Insurers Finally Get Acquainted With Cloud

The new form of computing requires the same management and due diligence as any IT engagement, but insurers are finding areas in which to apply it.

Insurance Networking News, August 1, 2012

Joe McKendrick

While cloud computing still elicits worries about data security and systems resiliency, many CIOs and industry observers report that carriers are getting more comfortable with the cloud and are beginning to see greater possibilities beyond simple cost savings. Now, both private and public cloud services are serving the needs of a number of insurance companies, and some analysts are even starting to advocate that insurance companies get into the cloud business themselves.

Overall, there has been a sea change across industries in attitudes toward cloud computing, as reflected in the results of a recent North Bridge Venture Partners survey of 785 companies. Companies are accelerating their trust in cloud solutions, with 50 percent of survey respondents "confident" that cloud solutions are viable for mission-critical business applications.

This confidence is increasingly being seen in the insurance industry, which now is engaging the cloud with the same levels of enthusiasm seen among banks, financial services, and for that matter, retailers and business service providers, observes Stanton Jones, analyst with Information Services Group (ISG). "There are very strong examples of insurance companies moving to SaaS [software-as-a-service] platforms," he says. "They are definitely getting more comfortable with cloud computing in general."

Continuity

Scalability and business agility top the list of business cases to be made for cloud, as related in the North Bridge survey. The leading applications moving to the cloud include backup and archiving (43 percent), business continuity (25 percent), collaboration tools (22 percent) and big data processing (19 percent).

Backup and business continuity is certainly on the mind of Michael Anselmo, CTO of Narragansett Bay Insurance. The insurer operates two remote, cloud-based data centers to provide resiliency. "Our specialty is homeowners' policies," however, the company is headquartered in Rhode Island, which often is in the path of hurricanes, he says. "We need to ensure that we are up for our policyholders during hurricanes. The issue is that while we want to be supportive in the event of a hurricane, our biggest issue would be claims. During a hurricane, we're not selling policies, we're servicing claims." For that reason, all of Narragansett Bay's operations-including its phone systems-are in the cloud.

Insurance agencies also are seeing the advantages of cloud computing. Backup is a crucial cloud application at Grace/Mayer Insurance Agency Inc., which employs live, Web-based backup of its systems, as well as a third-party provider for its e-mail. "We don't use tape or anything-all our backups go to a local [network-attached storage] device, and then that gets replicated offsite," says Jim Vigotty, IT manager at Grace/Mayer. "I have a backup every 15 minutes."

Vigotty's team has actually been using Web-based backup for more than a decade, "before it was called cloud." Anything that needs to be recovered, he says, can be done within a matter of minutes from the cloud, he adds. Previously, to retrieve a file, he would have needed to mount the file from a tape, a process that could take up to an hour.

Cloud can be blazingly fast, and there are many issues that can be quickly remedied by available cloud solutions. For New York Life Insurance Co., the option was to go to a cloud provider for agents' document management requirements. "Agents out in the field were getting buried by paper," says Bruce Rector, owner and president of MuniMetriX, which runs the document cloud for New York Life. "They wanted to get rid of it. Its home office had a big giant system, but individual small agents couldn't have that, and it couldn't be rolled out to the field."

Through the cloud engagement, New York Life is able to maintain "the complete client files that agents have," says Rector. "They have the applications, then they have their fact finders and policy receipts, illustrations-everything dealing with the clients. They don't have paper files anymore. They still go out for onsite visits for various reasons; they want to visit the agent in the office, but all the reviews are now done in the cloud."

Maturity

Security remains the primary inhibitor to adoption, with 55 percent of respondents to the North Bridge Ventures survey citing it as a concern, followed by regulatory compliance (38 percent) and vendor lock-in (32 percent). Data security is still a major concern among CIOs, particularly in the cautious insurance industry.

However, ISG's Jones argues that cloud security has matured greatly over the past one-to-two years, and furthermore, it's getting to the point where data may be more secure in the hands of an outside cloud provider than an internal IT department. "Major cloud providers know security is their business. If they can't prove that they have a secure platform, then they have no business," he says. "Not only are IT organizations getting more comfortable with cloud, I think sometimes they're finding that they're looking at their own operations and realizing that the cloud provider has a better security architecture and a better security footprint than they do."

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