While AI/ML (artificial intelligence/machine learning) technologies—especially Generative AI (Gen AI) and Large Language Models (LLMs)—are taking center stage, the cloud happens to provide the necessary foundation for them to flourish.
Cloud computing has evolved significantly over the past decade through continuous innovation. The cloud now offers a multitude of tools and solutions to assist insurers with serverless computing, scalable storage, data management, and multiple layers of security, including encryption capabilities. Additionally, there are proven methodologies available for migrating to the cloud. However, despite these capabilities and technological advances, many insurers struggle to derive value from cloud computing, as evidenced by the recent Celent survey titled “Is Moving to Cloud Worth It?”
Getting started by organizing your data in the cloud is an optimal approach. The survey also revealed that insurers primarily leverage the cloud for data and analytics purposes. Other prominent use cases include storage, backup, serverless computing, and portals for agents, brokers, and customers. With the rise of advanced AI/ML technologies, including Gen AI and LLMs, it’s advantageous to harness the cloud’s capabilities and foundational models to evolve your use cases.
According to the survey, speed matters when it comes to moving to the cloud. A timeline of less than three months is seen as a significant success, while anything close to or over two years has resulted in dissatisfaction among insurers. For small to midsize insurers, if your cloud journey plan exceeds six months—or if the execution is taking longer—it makes sense to pause, reassess your situation, and then restart the journey. The same holds true for larger insurers if the timeline extends beyond 15 or 18 months. The survey report also includes a section on critical success factors, which will provide guidance to insurers when initially planning, reassessing, or restarting the cloud journey. Lessons learned are also provided in the survey, which can be used as a reference to help improve value generation for insurers in the cloud.
The survey also revealed a shortage of cloud computing skill sets, which is considered the most challenging aspect of transitioning to the cloud. Organizational readiness, security, and the partnership ecosystem were also identified as areas of high challenge. It will be of utmost importance for insurers to thoroughly vet the team assisting them in their cloud journey. If you are partnering with a cloud provider or a system integrator, it’s advisable to ensure that the team that initially convinced you to select them is the same team engaged in your cloud undertaking. From a vendor perspective, the survey found that partnering with a cloud provider to lead the migration efforts was much more successful than having a system integrator lead it.
The cloud provides an excellent platform for insurers’ computing needs. Many vendors of insurance core application software are also transitioning to the cloud, offering their products in a Software-as-a-Service (SaaS) model, with some exclusively adopting this approach. Once insurers have successfully migrated to the cloud and transferred their data to a cloud-based repository, a multitude of business and operational values can be generated. These include:
- Establishment of a data-driven enterprise
- Decision support analytics
- Insights from social media
- AI/ML use cases
- Scalable storage
- Serverless infrastructure
- Backup and disaster recovery solution
- Omnichannel experience for customers, agents, brokers, and users
The chart below, derived from the survey, illustrates the various areas of cloud usage among insurers.
Cloud computing is a crucial component for a data and technology-driven insurance company. In addition to providing powerful insights, cloud computing offers benefits such as operational efficiency, speed-to-market, and product innovation. Over an extended period, it contributes to value in terms of growth, profitability, and cost reduction.