We caught up with Srikanth Chander Madani, Industry Advocate, Worldwide Financial Services, Microsoft Corporation, to shine a spotlight on the cloud migration trend among EMEA insurers, and the key factors shaping their technology demands in 2023.
As a Duck Creek Technologies Solution Partner, Microsoft provides Duck Creek with the flexibility, scalability and reliability needed to provide insurers with future-ready core systems deployed in the cloud as an advanced SaaS solution.
But this is more than just a partnership on paper – it is a meeting of minds – with a recognition that the pace of technology adoption and change is increasing. A financial services industry strategist at Microsoft’s Corporate Headquarters, Srikanth has a wealth of experience and insight across sectors, so it was a privilege to fire some questions his way.
Q: How does the insurance sector in EMEA compare with the wider financial services sector when it comes to cloud adoption?
It may surprise some to hear this, but insurers are ahead of the curve when it comes to attitudes towards and adoption of cloud computing. While the banking sector is a bigger overall user of cloud (which is no surprise, given the larger size of this sector), in EMEA we see that, across the board and extrapolating from our user base, insurance is clearly using more advanced cloud services than banking, and the gap has increased every year since 2019.
There are several drivers of this: insurance is by its very nature a very risk-aware industry, and in the past some insurers had the sense that having their computing infrastructure on premise leads to more control and security over the cloud model. However, this is increasingly seen as a misconception, with those adopting the cloud SaaS (Software-as-a-Service) model emerging as more able to roll out new products and services quickly as well as improving their customer experience.
It is also clear now to insurers that high performance computing in the cloud still gives them full control over their unique selling proposition in a more secure environment. All of these realisations come after trying and testing the cloud over the last few years in an environment in which the cost of capital has been an issue for insurers.
This has prompted them to be more careful about investing resources and monitoring the benefits of any investment, and as such it has also become apparent to many insurers that the transition to cloud computing is not just an effective way of optimising their costs but also, and much more importantly, of ‘future proofing’ their technology systems and processes – by building agility and resilience.
Q: The future proofing point is really interesting. How does this tie in with new types of products and services that insurers are exploring to deliver for their customers?
I think the recent truism that every company is now a software company rings very true for insurers, who are increasingly becoming software service providers, particularly as they explore opportunities in emerging areas such as embedded and composable insurance.
Did you know, for instance, that the two most common jobs we see advertised at large insurers are IT staff and distribution channel staff? That is non-intuitive, I would suggest, as one might expect a focus on actuarial, risk, underwriting, claims call centre, and risk engineering etc.
I would use the analogy of the mobile phone to highlight this point – over the last 15 years there has been a fundamental shift in how and why we use phones, to the point that now we use our smartphones for pretty much everything except for making phone calls.
I think that cultural, i.e. consumption-side, and technological changes are similarly changing how consumers view insurance, and the way insurers are shaping their future products to make them more relevant and personalised to consumers.
Q: How can insurers measure the value of cloud adoption?
The old saying goes you cannot manage what you cannot measure. The value of moving to the cloud is the million-dollar question, but one that’s actually increasingly simple to answer. Our customer experience shows that cloud migration leads to increased speed to market and operational agility, lower total cost of ownership and being able to refocus IT resources to work on higher value work.
In addition it broadens their digital capabilities through access to technology ecosystems, powering more data-driven business models. There is also clear evidence of cloud systems empowering much faster speed to market for new products and services for insurers.
For further reading, I would encourage readers to delve into the white paper co-written by my team members together with Deutsche Börse – which weighs up the risks and rewards of their cloud journey using a data-driven model of measurement.
Q: How do you expect the technology landscape in EMEA to develop in 2023, and how can insurers keep pace?
I think in the volatile economic environment that EMEA finds itself in, the competitive advantage for those insurers that are able to harness greater data insights, operational agility and faster speed to market will become more and more apparent on the bottom line.
We are also seeing strong interest in ESG (Environmental, Social, and Governance) and sustainability initiatives at insurers, with strong demand for transitioning insurance portfolios to be less carbon intensive and measuring success using real-time data insights. Of course, ESG is broad, also including cyber security and insurance cover that enhances resilience.
Company culture, including the ongoing benefits of remote working, as well as greater diversity and inclusion across the industry will also continue to drive technology investment decisions with a focus on technology security, functionality and efficiency across a dispersed workforce.
Data is also driving new insights into risk, and entrepreneurial thinking about new horizons for insurance products – I think we will see continued global roll out of more nuanced parametric insurance products in 2023 and beyond, creating a more simple, transparent kind of insurance particularly when considering climate-related risk, for instance.
Embedded insurance propositions will also continue to see strong growth, with the emphasis on more personalised insurance that is highly relevant to consumers, more cost-effective for them and meets them at the point of sale of a product or service in a transparent and helpful way.
I think just as cloud architecture allows insurers to take a modular approach to their core systems, it also empowers a more modular, agile development and roll out of these innovative products and services that are opening up new frontiers for insurance as an industry.
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This blog represents the personal views of the author and does not represent the position of Microsoft Corporation.