Protecting data, closely adhering to pertinent rules and regulations, cleanly importing existing architecture, and controlling costs are all imperative for insurance companies when they migrate to and work in the cloud.
Recent survey data shows that 91% of banks and insurance firms are migrating to the cloud. And no wonder: Cloud migration offers significant benefits, such as better security, effective resource management, and cost optimizations. But these benefits don't come without challenges.
Addressing Data Security and Compliance Concerns
Properly managing the vast amounts of personal data insurance companies handle – which are so critical to day-to-day operations – involves changing the infrastructure, networks, access controls, and firewalls, among other things. All of these changes create big security challenges. Fortunately, cloud providers offer multilayered security measures, such as advanced network protections, continuous monitoring, end-to-end data encryption, secure backups, and rigid user permissions.
Combining these approaches with employee best practices such as multifactor authentication, secure awareness training, and role-playing scenarios around social engineering can give insurers a multilayered data defense posture.
Cloud providers also help insurance companies adhere to industry-specific regulations (e.g., GDPR and HIPAA) that require detailed security audits to monitor access to restricted data. They do this by automatically creating and updating those logs to better prepare them for quarterly or annual compliance audits.
Clearing Legacy System Integration Hurdles
Insurance firms have huge hurdles to clear to successfully integrate legacy systems into the cloud. That's because a typical company's traditional infrastructure is weighted down with a mainframe administration system that may contain decades of policy information, claims and customer data. Systems that use obsolete programming language, unique architecture, or ancient data formats face a formidable challenge.
Maintaining legacy systems can waste time, retard digital transformation, and impair network performance. This is a priority concern for insurers, which say they spend 70% of their IT budget on that task. Moreover, per-policy IT costs can be 41% higher on legacy platforms.
Installing a modern system lowers maintenance costs by making legacy skills less necessary, fostering automation, cutting the time and energy businesses need to introduce new initiatives, and making IT and business teams more efficient.
There are ways to effectively migrate these systems:
- Moving one or two systems at a time, in phases, reduces the likelihood of downtime and improves customer satisfaction. Testing and validating each migration ensures the highest-level performance.
- By adopting a hybrid cloud approach, insurers can keep immovable, critical systems on-site or in legacy infrastructure while moving testing environments, data warehouses, or customer-facing software-as-a-service (SaaS) applications into public or private clouds. This lets insurers scale more modern systems cost-effectively without importing traditional architecture before it's ready.
- Microservices disassemble siloed, legacy infrastructure into smaller, independent applications, making it easier to modify outdated software. APIs take it from there, communicating in real time to cloud servers or third-party vendors so insurance companies can improve their reliability, build faster deployments, and conduct a controlled, well-paced cloud migration over time.
Optimizing Cloud Costs
Migrating to the cloud requires insurers to apply careful IT cost management to efficiently store data and process workloads. Most cloud providers have built-in cost management tools, mostly user-friendly, easy-to-understand interfaces that provide high-level pre-configured views and granular customer reports. This way, companies can see what they're spending, how to better control costs, and project costs as their businesses grow.
By right-sizing cloud resources, insurers can auto-scale to accommodate peak demand periods (e.g., the major increases in server capacity that health insurance providers experience during open enrollment season when potentially hundreds of thousands of users try to register all at once). Dynamically expanding server capacity makes it easy for customers to sign up for new policies – which cuts downtime and boosts revenue.
There are two most effective ways to optimize cloud costs. The first is reserved instances – which strengthen core business functionality with a stable, consistent system purchased for longer periods. The second is spot instances, which help use idle cloud capacity at a lower cost for testing or data processing tasks.
Taking a Strategic Approach
Providers confront unique data security, legacy systems, and cost management challenges in moving to the cloud. But the long-term benefits – faster, nimbler digital transformation, a competitive edge, greater employee productivity, and more secure network infrastructure – frequently outweigh the short-term process frustrations.
