Insurers should be accelerating into the cloud after the upheavals caused by the COVID-19 pandemic. Instead, many are stalling. Seven big myths are blocking their cloud progress.
The COVID-19 pandemic has thrust cloud computing to the top of the strategic agendas of insurers around the world. Without the flexibility and resilience of on-demand cloud services, many insurance companies could not have kept their businesses running during the upheavals triggered by the pandemic.
With premium income among insurers already under pressure, productivity gains stalling, asset returns flat, and claims volumes almost certain to climb, now’s the time for insurers to push ahead with their cloud strategies. They should capitalize on the benefits they’ve already grasped, and push more applications and resources into the cloud. The cost savings and revenue growth achieved by such strategies are going to be critical in the post-pandemic economy.
But no.
Many insurance executives I talk with are holding back. They’re reluctant to accelerate their migration to the cloud. Our research shows that insurers have only 10 percent of their computing workloads in the public cloud. This is surprisingly low. All the more so when you consider that close to 90 percent of insurers are using some form of cloud service.
“Tiptoeing into the cloud is not a good approach.”
Tiptoeing into the cloud is not a good approach. By stalling their migration to the cloud, cautious insurers risk falling behind their more progressive competitors. They’ll miss opportunities to improve efficiencies, increase innovation, scale-up applications and launch new offerings. They could even put their survival in jeopardy.
Why are insurers not seizing the benefits of cloud computing?
Cost, caution, and confusion.
Few of the insurance executives I talk with fail to see how their companies would benefit by scaling up their use of cloud computing. We found, for example, that 68 percent of insurers have already assessed how they could move their legacy applications to the cloud. What’s more, 58 percent of carriers have drafted cloud strategy execution maps with key performance indicators marking their expected milestones. Most insurers are ready to start shifting much bigger workloads into the cloud.
“Cloud computing has matured significantly in the past few years.”
But still they hold back.
I frequently hear a familiar list of concerns about the cloud. These doubts might have been valid in the past. But they’re history now. Let’s look at the most common concerns.
- Regulatory deterrents. Insurance regulators do not allow public cloud services or data to be located in a foreign country.
- Security threat. Critical data is more vulnerable in the cloud.
- Legacy burden. The cost of migrating custom applications to the cloud is prohibitive.
- Early disappointment. Initial cloud initiatives have not achieved their financial objectives.
- Capacity constraints. Early cloud projects couldn’t be rolled out to other business units.
- Dependency risk. Big cloud service providers can lock their customers in.
- Staff concerns. Employees are not ready to embrace the cloud.
Today, none of these objections should deter insurers from moving more complex workloads and critical applications into the cloud. Cloud computing has matured significantly in the past few years.
Amazon, Microsoft ,and Google, for example, have invested billions of dollars in their cloud businesses to improve the reliability, performance, and security of their services. They’ve developed a raft of tools and systems to help their customers migrate their infrastructure, platforms, and applications into the cloud. They’ve also invested heavily in technical and industry-specific skills. Sometimes, they’re even working with their customers to build new business offerings that use their services.
Some progressive companies are already using cloud technology to advance their innovative business strategies. Deutsche Bank, for example, recently teamed up with Google to develop a suite of cloud-based financial products. Allianz has joined forces with Microsoft to extend its global insurance platform
Big cloud service providers have also worked closely with regulators, industry representatives, and customers to meet the specific needs of key markets and geographies. Data privacy concerns, for instance, have been addressed by cloud service providers through, among other things, the installation of scores of local data centers. In Europe, insurers have access to nearby data centers in almost every country. What’s more, the data protection and system security that the big cloud providers offer their customers matches and often surpasses anything that insurers could implement on their own.
Alongside the likes of Amazon, Microsoft, and Google, a host of other technology providers are making it easier for companies to shift more of their businesses into the cloud. Leading software applications from SAP, Oracle, Salesforce, and ServiceNow, for example, are delivered to users as cloud-based software-as-a-service (SaaS) offerings. Several professional services companies are also bulking up their skills and product resources to better guide their clients into the cloud. Accenture, for instance, recently boosted its cloud capabilities in Europe by acquiring French service providers Cirruseo and Gekko. It has also just announced a US$3 billion investment in its new Cloud First business unit. With cloud revenues topping US$11 billion, Accenture is a leading provider of services and tools for companies moving to Amazon, Microsoft, and Google cloud platforms. We have completed more than 20,000 cloud projects in 168 countries.
“The cloud value proposition is stronger than ever.”
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