Perspectives

How Cloud Adoption Can Make Insurance Claims Systems Scalable and Elastic

Brijesh Chandra
Business Solutions Lead, Insurance, Healthcare and Life Sciences
Article

The insurance industry’s reputation of being static and sluggish in response to demand is a thing of the past. Today’s customers expect insurers to scale up for calamity claims and at the same time, continue their business as usual. For instance, Hurricane Florence, which hit the Carolinas in September 2018, resulted in more than 185,000 insurance claims in a few weeks. While this disrupted millions of lives, the estimated losses that the industry incurred ranged from $1.7 billion to $4.6 billion. Claims for damages varied from downed trees to homes and automobiles, to extensive roof damage poured in humongous numbers.

Conventionally, insurers would set up an on-premise claim application site to meet customers’ needs and avoid service delays during such catastrophes. This also means, heavy investment on part of the insurer especially in infrastructure that can handle the workload. Unfortunately, many a times, insurers end up incurring huge losses if there is little or no demand. However, if they don’t invest in infrastructure to handle the workload, the insurer fails to service their customers in such times when they need it the most.

Adopting a cloud model can help not just insurers speed up the claim process during such demands, and with the right use of this technology, they can create a deep impact for their businesses. Embracing cloud will help reduce operations costs and make claims scalable and flexible for customers.

Here’s how the Insurance claims business can benefit from the cloud model.

Tapping cloud for unpredictable scalability of claims business. Cloud platforms have the inherent ability to scale computing resources based on demand and business workloads. This flexibility means that insurers needn’t to invest up front in the infrastructure to handle peak workloads, as they can scale up when and if there is a business demand.

Moving to the cloud gives the flexibility to the insurer to service policyholders and manage workload more efficiently as handling a calamity claims requires a different approach in comparison with other insurance claims.

Lower ongoing operations costs. Insurers with on-premise data centers run many servers, depending on the size and nature of the business. If we compare data centers of that size to cloud data centers, which have tens of thousands of servers, you can see that the economies of scale cloud operators achieve cannot compare to on-premise applications. Adopting a cloud model will require little to no capital investment and provide flexibility to insurers, resulting in a decrease in ongoing operations costs.

Business continuity and disaster recovery. Imagine a North Carolina insurer had its data center damaged by Hurricane Florence. Would they ever be able to do business again? The answer is yes. The cloud model will provide a mechanism to distribute your system (and data) across different locations to mitigate the risk of data loss or inaccessibility due to a disaster. The cloud model approach can be adopted across regions. Whereas, to set up on-premise data center across geographies will involve a large capital outlay and can strain finances.

However, in a cloud environment, the cost is typically OPEX and having your data stored in the cloud would allow business continuity for insurers and quicker disaster recovery for policyholders.

The speed, ease, and efficiency of the claims process hold the key in times of peak demand as it sets the tone for a healthy customer relationship. Adopting a cloud model will not just allow insurers to reduce costs and process claims faster resulting in quicker payouts to beneficiaries helping them to recover from the loss and move on.