Cloud Solutions for Insurance: Streamlining Insurance Processes Without a Complete Overhaul

The insurance sector has been striving for modernization through digital transformation since the 1980s. Despite technological advancements, the industry has struggled to keep pace, often relying on older technologies that fulfill their initial purpose but fail to meet the expectations of today’s customers and employees. In this blog we will look at why insurance carriers need to modernize their core system platform, the challenges associated with modernization and cloud solutions for insurance like Silk.

The Need for Cloud Solutions for Insurance

Insurance providers often invest more resources in maintaining and supporting outdated systems than in exploring new business opportunities and developing innovative products. These resources could be better utilized in creating new products, exploring fresh sales channels, and other competitive endeavors.

Over the last 50-75 years, the insurance industry has been facing a number of challenges related to technology. Rapidly changing technological advancements have been making it hard for carriers to keep up. While the industry refers to this as digital disruption, one might argue that this is all part of a continuing technical evolution. Legacy systems need to be modernized and carriers need to evaluate a modernization strategy that aligns with their goals and priorities. Artificial Intelligence (AI) is one technological advancement that is spurring on the desire to modernize and move to cloud solutions compatible with AI ecosystems. Many carriers are experimenting with AI but struggle to find the right use cases with the expected ROI.

Climate change is another aspect of change that is impacting the industry. Because of climate change, there are new potential risks and a need for more advanced modeling. There is a new generation of customers and employees that are driving new advancements in customer experience and creating a need for new service offerings and products.

Regulatory and security concerns are also always top-of-mind for those in the industry. Regulatory compliance is something all carriers need to address and with regulations constantly evolving, this makes compliance a complex undertaking. Finally, cyber threats continue to grow, and carriers need to adjust to protect their company, their cloud footprint, and their customers.

While this is not an exhaustive list, these challenges are making carriers rethink their strategies to adapt to this rapidly changing landscape and maintain and grow their competitive advantage.

Modernization is essential for carriers to leverage the advantages of technology and deliver greater value to their customers. The shift from a repair-and-replace approach to a predictive and preventive strategy can minimize damage, injuries, and loss of life through data and AI. For example, if a carrier is aware of a severe weather threat with high winds and hail, they can proactively reach out with a text message that indicates that putting your car in a safe place might avoid a claim. They can also send information on how to stay safe and where to get help in an emergency. This proactive role enhances the carrier’s value proposition and allows them to offer additional services. However, delivering modern services with outdated technologies is challenging.

According to a Gartner survey, the driving force of a majority of insurance digitalization initiatives in 2023 is not growth but improving the customer experience and achieving operational excellence. The survey found that over half of insurance industry CIOs are increasing technology investments in 2023, with the most common areas being application modernization, cybersecurity/information security, and BI/analytics.

A report by Deloitte Insights reveals that most insurers have begun their modernization journey. However, fewer than one-third have completed some (20%) or all (12%) of their initiatives. Just over two-thirds have projects currently underway or in the planning stage.

These statistics highlight the urgent need for modernization in the insurance industry and the ongoing efforts towards achieving it.

Options for Modernization in the Insurance Industry

Carriers often need to significantly alter their core system strategy to transform their business and address their priorities of enhancing customer and employee experiences. There are three primary modernization strategies:

1. Purchasing a Commercially Available Core System: This could involve replacing or updating an existing core system to make it more adaptable and responsive to the carrier’s needs. Over time, customers may have customized these environments, making modernization costly and time-consuming.
2. Developing a New Proprietary Platform: Some companies may opt to construct an entirely new platform tailored to the carrier’s specific needs. This option can also be expensive and take years to complete.
3. Legacy Platform Modernization: This involves adjusting the existing environment to optimize processes and make more efficient use of technology. These projects can be shorter in duration and aim to enhance performance and outcomes without significant investment.

Each option has its pros and cons, but all can aid carriers in their modernization efforts. In each case, carriers need to assess the cost, time to market, and overall risk.

When you think about legacy platform modernization, it shouldn’t matter if your business units are using a combination of core systems on a mainframe, home grown applications or, commercially available applications like Guidewire, Duck Creek, EIS, Majesco or Sapiens. With the right cloud solution for insurance, you can gain better access to your data, enhanced with third party information and AI to drive improved outcomes and experiences for customers and employees. Done properly, modernization can improve the customer onboarding and claims experiences, help to move to a predict and prevent methodology, identify new sales opportunities, identify the need for new products and services and provide a holistic view of your business by agent, agency, customer, line of business, etc.

Advantages of Modernizing a Legacy Platform to the Cloud for the Insurance Industry

When undertaking modernization, it’s crucial to demonstrate incremental benefits to management.  For example, delivering a rapid, lower cost solution that immediately enables you to provide a more differentiated service to a new or existing customer. This shows the value associated with the project and the resulting ROI. For example, lowering the cost of claims improves the customer experience along with potential legal and fraud costs. If management sees that kind of value, they will continue to support the subsequent phases of the project. The ultimate goal of modernization is to enhance existing systems while planning for the future. Providing superior tools to sales and customer service teams, improving performance, and gaining deeper insights into claims, customer, sales, and underwriting data are all considerations on the modernization journey.

At Silk, we aim to reduce risk and maximize benefits for our customers. Silk enables Insurance companies to modernize on the cloud using our cost efficient, high performance, high resilience architectures, and our support for easy and efficient use of data across multiple teams, such as for claim processing or supporting AI models for predict and prevent applications. Silk allows customers to streamline their current environment while planning their long-term modernization strategy. Our solution optimizes current systems with a comprehensive plan to drive further modernization based on needs. We create cloud solutions that evolve with your changes and don’t require replacement in the long term. This approach equips sales and service teams with the tools they need today to offer differentiated services and better understand and meet customer needs. It also promotes a more self-service approach for customers that understand their needs and can provide guidance through multiple channels.

Core system modernization is not merely a trend; it’s a necessity for insurance companies to remain competitive in the digital era.