Cloud technology provides many benefits to insurers that include operational agility, built-in scalability, resiliency, and security. And although cloud adoption has improved significantly in the insurance sector, not all insurers have been able to garner the expected value and realize the full benefits of cloud transformation.
How the Insurance Industry Can Benefit from Cloud Technology
According to Deloitte1, cloud platforms may be the most significant technology initiative insurers have adopted in the past few years. The idea behind cloud computing is both simple and revolutionary. Instead of owning and maintaining physical operating systems on site, insurers can access the IT resources they need when they need them via the internet. This new approach has multiple advantages for insurers:
They don’t have to invest in buying and maintaining physical operating systems. This can greatly reduce operating costs.
They can reduce their data center footprint. Having an easily accessed cloud-based system contributes to a seamless decentralization that enables remote work.
They can scale easily. Without the need for significant investments in servers and storage capacity, nor the worry about versions and updates, scaling that enables growth is easier and faster.
They can pivot quicker. Technology is changing fast. Insurers need to be flexible to keep up with new technologies and changing consumer expectations. That’s hard when an insurance carrier is tied down with legacy systems, but cloud-based operating systems can support flexibility.
They can use cloud systems to end data silos. Insurers are leveraging data to improve everything from underwriting and claims to daily operations, but insurer data tends to be siloed, which makes it difficult to obtain a holistic view. With cloud-based systems, it’s easier to integrate data for more complete insights.
Cloud Adoption So Far
Cloud adoption is often a means to an end. According to Arizent2, insurance carriers are prioritizing investments in cloud and digital infrastructure as a way to improve in other areas, such as underwriting, product development, customer service, and marketing. In a 2023 study, 43% of insurers called cloud and digital infrastructure their number one priority, which placed cloud adoption in the top spot – even ahead of big data.
Insurers value the flexibility, capacity, speed, reliability, maintenance, and security that cloud technology offers. According to Aite Novarica3, insurer cloud adoption reached over 90% in 2022. Per a survey they conducted of 76 insurance CIOs in 2Q 2022, about half of insurers that didn’t have any cloud presence were planning to pilot a cloud implementation during the following year. Interestingly, whereas 80% of insurance CIOs planned to expand cloud adoption further, only 1% planned to reduce reliance on cloud systems. This could indicate that the vast majority of insurers that had moved to a cloud system are happy with the decision.
But not so fast. Just a year later, in April of 2023, Celent conducted a survey of its Executive Panel of senior technology and operations leaders from North American insurance carriers to discover their perspectives on moving to the cloud – both the benefits achieved and challenges experienced. They found that although most insurers felt it was worth the effort and cost, not all insurers are achieving the much-touted benefits.4
Success Factors for Cloud Transformation
Successful cloud transformation depends upon many factors and is not the same for all insurance carriers. No matter where insurers are in their cloud transformation journey, they can take steps to garner more value and improve their chances of realizing the full benefits that cloud technology has to offer. Here are some cloud transformation success factors for insurers to consider:
Have a clearly defined cloud strategy at the beginning.
Create a comprehensive cloud business case and obtain senior leadership buy-in.
Perform due diligence on all cloud partners, look for synergies, and expect a learning curve.
Develop and nurture mindset shifts. Everything won’t be known ahead of time.
Recognize the talent needs for working with the cloud, including reskilling existing staff, and incorporate these into planning and budgets.
Utilize agile development methodologies and iterative product development lifecycles.
Create a strong organizational change management plan.
Build foundational knowledge about security and safeguard data.
The Path to Innovation and Growth
Cloud technology is critical for providing the digital capabilities necessary to rapidly develop innovative new products that allow insurers to not only reduce costs and technical debt, but also provide better service to their customers. However, to truly reap the benefits of cloud transformation, insurers need to have a comprehensive cloud strategy and follow cloud best practices. And to exceed policyholder expectations, they also need to provide the truly seamless, enhanced, and personalized digital payment experience that cloud technology enables.
Are you ready to modernize your payment offerings to meet your policyholders’ needs? One Inc provides a cloud-based, scalable payment platform that enables innovation and growth. Our Client Success Team actively partners with clients to optimize their payment transformation by providing education, digital adoption best practices, digital payment data and metrics, and best-in-class benchmarking. With One Inc at your side, continually adding value, cloud-based digital payment success is achievable. Learn more.