What opportunities does the cloud make possible for insurance?

Data and digital tools have already become crucial competitive capabilities for insurance carriers. The next frontier is the cloud. In fact, according to McKinsey research, insurance is one of the top five sectors in terms of potentially generating value from cloud--$70 billion to $110 billion in 2030. As a percentage of EBITDA, insurance ranked first.

To get cloud right, carriers need to focus on two things: defining where the value in cloud lies and building a partnership between business units and information technology divisions.

Be clear about where the value is in cloud. Yes, cloud is a more efficient way to operate IT systems, by lowering costs and risks across IT and core functions. This is the low-hanging fruit. The greater potential is in generating value through innovation, by harnessing the cloud to develop new revenue streams. That includes using advanced analytics, the Internet of Things, and automation to bring new products to market. One insurance carrier, for example, announced a new direct-to-consumer business that targeted gig-economy workers and retired baby boomers. This was made possible by deploying a host of cloud-native services, including AI-based chatbots, data services, and automated or digitized workflows.

There are substantial advantages to cloud innovation. Among them:

• Time to market. The cloud can launch new capabilities, business features and products faster. When a large, global property-and-casualty company adopted a cloud-based policy administration platform, it brought new specialty insurance products to market within three months. And remember: Early movers benefit most.
  
• Lower costs. Cloud technologies enable better asset utilization and more flexible operating models. These make existing revenue pools more profitable and help businesses access new opportunities. One investment management company developed a cloud-based record-keeping solution, which has improved efficiency, scalability, durability, and automation. It now has a 100% cloud-native architecture that can reduce the cost of computing by 30% and deploy workloads up to 20 times faster.
  
• Economies of scale. Unlike on-premises data centers, cloud can be scaled up or down as needed. In addition, it can understand and make use of incredibly large data sets, such as tens of millions of claims data points. One wealth management firm is using cloud-based data and analytics algorithms to improve the lifetime value of clients by delivering nudges based on key life events, such as retirement.
  
• Advanced capabilities. Advanced cloud capabilities allow companies to generate new insights at low cost. For example, machine-learning services can identify fraudulent activity much faster. Other tools enable easier access to regulatory information, helping them to stay compliant at lower cost. One financial-services company has moved all servicing to cloud; that has allowed it to serve smaller customers than it could before because automation makes the cost per call much lower. Customer satisfaction scores rose, and agents can now spend more time with people on complex interactions.
  
• Build a close working relationship between IT and the business side. Cloud transformations are most successful when IT leaders and business unit heads work closely together not only on the technicalities, but also to educate the whole business—and the board—about what cloud can do.
  

Ensuring that cloud topics are incorporated into strategy discussions, for example, gives teams a chance to develop a practical understanding of how cloud services can advance business goals. IT leaders should put together a portfolio of examples detailing how their peers leverage the cloud. That will help the leaders across the business visualize what they can do.
In addition, immersion programs that bring IT and business leaders together can energize both. These could include 'go-and-see' visits to learn from their peers in other institutions who have gone through similar cloud journeys. The most effective immersion programs include a cloud learning curriculum for business leaders, to help them understand how cloud can enable transformation initiatives. At one global life and retirement company, the chief information officer orchestrated a three-month cloud immersion program for the company's top 100 business and IT leaders. The program featured learning the basics, field exercises, and site visits. Coming out of these sessions, the leadership team identified the cloud capabilities most relevant to them and then assigned a go-to person to each to advance them.

For the insurance industry to deploy cloud to anything like at full potential, senior leaders need to think in terms of the art of the possible. Insurers that use the cloud effectively can provide better omnichannel experiences for customers, develop a diverse portfolio of integrated services and roll out solutions quickly. The process can be intense and difficult, but that is no reason not to get started.