A couple of years ago, insurers were skeptical of cloud computing. Now? Not only are they leaning into cloud-first strategies, but cloud has become the default hosting option for more insurance technology. Building and hosting apps in the cloud lets insurers focus on running their business and servicing customers without worrying about the infrastructure being used. In addition, cloud platforms are often able to handle more advanced capabilities like machine learning and data analytics.

The most common type of cloud platform is what is called Platform-as-a-Service, or PaaS; the well-known PaaS applications include AWS and Microsoft Azure. It’s not uncommon for insurers to include Software-as-a-Service (SaaS) platforms in the cloud computing category, but these applications are licensed on a subscription basis. In fact, SaaS has become the default licensing model for many software vendors. While SaaS solutions are typically deployed on the cloud, that is not always the case.

In a recent Aite-Novarica study on insurers’ cloud usage, 90 percent of carriers reported using cloud computing. But most insurers’ infrastructures are still primarily hosted or on-prem, no matter what their strategy for new applications is. Given how quickly rates of cloud adoption are changing, however, that is likely to change.

The Future of Cloud in Insurance

The same study conducted by Aite-Novarica revealed that 79 percent of large insurers and 70 percent of midsize insurers intend to increase their usage of cloud computing in the coming years. Even insurers without any current cloud platforms plan to launch a cloud pilot some time in the next 18 months.

Insurers with current cloud usage generally rely on public cloud, but some do use private clouds or a hybrid public-private cloud strategy. Large insurers are particularly likely to rely on public clouds. Each methodology has its own merits; having a single cloud provider minimizes the learning curve needed, while partnering with multiple cloud providers ensures that the best-fit platform is being used for each needed application.

While adopting a cloud-first strategy doesn’t cut any costs in the short term, it does open insurers up to a world of new capabilities and increased agility. Things like serverless computing, big data analytics and use of APIs are all better available to insurers with cloud platforms. Carriers are also often looking to “get out of the data center business,” improve security and increase storage possibilities, among other reasons for switching to a cloud-focused strategy.

Maximizing the Benefits of Cloud

Portals, analytics and digital engagement are the current most common uses of cloud computing for insurers. Thirty-five percent of large insurers reported having portals deployed on the cloud, and 33 percent of midsize insurers are working on expanding their cloud usage for portals. Cloud growth is on the horizon for insurers in a range of areas, however, including rating, underwriting and policy administration; financials and investments; and, in some cases, claims and billing, although these usages remain less common.

The ease of maintenance, flexibility and speed to deployment are among the many features encouraging this growing tide of cloud computing at insurance carriers. The benefits of cloud are clear to insurers now, but they are still apprehensive about some of the challenges that come with implementing these strategic changes. The availability of skills to service cloud platforms is seen as one of the largest challenges, while the ability to integrate with other systems, the complexity of cloud and the overall cost are seen as downsides at some carriers.

With proper planning and focus on implementing any new cloud computing technology, however, insurers can successfully move a growing number of focus areas onto cloud platforms to reap the benefits. As with any technology strategy, CIOs should prepare to work with skilled architects, a strong vendor management team and other dedicated staff to achieve a smooth transition.