Key Takeaways:
- Cloud computing in insurance provides teams with a modern, scalable, and flexible infrastructure for managing core operations.
- Insurers can use cloud-based systems to reduce their reliance on outdated IT infrastructure and improve operations with access to more advanced tech capabilities.
- The shift to a cloud environment helps insurance teams work more efficiently and innovate and deploy new products faster.
Traditional, on-premise tech infrastructure is falling out of favor among insurers, who are embracing more flexible and scalable cloud-based core insurance solutions.
These platforms lay the foundation for growth, innovation, and agility. They enable teams to pursue new market opportunities quickly without being restricted by clunky and slow-moving on-premise IT systems.
Below, we’ll explore the growing popularity of cloud-based core insurance solutions and how teams are using them to improve their competitive edge in today’s fast-paced market.
What is Cloud Computing? Exploring its Role in the Insurance Industry
Cloud computing refers to the on-demand delivery of resources like storage, software, and databases from remote servers instead of ones located on-premise. Cloud-based core insurance software leverages this technology, which is a comprehensive platform insurers use to manage core operations, including policy administration, claims management, and billing.
Cloud-based systems offer advanced computing power, excellent flexibility, and quick deployment of new insurance products and services. They often come with advanced capabilities like real-time data processing, integration with other digital tools and platforms, and robust security features tailored for the sensitive nature of insurance data.
In particular, systems that are delivered via the Software-as-a-Service (SaaS) model are even easier to manage. Updates to these systems are regularly deployed without team involvement, and the vendor manages the ongoing maintenance, not internal teams.
How the Cloud is Revolutionizing Insurance Operations
While traditional on-premise tech infrastructure has long been the standard for insurance operations, these systems are not equipped to deliver the speed, data processing, and connectivity needed in today’s fast-moving environment.
They may not support integration with emerging technologies like AI or allow the flexibility for insurers to quickly add new products or update pricing to accommodate current market demands. In other words, they can hamper insurers’ ability to adapt and capture new growth opportunities.
As policyholders’ needs and preferences change, competitive dynamics evolve, and new regulations emerge, insurers need an agile core system that can keep pace with market trends without requiring a substantial investment of resources to implement updates on-premise. This is where cloud computing comes into play.
Key Benefits of Cloud Computing in the Insurance Industry
The continued adoption of cloud-based insurance platforms will bring about a new wave of innovation and opportunity for modern insurers. These platforms will support their ability to more precisely address policyholder demands while improving operational efficiency and data security. Let’s take a closer look at the benefits these systems provide.
Enhanced Efficiency
Cloud computing systems give insurance teams access to advanced tech capabilities that help them work more efficiently. This is why 84% of banks and insurers adopt cloud solutions in the first place.
Compared to traditional systems, cloud-based platforms may integrate with artificial intelligence (AI) and machine learning (ML) technologies to automate routine administrative processes and free up the team’s time for more complex tasks. This might include setting up a workflow to automatically send out policy renewal reminders or automating the document collection phase of claims processing.
- Why It Matters: Insurers had a common problem with traditional systems, where data was siloed across multiple locations. However, the connectivity of cloud-based systems gives teams convenient access to critical insights in one location, streamlining the decision-making process.
Better Scalability and Flexibility
Another key advantage of cloud computing is scalability, making it easier for insurers to adapt to fluctuating demand levels while minimizing waste. Whether claims spike after a natural disaster or the home-buying season leads to a surge in policy applications, cloud-based systems can instantly scale up to handle more volume and back down again once demand normalizes.
- Why It Matters: For traditional on-premise infrastructure to scale, insurers would need to invest in the implementation of additional hardware and maintenance, which could take weeks. Once demand falls, they would still be on the hook for ongoing expenses associated with the expanded infrastructure, including any unused storage capacity or processing power, resulting in wasted IT resources.
Innovation and Product Development
In a cloud environment, insurers have access to real-time data and insights to inform product innovation, helping them make updates that better meet consumer needs and expectations. For example, a cloud-based platform enables insurers to offer usage-based policies. These systems can integrate telematics data from policyholder vehicles to offer personalized pricing based on the individual’s driving behavior and perceived risks.
- Why It Matters: Insurers can enjoy a much quicker product development cycle in a cloud environment than when relying on slow-moving, on-premise IT. Cloud systems allow teams to build and test new features and products in a controlled environment without impacting the rest of the system, offering more flexibility during development.
On the other hand, outdated IT can impose barriers on the product development cycle, making it difficult for teams to keep up with market demands.
Improved Policyholder Experience
The ability to quickly innovate and update insurance products with cloud computing platforms directly supports the policyholder experience. It means insurers can deploy new products and services that are relevant to their needs. Plus, it enables better efficiency with consumer-facing processes like policy issuance and claims processing, helping to prevent lengthy delays.
In addition, cloud-based systems are available 24/7, allowing policyholders to file a claim, pay premiums, and access policy documents when and where they’d like.
- Why It Matters: In a cloud environment, policyholders no longer have to wait until a representative is available during normal business hours to make these requests. This added convenience improves policyholder satisfaction, which can help insurers stand out from competitors in today’s consumer-centric environment.
Strengthened Data Security and Compliance
The nature of the insurance industry today requires organizations to collect and store vast amounts of policyholder data to support better decision-making and risk management practices. While this sensitive data is a prime target for bad actors, leading cloud-based systems implement advanced security mechanisms to keep policyholder data secure and confidential.
Additionally, cloud platforms are often designed in alignment with leading data security regulations, such as HIPAA or GDPR, which makes it easier for internal IT teams to demonstrate regulatory compliance.
- Why It Matters: Cloud computing systems continually deploy new updates and security patches to address vulnerabilities with minimal disruption to core operations.
This is typically not the case with on-premise platforms or local servers, which require manual intervention to be updated. Plus, these periodic security updates may lag behind the emergence of new threats, putting sensitive policyholder data at risk of exposure.
The Future of Cloud Computing in Insurance
Cloud-based platforms are already providing transformative benefits across the insurance space, and by 2027, Gartner expects cloud computing to be the key driver for business innovation. Here are some of the ways these solutions will continue to drive progress for insurers, no matter how market trends or policyholder expectations evolve:
- Delivering a seamless policyholder experience: Insurers who have yet to embrace self-service capabilities for policyholders can use the cloud to offer the around-the-clock accessibility and convenience consumers today expect.
- Leveraging emerging technologies: As GenAI and other tech innovations advance, cloud systems will support seamless integrations so insurers can take advantage of these capabilities.
- Improving risk management: Cloud-based platforms will continue to extract and analyze structured and unstructured data from new sources to generate more comprehensive risk profiles on policyholders and improve underwriting decisions.
Embrace the Cloud with Insuresoft
Cloud-based core systems give insurers the agility, flexibility, and efficiency needed to compete and win in today’s competitive landscape. This is exactly what insurers get with a leading solution like Insuresoft’s Diamond platform, supporting better scalability, cost-effectiveness, and quicker product releases.
With more than 30 years of serving the needs of insurers, Insuresoft understands what it takes to navigate a complex business environment. The Insuresoft Diamond platform gives insurers an all-in-one system that can handle all P&C lines of business, and a convenient COMPOSER Tool for making quick updates to the system to support business strategy.
Contact us today to see how the cloud is paving the future for P&C insurers.
