Most insurers are leveraging the cloud, but few unlock full benefit
More than 80% of insurers use cloud infrastructure today compared with just 29% in 2020.
A strong majority (91%) of insurance companies and banks have started moving their core business applications to the cloud, but few are leveraging cloud computing at a scale to reap its full benefits, according to Capgemini Research Institute. More than half of the companies surveyed have moved just a fraction of these core applications to the cloud.
Zooming into the P&C industry’s survey results show that 85% of companies are using the technology today compared with just 29% of companies in 2020, Capgemini’s survey revealed. The rapid pace of adoption in recent years has been driven demands for transparency, streamlined customer services and improved operational efficiency. At the same time, concerns about data security and resiliency in a cloud environment have waned.
While insurers are more open to the cloud now, many are opting for a “lift and shift” cloud migration method, which “impedes cloud systems’ full scalability and flexibility,” according to Capgemini.
“For today’s financial services organization, ignoring the cloud is simply not an option. Moving to the cloud requires looking beyond a cost-savings approach and being centered around driving innovation to gain a competitive edge,” Ravi Khokhar, global head of cloud for financial services at Capgemini, said in a release.
Where are P&C insurers in the cloud journey?
P&C companies are actively loading policy management and servicing functions onto the cloud. Using cloud infrastructure in this way can help insurers develop personalized services to assist sales and distribution. Capgemini reported a major carrier has leveraged the cloud to automate case creation for phone and chat flows, which reduced manual effort and lifted sales.
When it comes to servicing policies, AI can help insurance companies optimize pricing at renewals and negotiate the best value based on the underlying risk. However, suitable cloud environments are “critical” to unlocking the potential for AI, Capgemini reported.
“As companies race to adapt and implement generative AI, they need to be mindful that there will be no future AI benefits to be realized without cloud-enabled systems,” Khokhar said. “By defining and establishing an effective cloud target operating model at scale, the full potential of these transformational new technologies can be harnessed.”
As it stands, insurers are primarily investing in AI applications that are consumer facing. However, the lack of investment in backend core processing systems, which feed consumer-facing applications, is resulting in poor overall user experiences, according to Capgemini.
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