Transforming insurance with cloud computing
The rise of cloud computing has been nothing short of remarkable. What was once considered an interesting, if largely misunderstood, technology option has now become an integral part of the long-term business strategy of most insurers. But how can they benefit from this more dynamic and flexible way of fulfilling customer needs? Patrick Ashton, managing executive of Cirrus, a subsidiary of the SilverBridge Group, takes a closer look.
Whilst much focus has historically been placed by internal ICT departments on the potential cost efficiency benefits of the cloud and compliance concerns around data protection; cloud offers insurers far more business benefits in terms of better customer service, speed to market for new offerings and digital distribution channel opportunities.
Make no mistake, the impact on internal ICT competencies and infrastructure is significant but this is not the key obstacle to unlocking the full potential of cloud. Business mind-sets (especially at executive level) need to change to a more customer-centric focus in which easy access to products and related services for customers, in a buy rather than sell model, becomes a top priority. Cloud is certainly one of the solutions to manage this changing relationship with the customer.
Traditionally, insurance has always been one of the slowest industries to adapt to changing environments. The recent emergence of many Insurtech start-ups is testimony to this. Here, technology is being used to improve or automate largely existing processes which have not changed in decades; all to satisfy the needs of a more technology savvy consumer base.
Similarly, the cloud (like any digital transformation process) is more than just about technology. It enables new business models that provide insurers with access to a broader customer base. It is far too easy to limit one's thinking to view cloud as simply a technology-first solution. Instead, the focus should be on the opportunities that going the cloud route will unlock.
Changing business models
In the current environment, the Internet of things (IOT) has gained a lot of momentum. Having connected devices such as wearables provide insurers with a wealth of information to determine everything from driver behaviour to the need for pre-emptive medical care. This, in turn, generates a significant amount of data that puts the insurer under pressure to not only store and manage it, but also effectively analyse it. Availability and quality of data is nowadays the real opportunity within insurers. Without effective mechanisms for real-time analysis, this asset is largely wasted.
The cloud overcomes many of these challenges. Instead of having to rely on the capabilities of the on-premises server room, insurers can utilise the cloud for both storage and real-time analytical modelling, without having internal processing or storage constraints. Once the peak demand has been satisfied, resources can be scaled down again.
Data can be easily shared amongst stakeholders and decisions can be validated more quickly due to this 'fingertip' access to the analytics.
The scalability of system resources can have a direct impact on the business model with the incorporation of a variable pricing structure, based on the resources used on the cloud system. Unlike fixed-pricing models of in-house or other traditional platforms, the cloud makes budgeting and forecasting more effective with the insurer only paying for the resources used.
Scalability and centralised data sources, with real-time analytics, allow insurers to develop customised offerings quicker. This presents opportunities to experiment with new product, channel or solution ideas where quick access to test the market is needed but, likewise, quick exit must also be available should the developments not meet business expectations. Instead of generic solutions that focus on broad customer demographics, bespoke ones can be created that factor in the learnings derived from IOT, customer engagement (think of social media channels), and organisational strategy.
Using the already available data, coupled with the resources of the cloud and the in-house analytics team from the insurer, improved customer-centric offerings can be created more quickly and evaluated against key success criteria, providing the opportunity to change the offering or exit before significant expenditure has been incurred. This ability to experiment affordably with new offerings is possibly one of the most under-valued opportunities presented to the insurer by the cloud.
In theory, the resultant offerings should not only lead to more satisfied existing customers, but should also unlock opportunities to attract new customers to the business as well as maximising renewals along the value chain.
Cloud computing is here to stay. With increasingly rapid adoption across the financial services sector, combined with new tech-savvy entrants into the market, the one thing insurers cannot afford to do is miss out on embracing cloud and the resultant opportunities afforded.