year ago, we asserted that cloud was more aspiration than reality, “While many respondents have plans and/or pilot programs in place, few companies have completed work on major cloud applications. Core platform transformation in key areas such as policy administration and claims management is rarer still.”
While many survey respondents expressed optimism about progress in the year to come, it was too little progress and too late for most. Based on our more recent analyses, we estimate not more than 10 percent of insurance industry workloads currently run on public cloud platforms. That leaves insurers missing out on the cost and functionality benefits cloud can provide.
Cloud helps cut costs
Legacy technology has dragged down the economics of the insurance industry for a long time. Policies written decades ago, some in COBOL and sitting on mainframes, remain on the books as long-tail exposures. This legacy “tech debt” is a major concern for the industry and one that can only be fully addressed with scalable cloud solutions. As the survey report noted, insurers who migrated to automated operations on cloud saw IT run costs drop approximately 30 percent.
As revenue comes under pressure and recession looms, the need for cost improvement is clearer than ever. The technology cost reduction to be found in public cloud is the first place to look. Costs associated with public cloud have continually dropped in recent years. Major public cloud platforms with growing installed user bases are releasing and optimizing functionality each year with increasing sophistication and industry tailoring.
Cloud enables revenue growth
There is functionality that helps with the revenue pressures too. We can expect COVID-19 to have lasting impacts on customer behavior. The need for virtual agents and direct-to-consumer models will only increase. The only way to capture that revenue is through digital customer and agent journeys that only the cloud can enable.
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