In the past decade, cloud computing has taken over the insurance industry. Novarica says 75 percent of insurers plan to expand their use of cloud computing in the next year and a half. The percentage of insurers using the cloud has increased from 70% in 2018 to 90% in 2021.
The benefits of the cloud become especially valuable for SMEs (small-to-medium enterprises) without the infrastructure to support their systems, let alone the staff to dedicate 24/7 to maintain uptimes. Cloud computing allows insurance SMEs, including brokers and smaller carriers, to offer enterprise services without the overhead.
For larger incumbent insurers, the cloud enables rapid deployment of new digital services with a lower total cost of ownership, allowing them to keep up with nimble insurtechs.
Cloud opens the door to digital systems without constraints. Cutting-edge tech used to be reserved for large organizations with the funds and capacity to deploy, manage and maintain their systems. It is now open to organizations of all sizes through the cloud.
Here are five key ways cloud-based systems allow insurance SMEs to become more competitive:
1. You avoid costly upfront investments
One of the most limiting factors for the growth of a small business is the upfront capital to invest in competitive technology. Traditionally, engaging on the same level as enterprise competitors meant investing many thousands of dollars in infrastructure to support the day’s technology. Cloud computing companies generally bill month-to-month for the use of their infrastructure, which is more manageable for growing organizations. You rent rather than own. If you ever become dissatisfied with your cloud provider, you can switch.
These cost savings don’t just benefit smaller organizations. Cloud enables larger incumbents to lower their own total-cost-of-ownership, freeing IT resources from server management and redeploying them to innovative areas like customer experience.
2. You get the benefits of a built-in support team
Once you’re working on a cloud system, you get the benefits of an extended team. Not only does this reduce strain on your own team, but it will also reduce your long-term IT costs due to the economies of scale of cloud providers. In fact, McKinsey says there’s more than $1 trillion worth of value in cloud adoption for Fortune 500 companies.
Depending on your contract, you won’t have to worry about the time, costs, or staff required to make system upgrades or fix any hiccups in the system. Almost all cloud providers guarantee upwards of 99.95 percent service level uptimes, which means their systems are always available, and your clients will always get the services they expect. This will reduce strain, allowing you to serve your clients better and do what you do best.
3. Cloud computing provides reliable security to insurers
Although the cloud provides new ways to modernize businesses, only 40% of companies say they are getting full value from their cloud investments. Accenture says this stems from security and compliance risks; “security is often seen as the biggest inhibitor to a cloud-first journey—but in reality, it can be its greatest accelerator.”
The teams that take care of your system updates also work around the clock to ensure their cloud platform is secure. In addition to resources, cloud solutions bring to the table operational best practices and security standards, along with regular monitoring, patches, and system fixes to ensure robust security you can depend on without added investments.
A report by IBM says many insurers are using the cloud for compliance and data retrieval;
For compliance, insurers can take advantage of infrastructure as a service to handle the hardware and space necessary for data archiving and retrieval. They could even contract with a third-party that specializes in data compliance after they put data in the cloud. Business processes as a service can help automate systems and workflow, standardize processes and optimize information input and retrieval to facilitate the preparation for audit or to meet specific compliance requirements.
This does not mean that the cloud is a silver bullet when it comes to security. Insurers must understand the importance of the shared responsibility model. While cloud infrastructure providers like Amazon, Microsoft, and Google are responsible for the security of the cloud (infrastructure level), SaaS providers and their customers are responsible for security in the cloud (application level). Cloud security best practices must be implemented and followed accordingly.
4. The system can scale to your business needs
As your organization grows and your software needs evolve, you’ll have an external partner whose system can grow with you. You won’t have to reinvest in new infrastructure to accommodate the need for more storage or capacity. Cloud applications offer virtually infinite growth to meet the demands of your business and clients – at any size.
This is often described as the digital ecosystem economy. An article by Global IQX explains more; “Cloud adoption will grow alongside digital ecosystems as customer success demands more touchpoints and carriers benefit from the flexibility of dynamic sourcing from several service providers.”
5. It will drive innovation and offer a better experience for your customers
The benefits of cloud adoption save money and time: two of the most critical factors in business.
The cloud makes it easy to streamline processes and replace everyday tasks through automation and workflows. Additionally, cloud helps rapidly deploy new applications, and reduces time-to-market. This frees up employee time, allowing a better focus on innovation and customer service while growing your business.
Adopting cloud computing is equally as crucial for smaller businesses to level the playing field with large enterprises and remain competitive in the insurance industry. This is because the cloud can provide access to cutting-edge technologies and innovation without the burden of traditional IT costs.