Insurance companies have enormous amounts of data at their disposal but using it effectively can be a challenge. Supporters of the cloud, like Michael Ewald (pictured), director of technology at Contino, argue that storage in the cloud, plus cloud native applications, allow insurance companies to become much more data-driven and customer-centric.
Ewald said the cloud can also be used to crunch data that can help unlock new markets.
“When you have cloud you can literally start a proof of concept with a couple of hundred dollars and use huge amounts of data and spin out some proof of concepts,” he said. “This possibility is lost a little bit, not just by insurance companies.”
He said, for example, insurance companies could use data in this way to find markets where big risk issues like climate change may not have an impact.
“My observation is they [insurance companies] don’t understand how to unlock data at low cost,” said Ewald whose technical consultancy agency specializes in helping highly regulated industries like insurance and banking, migrate to the cloud.
He said the insurance industry has a very mixed record when it comes to effectively using the cloud.
“I’d say that there are two aspects: there’s using cloud and using cloud well,” said Ewald.
Some organizations, like Allianz, he said, are making a good fist of it.
“But some other insurance companies are making the mistake of using the cloud as another data centre and they’re not really utilizing or don’t have the knowledge to understand what cloud native actually means,” he said.
He added it’s important to think around modernizing the services and applications you intend to migrate to the cloud.
“I’d say on the whole insurance as an industry needs to really look at doing things using the cloud a lot better,” he said.
Before joining Contino, Ewald worked for one of Australia’s largest banks where he said he managed the entire data portfolio.
“Based on the conversations I’ve had with technical people at insurance companies they have a huge gap,” he noted. “They’ve got on their [digital] roadmap but the real issue, as I see it, is around the use of data.”
He said once companies get a taste of using data, they usually go down a path of increasing that use quite significantly.
“Data is something that grows,” he said. “So that means if you don’t design the architecture and use cloud native services as well as you could have, your costs will blow out.”
Ewald said insurance companies need to consider what’s involved when they want to actually crunch the data they have access to.
“The actual server footprint that you need just to get through the numbers in a reasonable amount of time so that you can use it for your reports and your operational uses for the next day,” he said. “It’s huge!”
At the scale required by many insurance companies, Ewald said one advantage of cloud native services is that you can use elastic computing, which provides access to processing power and storage when you need it.
“So during the majority of the day when you’re not using it, you shrink that down,” he said. “But when you actually need to crunch the numbers and do some machine learning to work out best price, customer churn or to forecast future markets, you can expand that out and just pay as you go.”
He said trying to crunch a huge data cluster on a local server requires a large upfront spend on infrastructure and then the wages of a support team.
“The wages are huge and you’ll still need a few million dollars just to outsource this to have a 24/7 team to keep it operational,” he explained.
He said offloading this to cloud native applications can be expensive but there are opportunity costs.
“The other thing is around reuse of services. What that can mean is identifying new data sources within the organization. By using cloud native services, it speeds up that time and that value, and what that translates to is a shorter project time, and a shorter project time means lower costs,” said Ewald.
Ewald said one of his customers, Green Flag, improved its ways of working by about 300% in terms of time to value by using cloud native services.
Allianz, another customer, was looking to get involved in the pet insurance market.
“But they needed modernized ways of working in order for them to unlock that [market],” he said.
Ewald said this involved a holistic approach. On the one hand, building an operating model using modern cloud native architecture, but also helping Allianz to adapt ways of working.
“It’s about how you bring business and technology together, reduce the amount of feedback loops so the requirements stay more solid and quicker so you can increase that time to value,” he said.
He said the result was improved customer response and experience.
“You need to think around your organizational structure as well as the tech,” said Ewald.
The cloud, he said, can also help with price optimization by bringing the data into a place where it’s more usable for the people working within policies.
“For the price points as well, because we’re able to provide a platform with which they can do better risk profiling because the cloud facilitates more data points that are more accurate,” he said. “The cloud makes it a very cheap option for you to experiment in this space.”
