The promises of increased agility, lower operational costs, flexible computing capacity and freedom from technical constraints are enticing more insurers to accelerate their journeys to adopt cloud services. As providers of an intangible service, insurers are ideal candidates to embrace cloud-based deployment. An October 2010 study conducted by Novarica found that "cloud and software-as-a-service (SaaS) solutions are more than just the latest buzz. Carriers that have invested [in these offerings] are seeing real benefits."

But many insurers are still on the threshold, held back by questions such as: Where do we start? Where can cloud provide the most impact? Can cloud computing meet our security, compliance and performance standards? How do we prepare our systems and integrate cloud with our current environment?

Rather than consider the entire enterprise at once, it's helpful for insurers to take a step-by-step, "business-first" approach to cloud deployment that lets them quickly realize the benefits of cloud while minimizing risk. Any cloud strategy should begin with an assessment that analyzes and prioritizes workloads to develop a staged plan for migration. This migration can be thought of as a 4-stage path, beginning with cloud deployment of low-risk, horizontal shared services, followed by back-office support applications and then mission-critical applications-all in parallel with the introduction of unique functions that weren't possible before the availability of cloud.



In Stage 1, insurers can move low-risk, horizontal shared services such as e-mail and collaboration software to the cloud. E-mail is a natural starting point for organizations looking for a fast, low-risk way to immediately begin realizing the cost benefits of cloud. For example, an Australian wealth management company is implementing a private cloud-based e-mail and collaboration solution as the first production system along its road to cloud.

Another function typically moved to the cloud is application testing and development. Systems development projects can account for a large portion of an insurer's overall capacity requirements, requiring insurers to buy or set aside hardware and software for what is essentially a transient purpose. Offloading those requirements to the cloud reduces total cost of ownership while ensuring additional capacity is available for new projects when required. And cloud solutions can actually transform the way development projects are done, eliminating issues such as differences between runtime and test environments.



In Stage 2, insurers can cloud-enable support applications such as claims and legal management software, printing, image and archive, business intelligence and credit scoring. Multiple options exist for implementing "as-a-service" cloud solutions to better align IT resources with business requirements and reduce the total cost of operation.

Stage 3 allows insurers to gain more benefits by exploiting the on-demand capacity and variable costs of cloud for core applications such as policy administration, underwriting and claims. Cloud can provide a fast path for modernizing homegrown and legacy applications, especially when business strategies such as geographic expansions are being considered.

Some insurers may still be doubtful about entrusting their mission-critical "crown jewel" applications to a commercial public cloud such as or Google. However, private cloud environments, on or off premise, can ensure high levels of security and performance for these enterprise-class applications, while helping insurers move to a pay-as-you-go capacity model with appropriate service-level agreements needed for financial services transactions.

Managed services in a trusted cloud environment are not far from what many insurers are already doing through IT and business process outsourcing arrangements. For some smaller insurers, cloud could provide a fast, low-cost way to upgrade security and add fraud and intrusion detection capabilities.



While the first three stages of this process are evolutionary, Stage 4 is revolutionary and can be implemented in parallel with the other stages. This stage enables organizations to rapidly introduce new applications and services to transform areas such as new business and customer service. Competitive advantages can result from eliminating barriers between the insurer and its agents and customers.

One example is on-demand electronic application services for agents. With cloud-enabled services, agents can enter an insurance application from their tablet or mobile device, from any location. The application can be submitted immediately through an interface to the insurer's new business and policy administration systems, with every stage completed electronically through paperless processing.

Cloud also presents an ideal environment for collaboration with channel partners on product development initiatives, going beyond market survey methods and integrating channel partners directly into the design process.

Collaboration is a key factor in the success of a cloud strategy. Before beginning any strategic initiative, insurers need to find a cloud vendor that can sustain a long-term relationship and provide flexibility, scalability and reliability. Together, they can develop a custom roadmap that takes into account the insurer's business drivers, goals, market, current environment and other factors that are crucial to success. That's how they will find the right path to the cloud. INN

Rich Carreau is CTO for CSC's Financial Services Group, Austin, Texas.

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Corrected March 11, 2011 at 3:28PM: yes