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Benefits of Deploying a Hybrid Cloud

Several long-established industries are considered “legacy” — having little motivation to change and slow to adopt new, critical technologies. Large, stable industries that provide essential or compulsory goods and services–like insurance–often fit squarely within this realm. But in 2020, the COVID-19 pandemic forced business leaders in legacy verticals to quickly adapt their technological infrastructure to support the long-term remote workforce. 

In the insurance industry, organizations already considering digital transformation sped up their plans. Some started nearly from scratch. , Leaders focused on innovations in areas like personalization, IoT, process digitization and even artificial intelligence. However, one essential area that is still frequently overlooked is the adoption of hybrid cloud models. 

The ability to undergo agile digital transformation while maintaining the same customer service levels and keeping up with shifting markets is possible–if the underlying infrastructure can adapt rapidly to changing needs. Cloud technologies, and specifically hybrid cloud models, enable smoother digital transitions for traditional industries because they can easily operate their existing on-premise infrastructure during the transition process.

What are the advantages of implementing a hybrid cloud model for insurance companies? Here’s a closer look.

What is the hybrid cloud model? 

A hybrid model in its most basic form is a computing environment that shares data with both a private and public cloud. Private clouds are dedicated specifically to an organization while a public cloud is delivered via the internet and shared across an organization. Less critical workloads can move to the public cloud without opening public access to data, while more sensitive information is kept in a more secure private cloud. Hybrid is an accommodating approach, especially for insurance businesses, which often store sensitive or protected customer information. 

Many industries cycle through short periods of increased demand. For example, insurance companies are busier when home and real estate sales are higher in the spring and summer and slower in January-February. Instead of investing millions of dollars to accommodate increased data and information during a small window of time, a hybrid cloud model scales seamlessly to accommodate evolving needs. Organizations may have the flexibility to only pay for services they use when needed. 

The hybrid cloud model affords many other advantages:

Improved data security and privacy

Data security and privacy is an ever-growing concern for IT and business leaders, especially in industries like insurance that house sensitive or legally protected customer information. For this reason, moving to the cloud can seem like a risky option. However, a hybrid cloud model can alleviate some of these concerns as doing so can reduce the risk of data loss or exposure. 

In a hybrid model, companies may opt to store their most sensitive data on-premise and shift functions like accounting or other operational processes to the cloud, all of which drives process optimization and cost savings.

See also: Tapping Cloud’s Ability to Drive Innovation

Enhanced flexibility over infrastructure 

Some business leaders in the industry have been hesitant about making the jump to the cloud due to concerns that they won’t achieve the same performance as that of on-premise infrastructure. However, the most important aspect of this transition is deciding which parts of the workflow must stay on-premise and which can be shifted over. This is a process that actually provides IT teams more flexibility and control within the overall system. 

The teams also can strategically use more of their budget through hybrid models because pay-as-you-go plans with no upfront costs are available. Cloud-only solutions can be costly upfront and disrupt workflows through complete lift and shift, but hybrid allows internal teams to define where multi-tenancy is needed. And, of course, any operations moved to the cloud will also benefit from automatic application fixes and updates–so they’ll always be using the latest technology.

Better disaster recovery measures 

Disruption, data breaches and physical infrastructure damage were prevalent in 2020 and early 2021. Insurance leaders must keep these concerns top of mind when making decisions about where and how to house varying types of data. 

A totally on-premise solution presents risks in disaster recovery. Contrarily, hybrid models can scale noncritical workloads while allowing IT teams to secure the most sensitive data and act quickly in the event of a disaster. 

Legacy industries don’t have to get stuck in the past or be forced to lift and shift all workloads into a full-scale cloud migration. Instead, organizations with critical infrastructure like insurance should implement a hybrid cloud model to reduce costs, improve security and enhance overall operations and productivity during peak seasons.

The Intersection of IoT and Ecosystems

Traditional, end-to-end business models are breaking down in every industry, including insurance. In the digital era, it is increasingly difficult for any single firm to deliver the seamless experience that customers expect. More insurers are leveraging digital ecosystems to reinvent their products and services, providing better risk management, reduced claim cost and new sources of revenue.

However, rooted in legacy systems and siloed business structures, most insurers even lack the foundations to successfully execute insurance ecosystems. Insurance organizations will likely struggle in moving from traditional insurance offerings to tailored, ecosystem-driven customer experiences.

Nonetheless, insurers should have a plan for incorporating ecosystems into their business models. It’s time for all insurers to become insurtechs.

As opposed to the traditional business model, where insurers create and distribute end-to-end products and services, an ecosystem model is characterized by unified/digital platforms that incorporate third-party products and services and collaborate with segment-focused distribution partners. Carriers must either bundle value from others with their products (e.g., providing IoT-based real-time risk mitigation services) or provide value to a bundle that someone else is creating (e.g., insuring the performance delivered by an IoT service provider).

Based on research from the IoT Insurance Observatory — a think tank focused on North America and Europe with almost 60 members, including many of the largest insurance and reinsurance groups and prestigious tech players like ValueMomentum — the adoption of IoT requires a robust set of capabilities, as represented in the following figure. 

Source: IoT Insurance Observatory

See also: The New IoT Wave: Small Commercial

Any insurance IoT program is a multi-year journey that requires overcoming functional silos, coordinating the different stakeholders and developing a collective intelligence. Insurers can achieve four kinds of goals:

  1. Improving core insurance activities (assessing, managing and transferring risks) by using IoT products and services for continuous underwriting, claims management and risk reduction. This goal was investigated in depth in our previous article, “Chloe and Insurance: A Love Affair.” 
  2. Providing positive externalities to society, a topic more and more relevant due to the current focus on ESG investments (environment, social and governance);
  3. Generating knowledge about policyholders and their risks. This knowledge has allowed carriers to insure current risks in a different way, enable up- and cross-selling actions and insure new risks;
  4. Improving customer experience by interacting with them more intimately and frequently, moving beyond the traditional risk transfer. Many players are selling additional services for a monthly fee; others have found new ways to sell insurance coverages thanks to IoT.

Partnerships are a key differentiator. Some insurers have recently announced bold initiatives to use an ecosystem to expand their reach. One such insurer is Nationwide, which recently disclosed its partnership portal, where it exposes its services and protection products – including auto usage-based insurance (UBI) and connected homeowner insurance – to partners. 

With more than half of insurers delivering on their core systems modernization projects in recent years, it’s time insurers leverage data coming from their core systems to grow their business. By integrating IoT devices data to the core system data and leveraging this data fusion, insurers will have the opportunity to build a more holistic view and understanding of their customers and their risks. Insurers will be able to build a sort of digital twin of the customer, then tailor their services and offerings and improve the customer experience. Insurers will also overcome business lines silos, enabling upselling and cross-selling. 

Many senior insurance executives acknowledge that the world will be more and more connected, but, even with ecosystems as a topic on the agenda, IoT has not been exploited in business processes in a meaningful way. To lead an IoT-based business transformation, a clear vision and a structured and well-communicated plan are necessary. 

Technology is one of the key enablers of this transformation. However, insurers will have to carefully investigate, determine, prioritize and experiment with a range of IoT business use cases to develop an IoT-based business model. Many insurers are exploring a range of scenarios beyond connected cars, including connected homes, health and lives, infrastructure, factories and transportation. A comprehensive approach to help insurers build out the required capabilities for IoT is below. This insurtech approach takes insurers from business model definition to vendor partner strategy, to platform implementation and finally to IoT insights across the insurance value chain.

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A main challenge for insurers is building the technology architecture to aggregate, normalize and analyze data to make it available for the IoT platform. A big question for many is: How do I get started? An effective way to develop your architecture is by leveraging frameworks.

The framework below breaks down the broad portfolio of technology components, services and capabilities. The components are arranged in three layers – Edge, Fog and Cloud computing – addressing where data should be stored and processed for speed, cost and effectiveness, depending on the type of data and purpose of the data. 

The collection of managed and platform services shown in the framework, across Edge and Cloud computing layers, connects, monitors and controls IoT assets and the processes that generate data for insights and analytics. These services work together across multiple layers that include the IoT ecosystem — such as sensors, devices and industrial sensors — and connect to the computing infrastructure at Edge, Fog or Cloud, persistently or intermittently. 

Data collected by the IoT ecosystem is then processed and analyzed at the Cloud layer, along with enterprise data sets such as on customers, policies, claims and billing. All of this data forms the inputs to the digital twin, which can then be turned into actionable outcomes using the latest computing techniques. 

For insurers that are currently investing in IoT, and for many more that are considering doing so, this framework can help guide your approach and provide a strong architectural foundation.

See also: Global Trend Map No. 7: Internet of Things

As new waves of technology or sudden social shifts bring disruptions or opportunities to the industry — similar to telematics or digitalization — insurers must capture opportunities rapidly. Insurers that can reinvent themselves by leveraging data, including from the IoT, and form ecosystems will win.  

After all, the digital economy is a “made for me” economy, and the digital twins allow insurers to tailor insurance experiences. Customers will reward organizations that understand their needs and provide them personalized value. 

There are already examples of successful insurers – in different business lines and different geographies – that have effectively integrated IoT. Their stories mastering usage of IoT is an achievable target without investing hundreds of millions of dollars, but instead by leveraging the right partnerships.

Tapping Cloud’s Ability to Drive Innovation

As insurers accelerate their digital transformation and customize solutions in areas like customer engagement and data management, they are realizing that they must overhaul traditional approaches and infrastructures and replace them with forward-looking, cloud-enabled solutions.

Instead of looking at a set list of projects or deliverables and identifying how cloud infrastructures can help efficiently tackle them, leaders need to look holistically at the various benefits that such systems can deliver – both in the short and long term – and focus on the myriad of forces that the cloud can help unleash. 

Cloud-Powered Forces

Three key forces that the cloud can unleash are speed, the intelligence premium and innovation.  

  • Perceived speed — This is the most compelling cloud force. Not too long ago, IT departments had to order equipment, navigate shipping delays and gaps in available inventory and then spend weeks receiving, installing, configuring and testing. This protracted timeframe caused major corporate initiatives to stall. In the cloud world, wait time is no longer part of the equation – the expectation is that you can get up and installed within hours. 
  • Improved learning process Smart, ambitious people can learn from various cloud courses (online even). People don’t need their manager to approve the cost or time for a corporate-backed training course and endure other impacts of bureaucracy. They can soon have the knowledge needed to leverage the cloud’s potential to build and do new things.
  • Innovation acceleration — Combining smart internal resources with a powerful cloud provider can greatly accelerate innovation.

Identifying the Right Cloud Partner

Once insurers appreciate the potential of the cloud, the next step is identifying the right partner, which will drive an organization’s core cloud infrastructure and therefore be an important collaborator in innovation. At Security Benefit, we recently decided to go all in on AWS, and that’s been great for us. In discussions with AWS employees, we hear all the time that “it’s always Day 1,” which speaks volumes to the provider’s innovation culture. 

Embracing innovation is important for acquiring talent. Prospective employees – junior and senior alike – want to know that they are landing at a place that champions groundbreaking ideas. When a company is leveraging the cloud’s capabilities, that organization is suddenly attractive to a larger pool of talent. This, in turn, compounds future opportunities for innovation.

See also: Data Security to Be Found in the Cloud

Overcoming the Hurdles During the Transition

Technology leaders should expect some challenges when making a transition to the cloud. While most people think that the biggest challenges they will face will be around compliance and regulation, that is not always the case.

In fact, the biggest barrier in a company’s cloud transition journey can be IT leaders who struggle to change their thinking. Some believe that cloud infrastructures are “just what we have always done, it’s just in another data center,” or that “we already do virtualization as we have a private cloud, so we know this.” That thinking can keep an organization from making much-needed upgrades.

The leading cloud providers today have changed some paradigms of technology. Even infrastructure experts may struggle with the change. Roles and responsibilities may need to be realigned to place the leadership duties in the hands of those with the right skill sets and mindsets.

A cloud-based infrastructure certainly has the potential to enable speed, collaboration and cost efficiencies, while delivering new levels of options and enabling transparencies. To make the most of the possibilities that cloud unlocks, insurance businesses must prioritize the right mix of internal teams and external partnerships.

6 Cybersecurity Threats for Insurers

The connectedness of everything – assets, people, business and commerce – has increased the severity and frequency of cyber attacks. The insurance sector faces a bigger threat than most industries because insurers deal with extremely sensitive data. Several insurance companies, such as Premera Blue Cross and Anthem, have experienced significant data breaches over the past years. However, these are not the only insurers affected. A report by Accenture shows that an average insurance company receives over 100 cybersecurity attacks each year, with 30% of the attempts being successful.

As an insurance leader, being aware of the potential cybersecurity threats puts you in a better position to adopt the right prevention measures. Here are the top cybersecurity threats in the insurance sector that you should know.

6 Cybersecurity Threats for Insurance Leaders

1. Cloud Vulnerabilities  

Cloud data access and storage has become a common practice for many people. However, this practice can increase the risk of a data breach. You can be susceptible to denial of services (DoS) and account hijacking attacks. With such attacks, hackers can access and tamper with your company’s data while preventing your team from accessing it. This threat can be prevented by implementing an extensive cyber risk management plan.

2. Patch Management

If your insurance company is using outdated software, you have a higher risk of cyberattack. Most cybercriminals exploit software vulnerability to access and steal company information. Failing to update your software patches makes your organization vulnerable to numerous data breaches.

Cybercrime vulnerability can be through something you consider as minor as the computer operating system. For instance, most organizations became exposed to cyber-attacks in 2018 for failing to update their Microsoft Office software following a patch release for Eternal Blue vulnerability. Therefore, it is advisable you stay up-to-date with any software you are using in your organization to avoid costly attacks.

3. Social Engineering

With the increase in social interactions, cybercriminals are exploiting such opportunities to launch social engineering attacks. Deception is the major aspect of such attacks. Usually, these criminals use trickery and manipulative approaches to lure individuals into taking various actions. For instance, you can be lured to disclose sensitive information or even bypass set security measures.

Social engineering threats are high because targets simply give hackers access to the system. Thus, it is hard for you to prevent these crimes with cybersecurity systems. However, regular training on cybersecurity is necessary for ensuring that your team members know how to detect and prevent such crimes.

See also: A Novel Approach to Cybersecurity

4. Ransomware Threats

If you thought it was only individuals who can be held hostage, think again, because your computer systems and data can, too. Ransomware attacks are some of the serious cyber threats you should worry about in the modern era. A report by the U.S Depart of Homeland Security reveals a rising number of ransomware attacks. The hackers attack your network and prevent you from accessing any data in it until a certain amount is paid. Such attacks are associated with significant losses. For example, besides the immediate losses, a ransomware attack can lead to huge monetary damages because of lost data and loss of productivity.

5. Third-Party Exposure Threats

The use of third-party services is a common practice nowadays, especially for payment processing. Most organizations do not take the necessary precautions when engaging in third-party transactions. Even where the party you are transacting with does not handle personal data directly, it can put your organization at risk of attack.

Hackers are using malware to access personal data, such as credit card numbers and Social Security numbers, through third-party companies. Therefore, it is important to take all the necessary precautions when dealing with a third-party vendor. For instance, inquire about their policy on data breaches and find out whether they have any measures in place to prevent cybersecurity attacks.  

6. Outdated Hardware

There is a common misconception that cybersecurity threats have to come from software. If you are using outdated hardware, your company data is vulnerable, too. With the increasing rate of software updates, some hardware may find it challenging to keep up. Obsolete hardware may be difficult to accept the latest security measures and patches. In such cases, your organization’s data is exposed; hence, at a high risk of cyberattack. Therefore, it is critical to regularly check your devices and replace any obsolete ones to avoid outdated hardware-related cyber-attacks.

See also: The Missing Tool for Cyber Resilience

Holistic Risk Management Plan

There you have it – a comprehensive overview of some of the top cybersecurity threats in the insurance sector. Evidently, as technology advances, insurance companies will continue to face different forms of cybersecurity threats.

While there might not be a one-size-fits-all approach to address or prevent cyber threats, being knowledgeable on the various cybersecurity vulnerabilities can help you adopt better risk detection and prevention measures. Therefore, make sure to adopt a holistic management plan to stay away from most of these threats.

The Cloud Concept That Many Miss

Ten years ago, the idea of moving to the cloud was just a vision for insurance companies. Five years ago, the cloud concept became a trend. Today, it’s a necessity. Increasing numbers of insurers realize that the cloud enables organizational agility and digital transformation, two key factors in outstanding customer experience. 

The countless articles and blogs about the cloud seem focused on migration and innovative concepts, such as DevOps and Big Data. But not enough attention is given to a key cloud concept: maintenance. 

Let’s face it, maintenance isn’t sexy, even though most insurance companies spend 10 times more on maintenance than on the transition. What’s more, maintenance contracts with suppliers dictate long-term relationships that last long after the transition has been completed and the go-live euphoria has dissipated. 

This is why it’s critical for insurance companies to choose their software vendor carefully. The functionality of the software product, as well as the delivery capabilities of the integrators, are, of course, important. But you should also examine the quality of service for the business as usual (BAU) period that starts once the software is up and running on the cloud. What are the criteria that should guide the insurer’s CIO when choosing a software vendor providing cloud-based solutions? 

The first thing you should check is if your supplier has an end-to-end operating model. In many cases, software development, integration and maintenance are provided by three separate organizations. Multi-functional vendors (also known as one-stop-shop vendors, or OSS vendors) will take full responsibility for the solution. An OSS vendor leverages its multidisciplinary expertise in IT, database, security and applications to provide end-to-end coverage for any incident that might occur.

The second thing you should look at is the service level agreement (SLA). The SLA must include tangible service level targets and penalties for breaches. Make sure it addresses all metrics relevant to your business, such as availability, performance, incident response and resolution time, customer service window and service continuity (RPO and RTO). 

See also: The Cloud’s Vital Role in Digital Revolution  

It’s important to understand all the service entitlements that represent the extent or frequency of service actions, which could, for example, include an annual disaster recovery drill, a weekly performance audit, quarterly database improvements and running the nightly batches on a daily basis. Also crucial is a monthly report that includes the actual performance against the service level targets and a list of corrective means taken to eliminate or minimize any underachievement.  

The next thing you should consider is multi-cloud expertise and experience. Many insurance companies have hybrid IT architecture, with some of their electronic assets available on-premise and some on the cloud. To remain as flexible as possible, it is essential to choose a supplier with multi-cloud expertise that can cope with a hybrid architecture or CSP switch.

Lastly, the insurance industry is a highly regulated sector, so naturally you should choose a vendor that complies with all the relevant regulatory requirements related to information security and privacy applicable in your country, such as ISO 27001 or GDPR. One way to ensure that your supplier is a professional organization is to examine how the supplier follows industry best practices of IT service management. You could verify this by asking for copies of the documentation of their processes, or by checking if the support managers are all ITIL-certified.

Choosing the right software vendor is not easy, especially because this choice establishes a long-term relationship between the two parties. Make sure you don’t place too much focus on your wedding to cloud transition – it is more important to think of what will happen once you return from the honeymoon.