Early Days of Evaluation

Insurers define cloud computing as the means for delivering and accessing scalable, technically enabled services through the Internet, private network or yet-to-be-defined means. Most insurers are early in their evaluations of cloud computing, both from a consumer and provider perspective. More pressing challenges, such as true channel integration, are competing for the limited investment dollars available for cloud computing evaluation. Further, as a rule, the insurance industry tends to lag other industry sectors in its adoption of emerging technologies.

Ultimately, all applications are suitable for the cloud. At the moment, peripheral services that support policy and claims administration functions and customer acquisition processes are best suited for the cloud. Such services are well understood and currently being provided as Software-as-a-Service, and their evolution or migration to the cloud is occurring.

The movement to consuming core processing applications via the cloud will come in time as insurance CIOs see improved tools/techniques for integrating cloud applications with their existing applications, better guarantees around meeting data privacy requirements, and more-compelling options for business continuity in the event that the provider becomes insolvent or fails to meet its commitments. From a provider perspective, though, adoption could increase at a faster pace, as businesses that might consume cloud-based services from insurers (e.g., brokers and third-party administrations) are accustomed to the dependencies that arise in a provider/consumer model.

IT departments will need to add cloud governance competencies for monitoring and managing services; improved architecture competencies to be able to build highly elastic, extendable, multi-tenant applications; and deeper cloud assessment capabilities to review and access provider capabilities. And insurers will need to leverage auditing standards such as SAS70 and impose additional stringent and active service-level agreements around performance and security.