Every journey to the cloud is unique, whether you are a life or P&C insurer. We have identified five guiding principles applicable to most carriers.

Each insurer faces a unique journey to the cloud based on its existing systems and strategic priorities. Though the potential cost savings alone offer a strong business case for adopting the cloud, we recommend carriers also consider the journey within the context of a broader digital innovation strategy.

Building a blueprint

The first step for insurers is to develop a blueprint of their business model. This blueprint might include a combination of:

  • A new infrastructure model based on a shared pool of resources that can be rapidly configured, provisioned and released. Using the cloud, infrastructure fixed costs are usually reduced (we estimate 20 percent savings in the total cost of ownership). Insurers can also expect to gain more control over operations and infrastructure service levels, and to see faster and more efficient distributed infrastructure provisioning.
  • A new architecture model that permits new levels of agility, flexibility and security, and enables the implementation of leading edge services according to business needs. Evolving from monolithic complex apps to flexible and scalable services, insurers should see increased speed and reliability of services in development and provisioning, along with the highest levels of security and compliance.
  • A new application model where completely managed end-to-end business solutions can be employed. The cloud provides standard and highly scalable solutions with low configuration requirements, offers a seamless introduction of state-of-the-art features in applications and enables abstraction of technological complexity.

Guiding principles

Once insurers have developed their blueprint, it’s time to build a clear roadmap. While there’s no one-size-fits-all approach, years of implementing cloud transformations have taught us five core guiding principles that are applicable to almost all insurers on the journey:

  1. Migrate non-core services to the cloud. Opting for a business platform as a service (BPaaS), insurers can move to a service provider work that does not contribute to a competitive advantage—such as human resources, procurement, trade settlement and accounting—at a lower cost with higher quality.
  2. Increase SaaS coverage. Wherever possible, insurers should reduce software development and maintenance costs by increasing the use of software as a service.
  3. Assess and transition other applications to IaaS/PaaS. Insurers can use standardized infrastructure-as-a-service and platform-as-a-service platforms to help reduce support costs for custom code that provides a real competitive advantage.
  4. Reduce the use of custom code. Insurers should actively quantify and measure their progress in reducing the use of custom code within the enterprise, moving to alternative platforms for better quality and a lower cost to maintain.
  5. Reduce the roster of vendors but maintain competition. A well-structured provider ecosystem can help reduce operational complexity while maintaining pressure on pricing through competition.

Through our client work across regions, we typically see larger companies moving to a multi-cloud environment, while smaller organizations take a single cloud provider approach. Each insurer should consider which operating model and cloud management platform is most appropriate for delivering its business goals. Although most cloud discussions involve technology, the operating model is the cornerstone—involving people, processes, tools and governance. Finding the right operating model is critical to increased agility and technology operating efficiency, and reduced infrastructure costs.

In the next post, we’ll look at effective cloud management and security.

To learn more, download Making Cloud a Business Asset.

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