To prosper in this new environment insurance companies can look to the cloud, in conjunction with other technologies, to help drive reinvention of their business model to offer new services and create direct, multi-channel relationships with customers

1. www.niit-tech.com
NIIT Technologies White Paper
New Era in Insurance: Cloud ComputingNew Era in Insurance: Cloud Computing
Surekha Sugandhi
Insurance Practice - Solution Architect

2. CONTENTS
Cloud Computing Services in the P & C Insurance Industry 3
Key Drivers for Cloud Adoption 3
Cloud Adoption Inhibitors 4
Best Practices for Cloud Computing Adoption 5
Conclusion 6

3. Cloud Computing Services in the
P & C Insurance Industry
Key Drivers for Cloud Adoption
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.
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.
3
Cloud, mobility, and advanced analytics are transforming the way
insurance companies offer value to their customers. As competitive
pressures within the industry increase, insurance companies will
turn to technology for assistance in this changed environment.
To prosper in this new environment insurance companies can look
to the cloud, in conjunction with other technologies, to help drive
reinvention of their business model to offer new services and
create direct, multi-channel relationships with customers.
The insurance industry faces daunting technology challenges,
including limited resources, aggressive timeframes and
often-unrealistic demands from business stakeholders Leaders
must reduce costs, increase service quality and position for
growth in rapidly changing markets. The changing regulatory
environment and unwieldy legacy applications make these efforts
even more difficult.
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 as:
sales and service support, collaboration, file sharing, and web
conferencing.
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.
Perceived cost savings, better collaboration, and faster
time-to-market are the key benefits of cloud computing for
insurers. Data privacy and regulatory compliance are the main
inhibitors of cloud computing for the P&C insurance industry.
Figure 1: Public Cloud Computing Adoption
6.715.1
25.5
Global Public Cloud Computing Market Size
2009
2010
2011
2012
2013
2014
2015
113.9
97
78.4
58.6
41

4. 4
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.
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 year.
Information Security Governance
Today, opinion is divided about whether protecting your corporate
data in the cloud, both to be certain it is there when you need it
and to safeguard it from unauthorized access by others, is more
difficult than doing so on your own.
Culture and comfort aside, simply communicating data over the
public internet, as opposed to keeping it entirely within a private
corporate network, may increase data vulnerability. In addition, the
business models of CSPs involve sharing infrastructure among
many clients and managing IT workloads among many different
physical machines or even geographically dispersed data centers.
That workload management issue means that a given cloud user
may not be able to determine precisely where its data is located or
how that data is protected. The shared infrastructure issue
effectively links the security fates of all users in a given cloud in a
sort of unintended Commune. These issues were cited in a recent
European Commission report as the key reasons why cloud
computing will require entirely new security governance models
and processes.
Privacy Concerns
On the privacy side, there is the concern, of course, that personally
identifiable information stored in the cloud can be breached more
easily than if stored in-house — but that’s mainly a security
concern. Beyond data protection, the core privacy problem for
enterprise businesses adopting cloud computing stems from the
diversity of privacy regulations from country to country, juxtaposed
against the CSP business model.
Cloud computing can complicate how you safeguard the
personally identifiable information of your customers, business
partners and employees, both to meet your organization’s own
legal and ethical requirements and to comply with the privacy
regulations of all the jurisdictions in which you do business — or
through which your cloud passes.
Manage Risk Communication and Training Plan
Cloud Adoption Inhibitors
While cloud services are simpler to use and less costly than many
in-house alternatives they add complexity to the businesses of
established companies entering the cloud computing market,
whether as service providers or users. The delivery of cloud
services is leading to new, multi-layered revenue streams with
increasingly complex and uncertain security, privacy, tax and
related compliance and control consequences for cloud computing
users and providers alike. Among the inhibitors are:
Loss of Control
Instead of controlling the IT environment directly, through the
implementation of technical specifications that they define, cloud
users manage their IT infrastructure through their relationship with
their Cloud Service Providers (CSPs) and through service level
agreements (SLAs). This requires skills that IT organizations
typically do not possess today, so they will need to reinvent
themselves to make this shift a smooth journey.
The other vendor management challenges stem from the loss of
control and lack of transparency into infrastructure details that
often come with moving to cloud services from in-house or
traditional outsourcing models.

5. 5
Keep cloud Efforts on Track
Make sure cloud computing receives the focused thinking,
planning and follow-up it requires. Identify and address both
immediate and longer-term business needs and opportunities that
lend themselves to cloud computing.
Set the standards for Success. Provide the
necessary oversight to the IT Organization
Make sure goals and deliverables are well understood, and
projects are well aligned with business needs. Clarify how the value
from cloud computing is to be determined.
Provide the necessary Support
Besides financial resources and technical talent, support other
activities that will underpin the success of cloud initiatives.
Examples may include a community of practice or a cloud program
office to develop cloud skills and share experiences.
Buy Cautiously, Appraise Frequently
It is too early to predict who the major cloud providers will be in a
few years, and what capabilities they will deliver, or how well. So,
when selecting cloud providers, carefully consider whether they
have the potential to be a desirable partner in the future. Even after
they are chosen, evaluate your partners on their financial stability
and on their ability to improve functionality and service levels, and
Integrate data across services.
Best Practices for Cloud
Computing Adoption
Understand the condition and scope of your
entire IT infrastructure and application portfolio
to create a prioritized list of what should go to
the cloud and when
Security and regulatory concerns undoubtedly will play a major role
in determining which applications can move to the cloud and
which likely will always have to remain in house. However, another
determinant is the lifecycle of the application. If an insurer knows
that one of its applications is due for a major upgrade program,
replacement or retirement within the next two years that could well
be the trigger point to move to the cloud.
Establish a clear Governance structure for
Cloud Computing
Many organizations have rules and structures in place that govern
how IT decisions are shared b between departmental leaders and
Regulatory Compliance
Cloud services are delivered by “virtualizing” hardware and
software that could theoretically be located anywhere in the world.
Thus, cloud computing raises new questions about whose rules
must be followed
Lack of Standards
Many standards are required to simplify interoperability among
cloud providers and between enterprise systems and cloud
services, but few exist. The lack of standards also may pose
obstacles to recovering data, whether for the purpose of legal
discovery or for migrating from one CSP to another
IT executives. Use these to define who inside and outside the IT
organization should be engaged in decisions on cloud computing.
Inspect what you Expect
When dealing with the cloud, service-level agreements are crucial
because cloud computing entails reliance on third parties. Thus,
choosing a service provider that meets SLAs is vital.

6. 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.
6
The key for P&C insurers to succeed and gain a competitive edge
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 noncore functions level. 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.
Conclusion

7. D_61_250314
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