Insurance companies have been cautiously adopting cloud technology as familiar biases have gradually lifted. Now, many more insurers are realizing the benefits of improved agility and lower costs of ownership.
The COVID-19 pandemic has accelerated digital transformation in the insurance industry. While the pandemic has forced the industry to embrace agility amid resource constraints and pressure to maximize revenues, it must not distract from the customer-focused forces driving cloud adoption in the first place.
Three major trends are pushing insurance companies towards cloud adoption:
- The growth of digital ecosystems
- Customer experience optimization
- The computing demands of big data analytics
Carriers that advance these trends through cloud adoption will not only remain competitive for the remainder of the pandemic but in the new digital experience landscape that will define the 2020s.
Rise of Digital Ecosystems
Business models in insurance are trending towards decentralized digital ecosystems to accelerate deployment and rapidly replace solutions as needs evolve. Cloud technology provides the agility and scalability necessary to sustain a thriving digital ecosystem.
Historically, insurance companies partnering with software providers had to make significant capital investments in server hardware, installation, and personnel to maintain the new systems and implement updates. This process could take months or years before the benefits were realized—an unacceptable delay today. With cloud computing, virtual data centers can be rolled out in hours and scaled automatically.
Insurers are growing their digital ecosystems with best-of-breed technology for every stage of the customer lifecycle. A major study recently reported that 38 percent of insurers have implemented open APIs, and 48 percent of insurers have a cloud-native enterprise. Cloud adoption will grow alongside digital ecosystems as achieving customer success demands more touchpoints and carriers benefit from the flexibility of dynamic sourcing from several service providers.
Customers Demand More
Cloud capabilities can enhance the experience of both insurance customers and partners like brokers. While most insurers are now capable of conducting their business remotely, they must contend with the challenge of customer acquisition and engagement slipping away during the pandemic.
According to Salesforce’s State of the Connected Consumer report for 2020, 80 percent of customers say the experience a company provides is as important as its products and services. As customers stay at home during the pandemic, they spend more time interfacing with technology platforms. They look for companies that understand who they are, what motivates them and offer relevant digital experiences such as streaming services, tailored news applications, and social media. This has contributed to an irreversible transformation of customer expectations.
Discerning consumers accustomed to the levels of service offered by major technology players are driving the growth of digital ecosystems and microservices in the insurance industry Insurers need cloud connectivity to compete.
Computing Demands of Big Data Analytics
Big data enables carriers to pinpoint customers’ needs. With thousands of data points available, the possibilities are nearly limitless. Cloud’s capacity and data processing power are indispensable in delivering meaningful, personalized experiences faster and cheaper. According to a 2020 AWS report, enterprises can expect a 27.4 percent average reduction in IT infrastructure spend per user, with a 37.1 percent reduction in time-to-market for new features.
Cloud enables insurers to pull from disparate data sets across systems, such as health scores, telematics data, and user data. These connected data sets can be leveraged by carriers to drive efficiencies across the entire insurance organization:
- Underwriting: improve accuracy when predicting risk
- Claims: reduce fraud while processing legitimate claims faster
- Marketing: boost customer satisfaction and personalize experience.
- Sales: generate qualified leads and identify coverage gaps and cross-sell opportunities.
These new capabilities have pushed major insurers to adopt the cloud as a core component of their digital strategy. Aviva, the U.K.’s largest insurer, says the cloud is “absolutely at the heart” of their business strategy to become a “digital-first” insurer. Carriers that can analyze disparate data sets quickly and process them in cloud-native insurance systems will win in the race for relevancy.
Customers, Not COVID, Are Pushing Insurers to the Cloud
COVID may be an accelerant but it’s greater customer expectations that are pushing insurers to the cloud. Before the pandemic, consumers owned an average of four devices and spent nearly half the day consuming some form of digital content.
The widespread adoption of cloud computing to support these expectations was inevitable long before the virus appeared. Insurers that can successfully establish a cloud-native digital ecosystem will benefit from greater agility, reduced time-to-market, and personalized customer experiences with measurable touchpoints beyond COVID-19.
Source: Insurance Innovation Reporter
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