The pandemic and numerous restrictions forced companies from the insurance industry to make changes to secure the continuity of business processes, avoid the loss of customers, or decrease satisfaction with the quality of services. It was modern technologies that helped to go through these changes relatively painlessly. In particular, technologies related to cloud services.
Cloud computing has become widespread
2011, Iceland, NY, USA. Conference room, 3rd floor of Computer Associates (CA) headquarters.
I’m talking to AGF (Allianz) about using neural networks for the health insurance market’s risk assessment process. The estimated cost of the test implementation is $ 750,000.
20 years later. Warsaw, Poland. Videoconference.
I am talking about the use of neural networks in property insurance underwriting. The estimated monthly cost of the system is $ 2500. System launch within two months.
What has happened in these 20 years? Of all the extraordinary events, one has left an undeniable mark on how we operate. The internet and computing power have become available to everyone.
Covid-19 pandemic has accelerated cloud migration in the insurance industry
The remote working model transition in insurance companies turned meetings into videoconferences. Both customers and employees got used to new communication tools, such as Microsoft Teams, Zoom, or Cisco WebEx. Thus, companies from the insurance industry have increased their experience working with cloud-based services.
These tools helped to ensure internal communication and uninterrupted customer service. However, looking at cloud services’ potential, this is only the beginning of a real transformation of the insurance sector.
The public cloud offers much more. It gives a real chance to build a market advantage, enabling the quick introduction of innovations and high flexibility in responding to changing customer expectations.
The benefits of migration to the cloud for insurance companies
According to analyzes carried out Bain & Company’s „Digitalization in Insurance: The Multibillion-Dollar Opportunity”, P&C insurance companies that start the transformation process using the cloud can expect a 28% increase in revenue and a 19% decrease in claims payments within five years, and a 72% reduction in administrative costs.
Improving Customer Experience
Cloud services play a crucial role in helping companies take their Customer Experience management to the next level. It mainly applies to the online services that allow creating positive experiences being the pillar of successful cooperation. Knowing that as many as 42% of customers can resign from brand services after just one bad experience, insurers are considering all possibilities to distinguish themselves in the area of CX.
In practice, companies can achieve it by minimizing interruptions in access to digital services and getting rid of the so-called “service weekends”, which are typical for the “on-premises” model.
The savings obtained thanks to the cloud can be spent on activities aimed at improving customer satisfaction, e.g., by offering customers lower prices of insurance products. Thanks to using ready-made components offered by cloud providers to create new products, such offers will reach customers faster.
Scalability and performance
Scalability and efficiency in the cloud model respond to all kinds of computing power needs during periods of increased sales, service, or other activities resulting from ongoing marketing campaigns. The cloud will handle it without IT involvement and long-lasting processes of purchasing more servers.
Before you decide to migrate to the cloud
All of these benefits sound encouraging. However, achieving them requires some effort. Earlier consideration of the following points will increase the chances for the cloud migration project’s success. It will also show the organization’s problems that need resolving before migration.
1. Take advantage of the experience of the companies that have already migrated to the cloud – learn from their mistakes.
There is no need to break open doors. Take a look at the experiences of other insurance companies that have already paved the way to the tough negotiations with the regulator and verified the largest cloud service providers’ flexibility.
Another way is using the services of technology and consulting companies experienced in leading various organizations through the entire cloud transformation process. (See our Cloud Services)
2. Create or verify your company’s strategy
When choosing the cloud, make it the foundation of your business strategy. In practice, it means indicating all places in the companies where the cloud will affect processes, operational efficiency indicators, acquiring new customers, or creating products. The next step is designing a plan of business initiatives.
3. Check the applicable legal regulations
Progress in regulatory changes and building new cloud standards has greatly simplified these issues. It does not change the fact that there are still many important requirements that need to be met. Therefore, involvement and close cooperation between Compliance, Legal, and IT departments are necessary.
4. Prepare a map of changes and processes in your company
Let’s explain this using the example of an infrastructure or service cloud purchasing process. It is also an online process, and the costs are charged from the moment of launching/purchasing the solution and are not amortized. It changes the way of cost accounting and settlement. The map of changes and processes in the organization will vividly show that the cloud will affect almost every process to a greater or lesser extent.
5. Specify your budget
The implementation of the cloud is a project that has to pay off. It has a cost and income side. The IT department and TCO (Total Cost of Ownership) – popular IT solution cost estimation model will help in calculations.
6. Determine the benefits you want to achieve after migration to the cloud
The list should include overall benefits guaranteed by the cloud and specific advantages for a particular company. Having such a list, together with the indicators expected to achieve, will allow you to assess expectations against results.
7. Provide the competencies needed to carry out the change
Although it sounds like universal advice to anyone who implements new solutions, in this case, it is primarily a regulatory requirement. This task will be performed the best by the HR department in cooperation with IT. They will create matrixes of profiles with the scopes of competencies needed during the strategy’s implementation.
8. Prepare contracts with cloud providers or integrators
Legal regulations should be reflected in the records of contracts with cloud providers or integrators. Particular attention should be paid to the points related to SLA conditions, sometimes RTO and RPO, and contractual penalties to compensate for the potential loss of business benefits.
9. Prepare the requirements of individual departments
The well-prepared map of changes and processes will show you who will be affected by the changes and what will change in the responsibilities of entire departments and individual employees.
It will also give information, which employees in the company you should include in the communication process of the upcoming changes and implementation.
10. Get started and migrate to the cloud
Going through all the points will build awareness of the challenges and expectations. Knowing what you can gain, understanding the advantages of the cloud, a sense of control over weak points that may slow down the implementation will significantly increase the chances of successful migration. At this stage, you will decide on the size, pace of implementation, and cooperation with external partners.
Cloud computing is more than just IT.
Cloud is a new way of looking at the company’s business model supported by modern technologies. It is a model which reduces time, costs, and the number of people needed to introduce new products and services. It’s also the certainty, stability, and reliability of the provision of services, allowing you to increase your competitive advantage. Cloud means a complete business transformation of the entire organization, from the IT department through Sales, Compliance, Legal Departments, and Security.
Process changes are inevitable. It’s a large project which effects allow the company to move to a higher level, which would be difficult to achieve through another way.
Head of Cloud Unit