The cloud is widely recognized as one of the most transformative technologies for businesses today. Certainly, that’s true of the insurance industry. Insurers that can move more of their business, including, data, processes, applications and infrastructure, to the cloud will transform themselves to become much more data-driven and customer-centric. They will rely on modernized core systems, artificial intelligence (AI), machine learning (ML) and smart data analytics to gain predictive insights and make more informed decisions. These capabilities will be at the heart of successful business models and primarily consumed from the cloud.
Data integrity, system availability, elasticity and performance will be key for success, as are high degrees of automation and extensive use of cloud-native technologies. Leading insurers are already cultivating a more flexible cost base by adopting software-as-a-service (SaaS), platform-as-a-service (PaaS) and other cloud-based computing models.
These benefits help explain why so many insurers have big plans for expanding their adoption of the public cloud. Indeed, most insurers aim to move at least 80% of their business to the cloud in the coming years, building on the workloads they have already migrated.
To meet the primary objectives of increased agility and digital transformation and to make the most of their cloud investments, insurers must navigate a few critical tasks (like data security) and internal challenges, including culture change and lack of cloud experience.
But despite the large ambitions and consensus about the cloud’s importance and value, many insurers have a long way to go in terms of adopting the public cloud. To make the most of their cloud investments and meet their primary objectives of increased agility and digital transformation, they must navigate a few critical risks and internal challenges:
- Objective - agility and flexibility
- Challenge - culture change
- Risk - data security risk
- Initiative - execute on public cloud roadmap
- Trigger - digital transformation
These are among the most salient findings from EY European public cloud adoption survey. We interviewed the chief information officers (CIOs), chief technology officers (CTOs), and cloud strategy leaders from more than 70 European insurers to understand their current state and strategy, use of cloud technology and their plans for the future as well as challenges, potential risks and planned investments. This article highlights the survey results and the implications for both the industry as a whole and individual insurers.
About the survey
Interviews for EY European insurance public cloud adoption index were conducted between September and November 2020 with CIOs, CTOs, and cloud strategy leaders from 70 insurers headquartered in the Netherlands, Switzerland, UK, Spain, Norway, Ireland, Italy and Germany. These companies operate as general, life, non-life and health insurance businesses. About 60% of respondents were from large insurers (with at least €2bn in annual gross written premium), with the rest from small- and medium-sized firms.
The cloud’s rise to the top of the strategic agenda
Overall, the results confirm that public cloud adoption is being driven by the need for digital transformation and business strategy realization. In other words, because it’s seen as a business enabler, public cloud adoption is a topic very much on the strategic agenda of senior executives, even though IT is usually the sponsor of cloud initiatives. Specifically, companies are moving to the public cloud for better data analytics, including AI and machine learning, and to address complexity and end-of-system life-cycle issues. Cost reductions, while important, are not viewed as a primary objective, but are viewed more like an outcome of successful migrations.
Recommended actions for insurers
Based on the research results and EY direct engagement with many leading global insurers, we recommend the following actions for those firms that want to make the most of their investments in the public cloud by taking a holistic approach:
- Infuse the board and business leadership with cloud knowledge.
- Conduct readiness and maturity assessments.
- Build holistic cloud strategies based on business value created.
- Define clear success criteria aligned to business objectives.
- Establish a cloud competence center.
- Involve legal, risk management and compliance teams, as well as regulators.
- Embrace robust change management.
- Prioritize data security and risk management.
- Design a target operating model for the cloud.
- Formalize a cost management framework.
There is an increasing recognition that moving to the public cloud in a controlled and secure manner and in line with regulatory guidance requires more expertise and different skill sets than most insurers currently have. Clearer metrics are also necessary to measure the effectiveness of specific projects and migrations, ongoing cloud operation and overall returns on cloud investments. Lastly, the survey results reveal that most current public cloud efforts are sponsored and led by IT, highlighting the need for closer coordination and more frequent communication between IT and the business.