Tech Drivers: Cloud Computing and Insurance

From the Oliver Wyman / ZhongAn survey of the technology shaping the insurance industry.

Cloud data exchange

Key Takeaway

The cloud offers insurers cost savings, workforce mobility, and improved interactive platforms and data management.

With the commoditization of insurance products and the shift in sales channels, cloud computing and its promise of converting fixed capital expenditures into variable operating costs have captured the attention of most insurer CIOs and, by extension, CFOs. Insurer-owned data centers, accustomed to delivering mission-critical services 24 hours a day, seven days a week, are more likely to have the capacity to meet peak demand requirements than their counterparts in nonessential services. For insurers that only occasionally experience high peak demand, the cost of maintaining this reserve processing capacity can be significant.

Similar arguments hold true for the application layer. While it can take years to implement or upgrade core insurance systems, software-as-a-service vendors promise to deliver a fully-fledged application via the cloud. This capability has traction in application areas which naturally lend themselves to cloud delivery. The prime example is customer relationship management, which was the driver behind the success of – today a business with a market capital valuation of $60.1 billion.

However, insurance carriers also see challenges from cloud computing. The biggest concerns are related to privacy and security; potential theft of intellectual property; and regulations and legal compliance. Many cloud vendors report that insurance carriers are extremely concerned about privacy and security.

In 2015, Celent surveyed a group of 41 insurance technology executives to better understand cloud solutions in the insurance industry. (See the 2015 Celent report, Life in the Cloud: Vendor Plans and Priorities). They found that cloud-enabled solutions are on the rise, reporting that they have cloud-enabled core systems. More than 75 percent have implemented data and reporting solutions, and almost 60 percent report cloud-enabling document and workflow solutions.

Although the majority of the cloud offerings have been around for over two years, almost 30 percent were launched in the last two years, and some vendors are looking to launch in the next six months. Overall, cloud-enabled solutions are on the rise, with more than 80 percent of responding vendors reporting that they have cloud-enabled core systems. More than 75 percent have implemented data and reporting solutions, and almost 60 percent report cloud-enabling document and workflow solutions.

Two case studies provide helpful illustration:

Global Case Study 1: New York Life operates throughout the United States in the fields of life insurance, mutual funds, annuities, and group insurance. It was facing challenges to meet the unique needs of its brokers and associates. The launch of new enrollment sites took months, as it uses product-specific portals for brokers and third-party administrators to sell a variety of group life, health, and disability products. A cloud-based platform made the creation process of new portals required for new products faster and more agile. Furthermore, the system reduced the time to market and decreased client-drop-out rates thanks to the real-time integration of data and processes. Also, the scalable and extensible system reduced maintenance costs and unscheduled downtime (a more detailed description can be found in the Celent report: Celent Model Insurer 2017:  Case Studies in Digital and Omnichannel).

Global Case Study 2: Acturis provides a comprehensive cloud solution for insurance companies, ranging from customer relationship management for underwriting and claims to accounting in the form of software as a service. The solution includes an integrated management information suite with an integrated reporting system. Insurers can tailor prebuilt reports to specific requirements. For communication with insurers’ customers, Acturis provides integrated communications with branded documents, email and text production, distribution, and storage.

For more, read the full report from Oliver Wyman, ZhongAn Insurance, and ZhongAn Technology: Technology-Driven Value Generation in Insurance.

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