Insurance IT Officers Are on the Hunt for Better Cloud Solutions. This Report Tells Us Why
With the advent of new technologies and a greater focus on security and compliance issues, cloud-based solutions have stepped out of the background and the IT back offices to the forefront of the insurance industry.
In fact, in legacy industries like insurance, where larger companies typically dominate, are under new stress to go digital from pressures of new entrants that have technology-first strategies and are unencumbered with the technical debt that plagues industry mainstays.
According to David Nagrosst, senior director, advisory & consulting at Ensono, these new ultra-innovative companies are resetting customer expectations.
Existing customers are demanding more to stay loyal. They also want to ensure that secure and compliant solutions are in place.
New customers, on the other hand, expect sophisticated technological solutions from the start.
“A new younger set of customers expect even more, so these dominant companies must transform and adapt to remain relevant and not cede market share,” Nagrosst said.
And for many insurance players, that means embracing cloud-based solutions.
The Rise in Cloud-Based Solutions
Ensono’s recent Cloud Clarity report indicated that 55% of respondents from the financial and insurance sector stated their company’s most sensitive information is kept in cloud systems.
As such, companies that are dependent on cloud systems are focused on investing in innovative solutions that meet the industry’s complex security and compliance requirements.
That is easier said than done, however. As Nagrosst pointed out, the transformations of existing dominant players will likely be slower by nature, given the massive amounts of data and technical debt within these organizations.
That said, while insurers have massive amounts of data, making it quickly accessible and actionable is necessary for insurers to keep up with the rapid digital transformation.
“Additionally, protecting these enormous amounts of data is critical, which is more achievable in a cloud environment,” Nagrosst said. “With rising security concerns and cyberattacks, insurers must take advantage of the security of cloud-based solutions to meet these expectations.”
Steps Being Taken
To create a bridge between the old world of legacy applications and infrastructure and the new world of innovation, dominant insurance companies are leveraging secure hybrid cloud models to be more agile and mitigate the risk of this transformation.
These plans will be longer-term given the complexity of the operating environments, data sprawl, technical debt, and sheer scale and size of the dominant players in the industry, Nagrosst said.
“Moving into a new operating model cannot happen overnight. Because of this, we are seeing many insurers take methodical and incremental steps toward innovation that will ultimately be more impactful in the long term while yielding shorter-term improvements for their business,” he explained.
And in response to this new set of expectations from customers and pressures to control and reduce costs, insurers are innovating to smooth customer onboarding and lower customer acquisition costs through smartphone apps.
“They are also improving and reducing the cost of claims processing through machine learning, artificial intelligence (AI), and robotic process automation (RPA),” Nagrosst said.
In addition, a multi-faceted approach of encryption, access control, and disaster recovery must be implemented to achieve compliance and security in the cloud.
As Nagrosst explained, due to the programmatic nature and potential for human error, it’s also critical to develop robust governance around the cloud.
“This would include leveraging a cloud security framework and an automated cloud security posture management tool that can constantly scan for potential misconfigurations or poorly configured services,” he said.
Partners in Progress
One of the top strategies for leveraging cloud innovation while balancing compliance needs is ensuring insurers work with partners who understand their compliance requirements.
It can be challenging, as Nagrosst said, to ensure that all compliance needs are met with many available possible options while transitioning toward the cloud.
“One of the biggest mistakes insurers make is thinking they can implement a cloud system independently without the guidance of industry experts,” Nagrosst said.
“Insurance organizations can better navigate the cloud landscape and protect sensitive client information by enlisting the help of a trusted solutions partner to install these infrastructures and meet compliance standards.”
In this partnership, the cloud partner would implement software that has strong threat controls, system processes, meets regular audit standards, and can easily report updates.
On the other hand, insurers will monitor and update the new cloud software to ensure everything is secure.
As Nagrosst explained, one of the most common mistakes insurers can make in this process is not to update and monitor the new cloud systems that have been put into place, resulting in flaws and IT systems that fall short of the compliance standards needed for adequate security.
Further Industry Insights
In addition to identifying the number of survey respondents who acknowledge utilizing cloud systems in keeping sensitive information, Ensono’s Cloud Clarify report also identified key finance and insurance insights including findings that show 52% of IT executives at financial services and insurance companies have gone through the process of choosing a new cloud provider within the last 12 months.
The report illustrates that the top factor to convince these executives to switch was increased scalability (28%). In addition, 92% of companies use a combination of public and private cloud services, with 87% of respondents saying they use some form of private cloud for their IT environments.
The most crucial factor in choosing a cloud platform for the respondents was security and compliance certifications (43%), followed by technical capabilities (39%) and existing licenses with the vendor (30%).
The evolving cloud landscape within the insurance sector is simply that: evolving.
That said, Nagrosst stressed that today’s cloud systems must continue to evolve so that information can be securely accessed for insurers’ employees to continue fulfilling their job roles while working from home or from anywhere. This will allow insurers to remain flexible and competitive with the talent wars.
“We can expect more insurers to let go of traditional methods of information storage and go fully digital, meaning insurance and financial companies will need to continuously implement more robust cloud systems to efficiently and quickly handle growing amounts of client data that will need to be accessed by a diverse set of innovative applications that serve the needs of the customers of tomorrow,” Nagrosst said.
“Insurance professionals will need to constantly pay attention to and monitor their systems for software updates to ensure no flaws or loopholes remain for outside threats.” &