Some insurance IT shops back away from the term “transformation,” skeptical that getting there will cost more time and money than is realistic. In reality, transformation is overused to describe a plethora of solutions that, in fact, don’t transform much of anything.

The cloud is another matter. No longer considered a simple trade-up of one hosting method for another, at its foundation, it’s a platform, and as such it’s delivering on its promise to transform the way in which an insurance company functions.

An insurer’s IT department is paramount to this promise, and more evident every day as momentum builds for wide-spread adoption of Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS).

As early as 2014, industry analyst Ovum found that approximately one-third of all insurers had either deployed or were testing cloud-based (Software as a Service, or SaaS) systems for critical business functions, including the core systems such as policy administration and claims management.

This momentum has its roots in cost-saving, but also in important drivers that fuel transformation, notes E&Y in its recent report, “Transformation Through the Cloud.” In fact, as insurers consider the transformation from on-premises systems to cloud and SaaS, they immediately see new ways of approaching business challenges, and new opportunities to create efficiencies. According to E&Y, the business case for cloud-based transformation often include:

  • Lower total cost of ownership for key systems;
  • Less disruptive technology implementations and support models;
  • Increased speed to market and ability to implement technology and process changes faster (e.g., product launches);
  • Increased organizational agility and operational flexibility from modernized systems;
  • Reduced risk of technology obsolescence.

What makes these points valid? The mere switching from on-premises to cloud hosting of data has very little direct impact on the insurance business user’s everyday feature/functionality/workflow issues. But collectively, the elements that make up the business case actually transform how the business operates.

As just one example, in a report issued in April by Novarica that outlined the research and consulting firm’s latest Research Council Study survey results, respondents said that among the most important factors in adopting SaaS systems was the speed of deployment and the ability to sunset current applications (see Figure 1, “Relative Importance of Reasons for Adoption of SaaS Core Applications”).

Doug Moore, VP and CTO, ISCS

“The speed advantage is not limited to the initial startup times,” write Novarica authors Chuck Ruzicka and Tom Benton. “Initiating a new service on a SaaS platform eliminates the need to configure new hardware and virtualized instances at carrier sites. SaaS solution providers have strong incentives to standardize environments and processes across all clients.”

Standardization is a critical element to cloud-related business transformation, notes Doug Moore, VP and CTO of ISCS.

“As an example, we try to ensure that all customers are using current version levels,” says Moore, “and by ensuring availability, and providing redundancy (and therefore, risk mitigation), it frees the insurance IT team to be more strategic and innovate for the business.”

Novarica points out that using this approach to release management (keeping all clients at or close to current version levels) reduces support costs and provides additional benefits to carriers, as enhancements and new functionality are made available to them faster than with more traditional update models.

Cloud-based solutions offer a definitive path to transformation within the insurance sector, giving insurers the ability to embrace greater agility and conduct business in a fast-changing environment, and making the tried and true total-cost-of-ownership and return-on-investment principles no longer valid.