Achieve a successful cloud transformation

How insurance companies can move to the cloud, connect the dots and show exceptional business value quickly

There are many good reasons traditional property and casualty (P&C) insurance companies are racing to move their technology stacks onto the cloud. Low operating and capital costs, better use of IT staff, unmatched scalability and compute power, and open data sharing and security are all motivating factors. However, the failed efforts of a few have caused many to delay making the move.

We’ve all heard of firms successfully transferring their data to the cloud, only to find that the same data silos that existed on their servers are now simply residing on the cloud. Or, how about those who migrate a single use case to the cloud and then scratch their heads as to why the fix doesn’t play across the rest of their infrastructure? And then, there’s the case of the IT team managing the shift, only to overlook all the business considerations in the process. Or vice versa.

Admittedly, in an industry as slow to evolve as insurance, there is an ingrained reliance on legacy systems and applications that can increase resistance. Challenges related to traditional ERP systems, outdated mainframes, traditional languages and techniques that make code conversion more complex than it needs to be keep many firms frozen in time. The historical data stored on these systems can seem too unwieldy to be moved. Existing security and governance methods would have to change. And that’s without considering the sensitive customer data that will be involved in the transformation. A cloud transformation of any size can be more than a simple lift and shift proposition; any application or system being migrated will have to be modified to take advantage of the cloud and its many benefits.

Don’t do it alone

For a cloud transformation to succeed, finding an expert partner to assist is essential. Someone who has successfully delivered cloud-based solutions for insurance carriers in the past can provide valuable guidance, collapse timelines and budgets and ensure strategic alignments on the way to rapid results.

However, not all partners are equal. Technology experts can often lack business savvy, while traditional consultants may lack the hands-on technology experience needed to deliver a complete cloud transformation. There must be a balance.

Look for partners with a history of working with tier one cloud service providers. Examine their track records. Were they able to deliver a smooth data migration experience? Have they enabled AI or ML solutions that support insurance business goals? Look at their performance in terms of turnaround times and costs. Were they able to deliver processes, systems, and offerings relevant to the P&C industry? Do they offer pre-built modules for cloud transformations that simplify integrations, unify views across touchpoints and break down siloes? Can they perform partial transformations? Have they successfully migrated niche applications to achieve a controlled flow of data, or are they only comfortable with full-scale data migrations?

Ask for demonstrations and check references. If you can land a winning partner, you can launch a winning platform and move on to the more important work of putting your cloud environment to work on insurance matters.

Case study

Client

One of the large homeowners and commercial property insurance firms in the U.S. One of the large homeowners and commercial property insurance firms in the U.S.

Challenge

The COVID pandemic exposed challenges in its manual, expensive physical claims verification process, causing poor decision-making and higher loss ratios.

Solution

They engaged a transformation partner to orchestrate analytics and microservices on the cloud.

Result

Using powerful AI algorithms to analyze a variety of image data and other property attributes on the cloud, the client lowered loss and expense ratios by 5%, with a 4% savings on recurring book value.

Plan AI into your transformation

As we have established, the cloud is where top insurance carriers elevate their game. However, it takes more than just a cloud environment to separate your brand from the pack. To truly unleash the power of a digital transformation, AI and ML must be leveraged on the cloud in strategic fashion. This is where having a partner who understands insurance and technology can quickly move the needle.

Where a cloud platform affords scale, capacity and interconnectivity, AI provides the processing power you need to derive value from your interconnected universe. AI, combined with ML, can be trained to pull data from a broad swath of sources and sort the granular details to achieve specific business outcomes with increasing degrees of success. Imagine suddenly being able to:

  • Create a natural dialogue with customers, nurture leads and help agents prioritize prospects by instantly sifting data on the cloud using AI.
  • Help underwriters collect and extract relevant data, fill out forms and deepen their understanding of any given customer’s risk, automatically.
  • Assess the severity of damage, predict repair costs based on historical inferences, sensors and images, and settle claims using cloud automation.

AI set loose on the cloud can open new insights into the myriad of data streams connected to your enterprise and help you save time, cut costs, identify risk, improve customer experience and increase profitability.

Cloud-based AI in action

Here are three examples of how AI on the cloud can improve your insurance operations:

Streamline claims processing

Traditional claims processing is largely paper based. AI on the cloud can help by automating labor-intensive tasks related to claims inspections and is more accurate in spotting false and illegitimate claims. AI can be used to calculate payouts accurately while establishing real-time communication with customers throughout the claims process.

Support faster, more accurate underwriting

Cloud-based AI solutions can automatically extract data from multiple sources, including text documents and property images, and provide accurate information for underwriting purposes. This capability can effectively eliminate in-person property inspections and monitor properties over time to adjust policy prices.

Detect and prevent fraud

AI systems can be programmed to identify recurring patterns and capture irregular behaviors in claims processing, freeing valuable personnel for more effective exceptions management and customer service duties.

Adopt these strategies for a successful transformation

As you can see, to make your move to the cloud successful, a high degree technological and business acumen must come to bear in the transformation. A savvy, experienced transformation partner who understands the technology side as well as the insurance business will help streamline your journey. As you proceed, keep these proven strategies in mind to stay on course:

  • Take a phased approach: Compartmentalize your transformation project into executable phases. Plan carefully, incorporating well-defined timelines, targeted KPIs and adequate resources equipped for each task. Smaller wins strung together will steadily add up to the big win you expect at the end.
  • Build synergy between business and IT teams: Make decisions that satisfy the requirements of both camps. As various judgment calls come into play, one team or the other will have the greater say, based on their given expertise and relative purview. Such items as choice of cloud service provider, one-time vs. batch migration, single, multicloud or hybrid arrangement, and elements of the legacy stack that can be sunset or must be integrated should be discussed and agreed upon in advance. This requires open communications throughout. For this purpose, best practice suggests that a communications manager be named at the project outset.
  • Watch for opportunities to upskill: Certain champions will be required to bring the organization forward into the new environment. Identify these roles in advance and invest in the training necessary to ensure a smooth change. One area to focus on may be in the use of data analytics. The cloud plus AI will open new vistas on this front, and having leaders ready to take the helm will help to rapidly show progress.
  • Not all organizations are alike: Some carriers may want to bifurcate the transformation process around short- and long-term goals. For instance, rather than complete a holistic cloud transformation at once, a mid-size carrier might phase new digital components, services or processes onto the cloud that interface with the core systems via APIs. Then, as resources come available, larger portions of the system can be migrated to achieve a suitable transition.

Pulling it all together

A successful cloud transformation will result in a complete data ecosystem that is tuned to your enterprise strategy and poised for growth. All users will be able to access the information they need to perform in a secure and transparent manner. The platform will support multiple use cases for various stakeholders, including underwriters, agents, brokers and data scientists. A transformation partner who understands the business side of the equation can add much value to these ends.

Likewise, a partner who equally understands the technology side can accelerate your transition in a smooth, economical and efficient manner. They can ensure that your organization maintains its operational bandwidth throughout the migration, adoption and training phases, and have the resources to write application architecture where needed.

A successful migration will deliver near-term benefits by enhancing your ability to generate market-differentiating insights through shared data access. Long-term, your journey will pay off in better aligned enterprise strategies that meet the needs of end-users, support existing personnel and separate your brand from the competition through meaningful product offerings, enhanced revenues and a more rewarding customer experience.

To learn more or to arrange a meeting to discuss your current digital state or future plans, please visit EXLservice.com.

Written by:

Rahul Nawab
Senior Vice President,
Insurance Analytics Practice Lead