Other parts of this series:
- It’s time for insurers to conquer their cloud fears
- Smart insurers are transforming themselves in the cloud
- Three big goals for a winning cloud strategy
- Let business – not technology – set your cloud agenda
- Powerful cloud services will drive ecosystem innovation
- Big insurtech opportunities for carriers entrenched in the cloud
Some insurers view cloud computing in the same way that tourists see packaged holidays – an opportunity to hand over responsibility and contain costs.
It’s a mistake. Cloud computing offers insurers far more than cost and efficiency levers. It has the power to transform their businesses.
Accelerating into the cloud looks set to be a game-changer for insurance companies. Carriers that shift key applications and critical workloads into the cloud can quickly grow and adapt their businesses. They can also accelerate the digital transformation that’s so vital to their organizations, using digital technologies to open new revenue streams, boost competitiveness and strengthen resilience. And, at the same time, they can reduce costs substantially.
Savvy insurers are already using the cloud to transform their businesses.
Some far-sighted insurers have already spotted opportunities to use cloud computing to overhaul their businesses. We found that about 10 percent of insurers have begun reinventing their businesses around cloud services. Guardian Life, Allianz, and Berkshire Hathaway firm THREE Insurance, for example, are all building cloud-driven businesses.
About a third of the insurers I encounter are modernizing their applications by switching to software-as-a-service (SaaS) offerings from providers such as SAP, Oracle, Workday, and Salesforce. While close to a quarter of insurers appear to be migrating established applications into the cloud. Few carriers are taking advantage of platform-as-a-service (PaaS) offerings for key functions such as claims management.
Most of the insurance companies that have journeyed into the cloud have opted to work with one of the big three service providers: Amazon, Microsoft, or Google. A few have chosen to work with a combination of service providers. The majority of carriers, about 90 percent, are at the very least experimenting with cloud offerings.
Early movers that are making a big commitment to the cloud are already pulling away from their more hesitant counterparts. They’re starting to generate significantly higher revenues. Our research found that some insurers that made early and bold moves into the cloud are on track to double their revenues between 2015 and 2023.
Plenty of carriers recognize the benefits of scaling up their use of cloud computing. But, as I mentioned in my previous blog post, many of them are wary of shifting key applications and complex workloads into the cloud. One of the obstacles holding them back is their big investment in legacy applications. Some insurers still have critical home-grown applications running in Cobol. Such legacy “technology debt” is not easy to overcome. Rewriting legacy applications is likely to be far too expensive and disruptive for most organizations. Alternatively, switching to off-the-shelf commercial solutions can be costly and complex.
Insurers have another choice: they can adopt a cloud-enabled approach to migrating key applications. They can work with multiple vendors to migrate to a hybrid mix of private and public cloud platforms. This opens the way for a smooth step-up in the use of cloud services while, at the same time, ensuring that core systems are not compromised. It allows insurers to maximize the value of their capital investments while they shift applications away from their legacy technology to their new cloud environment.
All organizations should consider these cloud migration lessons.
The migration of critical applications and complex workloads to the cloud needs to be part of a comprehensive business transformation strategy. Such a shift goes far beyond technology. It is likely to affect almost every facet of an organization.
Each insurer will need to tailor its own business transformation strategy to guide it as it migrates its applications and resources. Much will depend on the company’s current technology architecture and the extent of its modernization and digital innovation. Nonetheless, our experience in cloud migration has highlighted some “best-practice” approaches that all organizations should consider. They include:
- Move non-core applications and functions to SaaS in the cloud.
- Rehost high-volume, scalable functions on IaaS platforms.
- Build a cloud-based data infrastructure to take advantage of data analytics, artificial intelligence, and machine learning.
- Replatform applications to capitalize on the growing range of cloud-native software solutions and tools.
- Use PaaS offerings from the big cloud services providers to develop advanced products, manage data, and deliver AI-powered services.
- Decouple legacy technologies to improve agility and reduce data processing requirements.
- Once a roadmap has been agreed and migration priorities defined, move quickly to maximize business benefits and curb costs.
In my next blog post, I’ll discuss the three key components of a successful cloud strategy—cost control, digital transformation, and business growth. In the meantime, take some time to look at the links below. They provide plenty of insight into how companies can get the best out of the cloud.