Cloud Computing in the Property & Casualty Insurance Industry - The case for developing a holistic cloud strategy
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Insurance the way we see it Cloud Computing in the Property & Casualty Insurance Industry The case for developing a holistic cloud strategy
Table of Contents
1. Highlights 3
2. An Overview of Cloud Computing 4
2.1. Types of Cloud Computing Services 4
2.2. Cloud Computing Services Delivery Models 6
2.3. Use of Cloud Computing Services 8
3. Cloud Computing Services in the P&C Insurance Industry 9
3.1. Key Drivers for Cloud Adoption 9
3.2. Leveraging Cloud Computing 10
3.3. Areas of Potential for Cloud 11
4. Benefits and Challenges 13
4.1. Benefits of Cloud Computing for Insurers 13
4.2. Challenges of Cloud Computing for Insurers 14
5. Choosing the Right Cloud Computing Models 16
5.1. Cloud Computing Adoption Propensity 16
5.2. Finding the Appropriate Cloud Computing Delivery Model 17
6. Conclusion 18
References 19
The information contained in this document is proprietary. ©2012 Capgemini. All rights reserved.
Rightshore® is a trademark belonging to Capgemini.the way we see it
1. Highlights
According to Forrester, the global market for cloud computing is forecasted to grow
34.9% annually1, from an estimated $25.5 billion in 2011 to $113.9 billion in 2016. The
main driver of this growth is likely to be the Software as a Service (SaaS) market,
with a predicted growth rate of 34.3% annually during 2011-16. The SaaS market is
expected to continue to be the largest cloud segment, making up more than 81% of
the total cloud market revenues in 2016.
The North American and Western European markets represented the largest cloud
markets in 2011, while in industry terms, the financial services and manufacturing
industries have been the largest early adopters of cloud services.
Cloud computing has the potential to provide significant benefits within the property
and casualty (P&C) insurance industry. P&C insurers are increasingly adopting
cloud services to gain operational flexibility and generate costs savings, but most
P&C insurers lack a holistic cloud strategy to fully reap the business potential of
cloud computing.
Deploying a mix of cloud services delivery models across the value chain can
benefit P&C insurers by helping to address customer data privacy/security and
compliance concerns—making cloud computing one of the top technology
priorities for P&C insurers.
According to Gartner, “By year-end 2013, the percentage of the IT budget of insurers
allocated to cloud computing will grow from less than 5% today to 25%.2” This
paper provides an insight into how P&C insurance companies can leverage cloud
computing solutions and delivery models to enhance their operational effectiveness
and derive cost efficiencies.
1 “Sizing The Cloud,” Forrester Research Inc., April 2011
2 Gartner, Inc.“Predicts 2012: Cloud Computing, Social Media and Mobile Technologies Will Disrupt
Insurers,” Juergen Weiss, Steven Leigh, Jeff Haner, Kimberly Harris-Ferrante, 16 November 2011
32. An Overview of Cloud Computing
Cloud computing refers to the use of highly scalable offsite IT resources, assembled
virtually, accessed over the internet, and used on demand in real-time or near real-
time on a pay-per-use or subscription basis, where the workloads are shared among
multiple customers.
In simple terms, cloud computing is a model that makes a set of services available
through the web, which are provisioned and consumed outside of the enterprises’
firewall.
2.1. Types of Cloud Computing Services
Once a cloud is established, the way cloud computing services are leveraged in
terms of business models can differ depending on requirements. Currently, the most
commonly leveraged service models are:
• Software as a Service (SaaS): SaaS refers to standard software application
functionality delivered over the public internet where the application resources
are shared among a large number of users. Key examples of SaaS include
NetSuite™, Salesforce.com™, Google Apps, Microsoft Office Live™, and Oracle
on Demand™
• Platform as a Service (PaaS): PaaS represents a complete pre-integrated
platform offering for the development and the operation of general purpose
business applications. Some examples of PaaS are NetSuite NS-BOS, Force.com,
Google App Engine for Business, and Microsoft Windows Azure™
• Infrastructure as a Service (IaaS): IaaS refers to highly standardized
computing infrastructure components, provided over the public Internet and
shared among a large number of users. GoGrid, Amazon’s S3 and EC2, Microsoft
Windows Azure, SAVVIS Symphony, and Rackspace Cloud are some of the most
commonly used IaaS platforms
• Business Process as a Service (BPaaS): BPaaS is the provisioning of highly
standardized end-to-end business processes delivered via dynamic, pay-per-
use, and self-service consumption models. Examples of BPaaS include Meeting
Expectations which provides event management services and PayPal® which
provides payment conflict resolution service
Increasingly, the core ideas of cloud computing, such as pay-for-use, multi-tenancy,
and external services, are gaining high visibility—especially in the SaaS arena.
As shown in the following exhibit, the cloud computing market has witnessed an
impressive 63.7% annual growth in revenues during 2008-11. Moreover, the cloud
computing market is expected to grow by 34.9% annually, from an estimated $25.5
billion in 2011 to $113.9 billion in 2016.
4 Cloud Computing in the Property & Casualty Insurance Industrythe way we see it
Exhibit 1: Global Public Cloud Computing Market Size by Revenues, 2008–2016F,
(US$ Billion)
CAGR CAGR
2008-’11 2011-’16
120 113.9 Total 63.7% 34.9%
BPaaS 53.5% 51.9%
97.0 IaaS 260.5% 13.9%
100 PaaS 154.9% 68.9%
SaaS 56.3% 34.3%
78.4
80
(US$ Billion)
58.6
60
41.0
40
25.5
20 15.1
5.8 8.7
0
2008 2009 2010 2011E 2012F 2013F 2014F 2015F 2016F
Source: Capgemini Analysis, 2012; “Sizing The Cloud,” Forrester Research Inc., April 2011
The SaaS market represents the largest cloud market segment, with $21.2 billion3 in
revenues in 2011. SaaS is expected to continue to be the primary growth driver for
cloud computing services, and remain the largest cloud segment during 2011-2016,
likely to account for more than 81% of the total cloud market in 2016. The growth
in SaaS is mainly driven by rapidly increasing demand for solutions like customer
relationship management (CRM), enterprise resource planning (ERP), and supply
chain management (SCM).
Regarding IaaS, the early successes of Amazon EC2 and Rackspace have prompted
many other providers to offer IaaS solutions, resulting in a tremendous growth
of 260.5% annually during 2008-11. However, the IaaS market is forecasted to
stagnate going forward due to significant commoditization, price deterioration, and
margin pressure.
The Forrester report also shows that although PaaS is expected to be the fastest
growing segment in terms of Compound Annual Growth Rate (CAGR) during 2011-16,
it is likely to remain relatively small at $11.3 billion in 2016.
3 “Sizing The Cloud,” Forrester Research Inc., April 2011
52.2. Cloud Computing Services Delivery Models
As shown in the exhibit below, cloud computing services can be hosted using four
distinct delivery models, depending on the use case and the business model of the
provider. In this section we review the four delivery models and discuss the evolution
of these models.
Exhibit 2: Cloud Computing Deployment and Delivery Models
Owner Operator Operating Model
High Low
Service Service
Public Clouds Outsourcing
Vendors Vendors
Level of Control
Cost Saving
Individual Service
Hybrid Clouds Virtual Captive
Firm Vendors
Industry Industry Shared
Community Clouds
Association Association Infrastructure
Individual Individual Staff
Private Clouds
Low High Firm Firm Augmentation
Source: Capgemini Analysis, 2012
Public Clouds
Public clouds include IT resources that are delivered as services via the Internet
in a standardized, self-service, and pay-per-use way. These services allow limited
customization and their respective resources are shared on a large scale. Some
examples of public clouds are Amazon, Google Apps, Windows Azure, Cordys
Process Factory, Salesforce.com’s CRM and Force.com.
Hybrid Cloud
The hybrid cloud model is a combination of the highly standardized public cloud offerings
and the more customized privately hosted solutions. Hybrid cloud offerings include
dynamic infrastructure services cloud-based integration (CBI), dynamic application
services, and dynamic BPO services. Although there are initial initiatives from vendors
such as Dell, Fujitsu, HP, and IBM, there are not many hybrid clouds in use.
Community Cloud
Community cloud is a cloud infrastructure shared by several organizations within a
specific community that has shared concerns, security requirements, policy, and
compliance considerations. It may be managed by the organizations or a third party,
and may exist either on or off premise. An example of a community cloud is The
Trusted German Insurance Cloud, which was launched as an initiative by the German
Insurance Association.
6 Cloud Computing in the Property & Casualty Insurance Industrythe way we see it
Private Clouds
Private clouds are typically owned by a specific enterprise. Private cloud solutions
are made up of licensed software and the internal IT functions of the enterprise, and/
or their service providers use these licensed software applications to enable the
shared provisioning of on-premises resources and services. The examples of private
cloud include eBay® and Fujitsu Flexframe™.
Exhibit 3: Global Share4 of Cloud Computing Services
Delivery Models
Analysts suggest there Hybrid Cloud
is a movement from 19%
private to public cloud, Private Cloud
46%
which is considered a
“natural” evolution. Public Cloud
35%
Source: Capgemini Analysis, 2012; CIO Global Cloud Computing Adoption Survey, January 2011
The Evolution of Clouds
To date, there has been a tendency of clouds to evolve from private to public. This
is due to the fact that data centers initiating cloud capabilities made use of these
features for internal purposes first before selling the capabilities publicly as public
clouds. Analysts suggest that this movement from private to public cloud is a
“natural” evolution.
Most industries are currently using public clouds for non-core office and support
functions; however, private clouds are the preferred model to host core business
specific applications because they are more secure.
Only recently have providers gained confidence in the in the public exposure of cloud
features in order to come up with hybrid cloud solutions. And, while community
clouds are still at a nascent stage, there are already indicators for such development,
like The Trusted German Insurance Cloud.
4 Global share is based on 271 total respondents; 110 US respondents; 82 EMEA respondents; 79 APAC
respondents currently using or piloting services or applications via the cloud
72.3. Use of Cloud Computing Services
In 2011, the North American and Western European markets represented the largest
cloud markets. According to Gartner, North America had the largest share (56%) of
the worldwide public cloud services market. North America’s share is likely to remain
stable and potentially even grow by 2016, though Western Europe may see a decline
Financial services as the adoption of cloud computing in other regions is expected to increase.5 Other
organizations are countries and regions are expected to adopt cloud computing in larger numbers—
most notably in Asia/Pacific, Eastern Europe, Latin America and Eurasia European
expected to continue to privacy rules, multi-country business processes, a deep euro crisis, and a lingering
be the largest users of recession are likely to delay cloud computing adoption in Europe.
public cloud services Although small, developing regions are forecasted to see their cloud market share
during 2011-15 growing, this growth is not expected to notably alter the overall regional market share
mix during the next four years.
The financial services and manufacturing industries are the largest early adopters of
cloud services. The public sector is also displaying interest in the potential of cloud
services, and its share of the overall market is expected to climb from near 15%
in 2011 to over 16% during 2010-15. However, financial services organizations in
aggregate are expected to continue to be the largest users of public cloud services
during 2011-15.
5 Source: Gartner, Forecast Overview: Public Cloud Services, Worldwide, 2011-2016, 2Q12 Update,
by Ed Anderson et al. 20 August 2012
8 Cloud Computing in the Property & Casualty Insurance Industrythe way we see it
3. Cloud Computing Services in the
P&C Insurance Industry
Like most industries, P&C insurance is currently using cloud computing services for
non-core office and support functions, primarily via SaaS. P&C insurers are mainly
using cloud computing services for email and other business support functions such
Cloud computing has as: sales and service support, collaboration, file sharing, and web conferencing.
the potential to provide
3.1. Key Drivers for Cloud Adoption
significant benefits to the
There are many factors stemming from business and technical challenges that are
P&C insurance industry, driving the insurance industry to adopt cloud computing services. However, the four
including cost savings dominant factors accelerating the need to adopt cloud computing services across
and operational flexibility. the insurance value chain are outlined below.
Key Driver #1: Increasing Cost Strains
P&C insurance companies were severely impacted by the ongoing financial crisis and
realized they could not afford to depend too heavily on investment income to sustain
profits. Insurers need to achieve profitability in a period of reduced premiums and
investment income, while also improving their speed to market to resist intensifying
competitive pressures. These challenges can be addressed through an infrastructure
cloud solution, which increases reuse and sharing due to virtualization, and reduces
the cost of IT ownership.
Key Driver #2: Need for Better Business Agility
Cloud technology enables insurance organizations to maintain a lean but highly agile
and efficient IT organization that can provide IT services on-demand, further enabling
business units to consider a variety of innovative business solutions that can be
quickly brought into operations as needed.
Key Driver #3: Call for Fast Deployment
The most important factor driving the need for cloud computing in the P&C insurance
industry is to shorten the time to implement new IT applications. An increasingly
competitive global insurance market—in which insurers are pressured to reduce the
time to market for new products and services—is driving a higher focus on achieving
IT agility and shorter deployment times.
Key Driver #4: Expanding Global Footprint
Many P&C insurers are seeking to expand their global footprint to reduce the risk of
over-dependence on any particular market or markets. These insurers need the high
level of flexibility and standardization fostered by various cloud computing services,
facilitating smoother and cheaper integration of “greenfield” operations, acquisitions,
and joint-ventures.
There are ample reasons for insurers to adopt cloud computing solutions.
Operational flexibility, costs savings, and pay-as-you-use are the key themes
expected to drive cloud computing adoption in the coming years.
93.2. Leveraging Cloud Computing
Cloud computing is among the top technology priorities for the management of
many P&C insurance firms globally. According to Gartner, “By year-end 2013, the
The average IT budget percentage of the IT budget of insurers allocated to cloud computing will grow from
allocated to cloud less than 5% today to 25%6.”
computing by insurers Small to midsize insurers or affiliates of large multinational insurers are likely to
be the early adopters of cloud computing. Small and midsize P&C organizations
is expected to grow to typically lack the financial and human resources to maintain all of their IT assets
25% by 2015, from 5% themselves, while affiliates of large multinational insurers are interested in entering
in 2011. new geographical markets swiftly, without imposing a centralized IT architecture.
There are very few insurers that have developed a holistic cloud strategy. Currently,
most P&C insurance organizations are just testing the SaaS waters with non-core or
non-revenue producing applications, such as test servers and horizontal applications
such as email, HR, and CRM. The most common applications in use by those
already using SaaS are email and office suites, followed by customer service and
support, project planning management and Web conferencing.
Exhibit 4: Top Current SaaS Deployments by Application Type for Insurance industry
across Globe (%), 2011
50%
42
39 39 39 39 39
40%
36 36 36 36
33 33 33 33
31 31 31 31 31 31 31 31
30% 28 28 28 28
25 25 25 25 25 25
(%)
22 22
19 19 19 19
20% 17 17
11
10% 8
6
3
0%
Office Suites
Email
Project & Portfolio
Management
Customer Service
& Support
Web Conferencing
Sales
Financials
(Accounting)
Expense
Management
Employee Performance
Management
Instant
Messaging
Vertical-Specific
Software
Talent
Management
Marketing
Automation
Employee
Self-Service
Sourcing and
E-Procurement
Recruitment
Travel Booking
System
Team
Collaboration
Social
Software
Supply Chain
Planning
Warehouse
Management
Transportation
Management
Currently Using Not Currently Using, but Planning in Next 12 Months
Source: Gartner, Inc., “Market Trends: SaaS in the Insurance Industry,” Derry N. Finkeldey, Steven Leigh, 14 November 2011,
Chart created by Capgemini based on Gartner data
6 Gartner, Inc., “Predicts 2012: Cloud Computing, Social Media and Mobile Technologies Will Disrupt
Insurers,” Juergen Weiss, Steven Leigh, Jeff Haner, Kimberly Harris-Ferrante, 16 November 2011
10 Cloud Computing in the Property & Casualty Insurance Industrythe way we see it
P&C insurers are likely to be more interested in adopting SaaS for non-core support
functions because of lower data privacy risk considerations and a higher degree
of standardization.
Only 25% of surveyed P&C insurers using SaaS are using a vertical-specific7
application in regards to core insurance business functions, such as: policy
administration, claims management and processing, billing and payments, rating
and underwriting.
3.3. Areas of Potential for Cloud
The greatest potential for P&C insurance vertical-specific applications in the next
twelve months is for agent/ broker applications and underwriting tools. Many insurers
are currently using or planning to use PaaS to build their own agent/ broker or
underwriting tools business applications within the next twelve months.
Exhibit 5: Expected Cloud Deployments for Insurance
Vertical-Specific Software Applications (%), 2011
100%
6% 6% 6%
11% 14% Don't Know
80%
40% 43%
48% 43% 49%
60% No Plans to Use in Next 12 Months
(%)
40%
43% 37%
37% 37% 23% Planning to Use in Next 12 Months
20%
11% 14% 14% Currently Using
9% 9%
0%
Agent/ Broker Underwriting Billing Policy Claims
Application Tools Adminstration Management
Portals
Source: Gartner, Inc., “Market Trends: SaaS in the Insurance Industry,” Derry N. Finkeldey, Steven Leigh,
14 November 2011, Chart created by Capgemini based on Gartner data
The most common barriers to deployment of cloud services for core insurance
business systems are:
• P&C insurers are accustomed to making extensive customizations to their
core applications, and are increasingly deploying solutions using only
configuration capabilities
• Many insurance software projects have major integration elements that can take
up 20% to 30% of the overall project budget8; these integration costs are not
addressed through a cloud offering
• Since core solutions typically have a long life, P&C insurers need to understand
the options for an exit strategy. If they use SaaS for their policy administration for
example, they also need to know how long they will likely use the SaaS solution,
and who will help them move off that platform in 10 to 15 years
7 Vertical-specific software is a software that is specific to the insurance industry, such as software
applications for policy administration, claims, billing, or underwriting etc. functions
8 Capgemini Analysis, 2012
11However, through 2015, the cloud computing opportunities for business support as
well as enterprise applications are expected to increase.
Here are the areas of major opportunities for cloud adoption by P&C insurers:
• Business Support Applications: Through 2015 and beyond, there will likely
be increasing opportunities for email and other business support applications
including office suites, and sales and service management applications such
as Salesforce.com. These applications are not seen as competitive assets, are
typically highly standardized, and require no industry expertise. Cloud computing
can generally provide significant economies of scale
• Infrastructure Services: Services such as storage, server infrastructure, and
Web hosting are expected to enjoy growing demand during the next three years
due to their low degree of vertical specialization required
• Enterprise Applications: Applications such as financial management, HR, and
procurement may lead to cloud adoption in the insurance industry—especially
when organizations are changing their operations model and are, for example,
implementing shared services
• Vertical Applications: Vertical applications that are highly standardized, such
as billing and collections, are anticipated to become increasingly of interest
to small and midsize insurers that are being forced to modernize their IT
legacy environments
• Housing Global Applications: National or multinational insurers that are
interested in housing global applications or expanding their geographic presence,
and want to become more nimble in establishing greenfield operations, are likely to
be among the early adopters of cloud computin
• Private Clouds: Private clouds are expected to be the preferred cloud
deployment scenario and need to be able to provide strong integration capabilities
with insurers’ IT legacy systems
• Community Clouds: Community clouds that are operated by industry
associations may emerge over the next three years, facilitating cloud adoption
among insurers. An example is the Trusted German Insurance Cloud, launched
as an initiative by the German Insurance Association in 2011 to provide common
services, such as customer black lists, to the industry
12 Cloud Computing in the Property & Casualty Insurance Industrythe way we see it
4. Benefits and Challenges
Cloud computing services that enable real-time data access and collaboration
between insurers, distributors, and customers, help insurers develop strong
collaborative capabilities and better information sharing—and improve their bottom
line by enhancing procedural efficiency, and reducing the total cost of ownership of
Perceived cost savings, IT infrastructure.
better collaboration, and
faster time-to-market are 4.1. Benefits of Cloud Computing for Insurers
By deploying and implementing cloud computing solutions, P&C insurers are likely to
the key benefits of cloud achieve six key strategic benefits.
computing for insurers.
Benefit #1: Better Economies of Scale
Cloud computing enables P&C insurers’ IT organizations to commoditize IT
infrastructures and related services, such as development systems and storage
or e-mail applications, removing the complexity of on-premises deployment
and management.
Benefit #2: Scalable Storage and Processing
Many P&C insurers’ IT organizations face the challenge of providing system
resources that meet peak-time data requirements. Cloud computing enables them
to avoid over-provisioning of IT resources and to increase the storage or processing
capacity by orders-of-magnitude at a more affordable cost.
Benefit #3: Higher Productivity/Collaboration
Cloud computing can help insurers provide their agents, brokers, and underwriters
with a common platform, allowing them to gain faster access to real-time data,
and increasing productivity. Such collaboration may also reduce conflicts between
traditional and other alternative channels.
Benefit #4: Achieve Standardization
Cloud computing provides P&C insurers with the ability to standardize and roll-
out systems consistently across multiple geographies. Moreover, as mergers and
acquisitions continue to be a factor in many regions, the ability to standardize
becomes a major driving factor.
Benefit #5: Shortened Time to Implementation
Due to intensifying competitive pressures, P&C insurers need to increase their speed
to market. In a cloud-enabled insurance organization, the business and IT project
implementation timelines are drastically reduced as the infrastructure is available
upfront, tailor made, and scalable as per the business needs.
Benefit #6: Lower Total Cost of Ownership
There is a decreasing desire among insurers for potentially high upfront fixed-cost
agreements and capital investments, making cloud computing licensing models—
primarily SaaS—more attractive. Cloud computing reduces upfront IT investments
for P&C insurers by shifting these costs to vendors who can spread them across
their clients.
134.2. Challenges of Cloud Computing for Insurers
Although P&C insurers can derive significant benefits by investing in cloud computing
solutions, there are certain obstacles that are acting as barriers to the wide adoption
Data privacy and of cloud computing strategies by P&C insurance companies. Data privacy and
regulatory compliance regulatory compliance are among the main challenges to cloud computing for the
P&C insurance industry.
are the main inhibitors of
Challenge #1: Data Privacy/ Security Concerns
cloud computing for the
P&C insurers are apprehensive about the possibility of their customers’ sensitive
P&C insurance industry. personal data being compromised on a public cloud. Any leak of customer data
could have reputational implications for insurers, and it may also lead to lawsuits.
Challenge #2: Compliance
Compliance requirements from local regulators, as well as domestic data privacy
norms, put constraints on the ownership and management of cloud-based services.
Emerging data privacy regulations in the U.S., Europe and other regions may create
additional uncertainty for P&C insurers in coming years.
Challenge #3: Lack of Integration
Integrating applications hosted on the cloud with an enterprise management
system is critical to leverage the full potential of mobile solutions. The lack of
technical integration will prevent insurers from leveraging the full potential of cloud
computing services in terms of process efficiency, data accessibility, and business
partner integration.
Challenge #4: Lack of Standardization
P&C insurance firms generally have too many IT applications and lack a high degree
of data and business process standardization to be able to fully take advantage of
the scalability promised by cloud computing.
14 Cloud Computing in the Property & Casualty Insurance Industrythe way we see it
Success Stories
Efficiently Managing Claims using Cloud Services
A large Mexican insurance company, a subsidiary of one of the largest European
multi-line insurers, offering a wide range of insurance solutions including auto,
medical expense, home, damage, and education insurance, had a claims
management system that lacked development flexibility and could not easily be
adapted to meet changing business needs. The system required extensive, and
costly, maintenance and support. The carrier wanted a new claims-management
system that did not rely on manual processes or infrastructure destined for
obsolescence, but instead had the flexibility and scalability to grow with the
business. At the same time, the insurance company did not want to make costly
financial investments or go through the time-consuming process of procuring new
infrastructure hardware.
The insurer decided to implement a cloud-based platform in a pilot deployment for a
new claims-management system. The cloud-based solution has custom workflows
that route claims to the appropriate department for resolution and then back to
the agent, and alerts that notify employees when action needs to be taken on a
customer’s behalf.
Using cloud computing, the insurer was able to implement its solution in only eight
weeks, compared to between 18 and 30 weeks for an on-premises solution. By
using the cloud-based solution, the insurance firm built a highly scalable application
without having to invest in costly infrastructure—avoiding a one-time hardware
investment of almost US$10,000. On average, the insurer estimates it will spend $97/
month for using cloud-based solution—a 65% savings over three years.
Overcoming Security Issues Surrounding a SaaS Solution
An insurance group—one of the largest insurers in the U.S. offering both personal
lines automobile and homeowners insurance, as well as a wide range of other
insurance and financial services products—wanted to leverage a SaaS solution to
offer electronic signature capabilities. However the insurer was concerned about the
security and privacy aspects of such an offering and how to ensure compliance with
the parent company’s data privacy requirements, based on industry regulations in
the U.S. and Europe.
The insurance firm employed a third-party cloud-hosted security solution that
enabled the firm to manage data security and encryption at the application layer.
The security solution allowed the firm to protect the data in both the public and
private clouds with patent-pending policy-based key management that gave the
control over the access of sensitive data to the insurance firm’s executives. With the
security solution in place, the insurer was able to validate that the virtual machine
security posture was safe to process sensitive data.
The cloud-hosted service was approved by security and privacy officers,
allowing the business team to introduce the new online signing service to customers.
It restricted access to keys, extending protection to sensitive information even in the
event of a data leak.
155. Choosing the Right Cloud
Computing Models
Cloud computing models offer P&C insurance companies the option to move from
a capital-intensive approach to a more flexible, pay-as-you-use business model that
lowers operational costs. However, when an insurance company seeks to move its
core business-specific application into cloud computing, data privacy and security,
The key to success and regulatory compliance are the two primary challenges that must be addressed.
for P&C insurers lies in
The key to success lies in selecting the right cloud computing delivery model to
selecting the right cloud match the business priorities of generating cost saving and improved business
delivery models to match agility while being in compliance with data privacy norms and without compromising
security of highly sensitive customer data.
their business priorities.
5.1. Cloud Computing Adoption Propensity
For P&C insurers, due to the data privacy and regulatory compliance concerns, it is
not easy to decide to what extent and for which functions cloud computing services
should be leveraged.
A holistic cloud strategy that can be implemented across the core and non-core
functions of the insurance value chain is vital to leverage the full potential of cloud
computing services. However, to develop a holistic cloud strategy it is critical to
choose the function and application that is best suited to be moved to a cloud.
Exhibit 6: Cloud Computing Adoption Propensity across
Insurance Value-Chain
Core Functions
Policy Administration Claims
Product Design Front Office and Underwriting Management
Support Functions
A holistic cloud strategy CORPORATE FUNCTIONS
is vital to leverage the Strategy, Planning
Governance HR Management Sourcing
& Management
full potential of the cloud
Corporate Customer Service Finance and
computing services. Communications
IT / IS
& Support Accounting
BUSINESS INFORMATION MANAGEMENT
Reporting & Enterprise Content Information
Systems Analytics
Visualization Management
High Cloud Computing Medium Cloud Computing Low Cloud Computing
Adoption Propensity Adoption Propensity Adoption Propensity
Source: Capgemini Analysis, 2012
Like most industries, for P&C insurance the highest cloud computing adoption
propensity is for non-core business support functions—where systems are usually
standardized and the risk of compromising the security of highly sensitive customer
data is relatively low.
However, insurers may not want to leverage cloud computing services— at
least during the early stages of the cloud adoption strategy—for their core policy
administration and claims management function where the data migration risk is very
high and the applications are disparate.
16 Cloud Computing in the Property & Casualty Insurance Industrythe way we see it
Once the cloud adoption propensity analyzed is finalized, the P&C insurers need to
decide the best cloud computing delivery model to leverage to achieve their goals of
cost saving and enhanced business agility without compromising customer data.
5.2. Finding the Appropriate Cloud
Computing Delivery Model
No single cloud computing delivery model alone can best meet the two most
important business priorities: data security and cost savings. P&C insurers need to
deploy a mix of cloud services delivery models based on the risk considerations at
each core and non-core function.
For core functions like product design and front office applications, including agents
and broker portals, P&C insurers are likely to prefer a hybrid cloud delivery model
where the cloud infrastructure is composed of two or more clouds (private or public)
based on insurers’ business needs and security concerns.
Exhibit 7: Deploying Cloud Computing Delivery Models
Across the Insurance Value-Chain
Core Functions
Policy Administration Claims
Product Design Front Office
P&C insurers are and Underwriting Management
expected to deploy a mix Support Functions
of cloud services delivery CORPORATE FUNCTIONS
models based on the risk Strategy, Planning
& Management
Governance HR Management Sourcing
considerations and level Corporate Customer Service Finance and
IT / IS
of system standardization Communications & Support Accounting
at each core and non- BUSINESS INFORMATION MANAGEMENT
core functions. Reporting &
Visualization
Enterprise Content
Management
Information
Systems Analytics
Public Cloud Hybrid Cloud Private Cloud
Source: Capgemini Analysis, 2012
For policy administration and underwriting, and claims management applications,
P&C insurers are likely to invest in private/community cloud delivery models to
overcome customer data privacy/security and compliance concerns. Although
private clouds are likely to be current preference, community clouds that are owned
and managed by industry associations are increasingly expected to emerge as the
model of choice.
Most P&C insurance organizations may seek to leverage public clouds for non-core
or non-revenue producing applications because of relatively lower risk considerations
and a higher degree of standardization in the industry. This will help the insurers to
reduce the total cost of ownership of these applications.
P&C insurers should develop a holistic cloud strategy based on risk consideration,
level of standardization, and target total cost of acquisition.
176. Conclusion
The cloud computing services market is forecasted to continue growing at a rapid
pace over the near-to-medium term. This growth will be driven by key business
priorities including operational flexibility, cost savings, and pay-as-you-use models.
P&C insurers are expected to enter the cloud computing arena cautiously, with no
single cloud services delivery model being a silver bullet for best meeting all their
business needs.
Cloud computing solutions will help insurers develop strong collaborative capabilities
and better information sharing, as well as improve their bottom line by enhancing
procedural efficiency, and reducing the total cost of ownership of IT infrastructure.
The key for P&C insurers to succeed is to develop a holistic cloud strategy that can
be implemented across the core and non-core functions of the insurance value
chain. P&C insurers should develop their cloud strategy based on risk consideration,
level of standardization, and target total cost of acquisition at each core and non-
core functions level.
The use of cloud computing solutions in the insurance industry is likely to continue
expanding going forward. The insurance companies who want to gain a competitive
edge are already developing their holistic cloud computing strategy and program.
In the absence of a holistic cloud computing strategy, insurers will be challenged to
achieve their business priorities of cost saving and enhanced business agility without
compromising customer data and security.
18 Cloud Computing in the Property & Casualty Insurance Industrythe way we see it
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19Insurance the way we see it
About the Authors
Sree Rama Edara is a Manager in the Insurance Centre of Excellence (CoE) for Capgemini
Financial Services with over 20 years of experience in insurance.
Ranjith Kumar Kandagatla is an Assistant Manager with the Global Insurance practice for
Capgemini Financial Services and has ten years experience in insurance.
The authors would like to thank Rengarajan Appan, William Sullivan, and David Wilson
for their contributions to this publication.
About Capgemini
With 120,000 people in 40 countries, Capgemini is one of the
world’s foremost providers of consulting, technology and
outsourcing services. The Group reported 2011 global revenues of
EUR 9.7 billion.
Together with its clients, Capgemini creates and delivers business and
technology solutions that fit their needs and drive the results they want.
A deeply multicultural organization, Capgemini has developed its own
way of working, the Collaborative Business Experience™, and draws on
Rightshore®, its worldwide delivery model.
Learn more about us at
www.capgemini.com
For more information, contact us at: insurance@capgemini.com
or visit: www.capgemini.com/insurance
The information contained in this document is proprietary. ©2012 Capgemini. All rights reserved.
Rightshore® is a trademark belonging to Capgemini.You can also read
