While cloud computing has been in the public consciousness for a few years, the insurance industry, with characteristic caution, continues to steadily advance onto this latest platform. However, tentative steps taken a year or so ago are now accelerating into bolder moves, as insurers recognize the value and competitive advantage cloud services deliver. “In a few years’ time we believe that cloud will simply become the way things are done,” states a report from Accenture. “Those insurers that move more quickly to embrace it will gain a competitive lead that others may struggle to match.”
Insurance companies already immersed in the cloud agree with this assessment, citing a variety of benefits they are already seeing. “Cloud is a big advantage for us,” says Marianne Petillo, president and CEO at ROM Reinsurance. “When you move to the cloud, you don’t have to worry about upgrades or maintenance; that’s all done for you.”
Cloud computing “provides a cost-effective solution that reduces our dependence on stretched IT resources,” says Gary Ramunni, senior project manager at Penn Mutual Life Insurance. In turn, the company’s IT leaders and staff can now focus on handling “the heavy lifting needed for the larger multi-year strategic initiatives.”
In its report, Accenture states that cloud computing can be instrumental in helping insurers to not only reduce total costs of IT ownership and operation, but to unify customer data and “drive new business and engage customers more effectively through new distribution models.” There are also advantages realized from handling peaks in demand more easily, as well as increasing speed to market and driving new business opportunities.
From an IT perspective, the move to cloud opens up the possibility of prompting “a move to a service-oriented model and new innovation in systems design,” as well as “supporting integration of third-party systems and agency management systems,” says Ramunni.
Just as there are many benefits gained from cloud, insurance companies have embraced cloud for myriad reasons. Business continuity was the reason ROM Reinsurance began its cloud journey, motivated by Hurricane Sandy, which blew through its lower Manhattan offices in October 2012. The company was knocked offline for more than five weeks, says Petillo. ROM’s content management systems provider, Hyland, creator of OnBase, was able to put the company’s files online and make them accessible within three days of the storm. “They basically saved us from having a real financial problem, not being able to get things done. We only had three days of downtime as a result of that.”
National Life Insurance looks to its SaaS provider, BlackLine, a financial software vendor, to maintain software updates. “They do a very thorough upgrade and a thorough testing,” relates Paul Brissette, director of corporate accounting for National Life. “The cost is less than if I was implementing the software on my server. What’s crucial is that when you do an upgrade, you need to do regression testing. When you upgrade something, sometimes you can break something that’s already working. So it’s very important to do through testing. Our SaaS provider knows its product very well, so it can do a more thorough testing. If I do my own testing, I might be missing some good test cases that I didn’t think about.”
In many cases, insurers are opting for private clouds to support their applications and systems. At Princeton Insurance, the motivation was to move to a private cloud to better manage storage challenges. The company found itself hitting the ceiling in terms of capacity for its business intelligence data; this consists of data warehouse subsets or cubes, which are then mined for correlations, patterns and anomalies, according to a case study from NetApp, the insurer’s storage provider. With a private cloud, “we can provision resources in minutes,” says Nicole Gadbois, director of network operations for Princeton Insurance. “We now have the flexibility to respond to business opportunities by quickly building new data warehouses, supporting customer portals, and developing data exchanges with insurers or insured.”
PUBLIC VS. PRIVATE
Many of Penn Mutual’s cloud services are private SaaS applications as well, says Ramunni. “That’s not to say that there may not be some limited use of public cloud occurring within the confines of the enterprise,” he adds. “With much of this still uncharted territory, ways to make use of many of the available services and technology are not coming as second nature but more as out-of-the-box thinking and solutions.” Penn Mutual also looks to SaaS applications from Blackline to round out its cloud portfolio.
Many functions on the periphery of insurance organizations are moving to cloud, but it may take some time until core functions such as policy administration systems are offered entirely from the cloud, says Martina Conlon, analyst with Novarica. “There are a couple of cloud policy admin vendors out there,” she says. “They’re useful when a carrier is going into a new line of business or geography, or trying out a new program, and they’re not 100 percent certain it’s going to be successful. So they want to limit their investment in technology up front, but they need to stand something up quickly.”
In terms of implementations, insurance companies tend to take advantage of multiple approaches, bringing together cloud with on-premises systems. Penn Mutual, for example, is currently “using several vendors to provide niche services touching on a breadth of non-mission-critical business areas,” says Ramunni. This includes back-office functions such as financial and human resources, he adds.
National Life Group also employs a multi-cloud and on-premises strategy. The carrier runs core applications on Dell’s cloud platform, along with Blackline’s SaaS financials, relates Brissette. “All of our policy administration systems now reside in our Dell cloud,” he says. This includes “10 to 15 different admin systems for our different types of products.”
Also see: Migrating to the Cloud? 4 Key Steps
Register or login for access to this item and much more
All Digital Insurance content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access