What types of insurance work are “commoditized”—meaning everyone does it, so there's no competitive value in it—and thus ripe for more cloudy type platforms?

I had the chance to run these questions past Krish Khambadkone, client architect for Infogain, a global systems integrator involved in implementing solutions across the insurance industry.

Khambadkone says in the cloud examples he's seen, insurance front-end quoting functions have been the most likely candidates for cloud sourcing to external vendors. He cites one vendor in Southern California that operates a “hybrid cloud” specifically for such tasks, which serves a number of insurance companies. Which means the vendor hosts and runs the software, but the applications and server instances are dedicated to the clients, and not shared as publicly available services.

He adds that front-end quoting is a highly commoditized and routine function that lends itself to such approaches. “Processes involved in the issuance of a quote for many commonly issued policies, such as medical, auto, casualty, property are quite standard and follow a set pattern,” Khambadkone explains. “Broadly speaking, it involves submission of questions, rating and pricing, underwriting, binding and quoting.”

The cloud model lends itself well to applications in which workflows can be automated. “There is no more need for a human actuary to rate and price a quote,” he points out. “These are achieved through straight-through processing; even the pricing is done using sophisticated pricing engines that use vast amounts of statistical data, algorithms and factors to arrive at the quote.”

Khambadkone hits at something here. There has been quite a bit of uncertainty about cloud within the insurance industry, and it doesn't make sense to take those systems and processes that offer competitive advantage and hand them over to a third party. But there are those many commoditized and automatable processes in which the pains and expenses of maintenance and upgrades could be handed to someone else to worry about.

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