After a cautious start, the insurance industry has hit an inflection point where many P&C insurers are embracing the public cloud. Increasingly, P&C insurers are shifting to the cloud with a variety of objectives in mind — among them, modernizing and optimizing their current offerings, driving smarter operations using data, and innovating and disrupting by attacking unmet market needs.
With this change, insurers have found that the capabilities of cloud not only help them simplify IT, but in fact have the potential to unlock competitive advantages.
Advantages of the Cloud Experience
Perhaps the most compelling value of cloud is its impact on business agility. Deploying new capabilities in a cloud world is both simpler and faster than within traditional software models. Cloud can also enable test and learn environments, allowing businesses to experiment with new concepts, scale the concepts that gain traction, and rid of the concepts that simply do not work. Operating on an API-driven, services-oriented platform suddenly makes it possible to experimentally collaborate with a variety of partners ranging from traditional P&C players (e.g., claims services vendors) to non-traditional players from adjacent ecosystems (e.g., B2C distribution platforms). It also opens up possibilities for insurers to collaborate with each other (e.g., on specific risk coverages) and match InsureTechs in speed and vision.
Another benefit is predictable outcomes. Because the cloud service provider is responsible for system infrastructure, delivery, support and security, SaaS models are allowing insurers to avoid surprises and motivating cloud providers to focus on run time efficiency and reliability. The shift to cloud allows IT operations teams to designate more time to strategic, higher-value activities – including project-related work. The cloud provider takes on non-differentiating activities, while internal customer IT team members focus on working with the business, having the potential to create a competitive advantage.
Lastly, cloud environments can now be provisioned in minutes instead of months, and because cloud shifts consumption from capital to operating expenditure, the underlying spend for technology moves from fixed up-front investments to variable investments linked to business success.
Cloud helps insurers reach new markets. For example, MetLife relied on cloud to execute a recent digital transformation. MetLife Auto & Home wanted to innovate underlying business practices based on a digital first strategy. This strategy encouraged IT and Business departments to think a different way, including the way products were designed to enable digital sales and to form partnerships adding value to the insurance journey for their customers. Cloud and the ability to variablize cost and drive agility were cornerstones enabling this program. MetLife is changing the way they do business and can now appeal to a new set of customers using many of the tools enabled by cloud deployments.
A Cloud-First Policy
The agility, predictability, and scalability of cloud is simply too compelling to ignore. Cloud is more secure than traditional data centers and, simply put, allows companies to operate with greater efficiency, flexibility, and security. Organizations that previously feared the cloud are now embracing it. In doing so, many are shifting to a “cloud-first” approach that makes cloud the preferred choice, especially for new projects. As the business benefits of cloud become increasingly clear to P&C insurers, adoption frequency will only grow.
Given the competitive nature of the insurance industry, insurers are restructuring how they enable technology with many adopting a cloud first strategy. Industry trends indicate a transition to cloud first that would have been unimaginable a few years back. This same trend has driven Guidewire to make cloud enablement a top strategic objective for this year and years to come.