There is no shortage of skeptics who say the insurance industry will never embrace cloud computing in a big way. The industry is too conservative, has too much investment in legacy systems, or is too wary of data security issues.

That may be true, but I've spoken with insurance CIOs who see cloud as a very effective delivery mechanism for new capabilities. (See my recent article on the topic here.)

But many are still hesitant to dip their toes into the cloud waters. What issues do insurers face when considering cloud computing? Jai Raju, insurance technology and innovation head at TCS, pointed me to a white paper he recently co-authored on the topic. “The challenges of adopting cloud are yet to be fully addressed and many are unknown,” he wrote. “Deciding on an appropriate path for onboarding their applications portfolio to the cloud poses a big challenge for insurance CIOs. Insurers will have to closely review the questions of ‘What?’, ‘When?’ and ‘Why?’ while defining their cloud adoption strategy.”

Raju predicts movement to cloud in three major waves, and predicts the likelihood of various areas within insurance companies moving to the cloud within each wave:

Product development and pricing: “Storage and historical data for this functional area is a candidate for Wave 1 migration to cloud computing. Most of the software utilized today is desktop software or point solutions. These will likely move to SaaS in Wave 2.”

Marketing, sales and distribution: “Data utilized for day-to-day operations and for campaign management can be moved to cloud computing in Wave 1. Most software utilized in marketing will move to SaaS in Wave 2.”

Sales and distribution systems: “These systems, especially those used by captive and independent agents, are likely to be Wave 2 or Wave 3 migrations to cloud. This is primarily because these systems are not robust, are constantly changing, and tend to be created in-house, since they are viewed as differentiators.”

Underwriting: “The policy databases can be moved to the cloud as part of Wave 1 but will see resistance from many insurers (due to fear of loss of security and loss of control). The core policy administration systems are likely to be Wave 3 cloud migration because of their criticality to the business. Underwriting systems, which are primarily SQL or Access databases coupled with access to external information sources, are not likely to be moved to the cloud.”

Risk management: “IT support services, which includes the infrastructure, databases, data management and security, loading and unloading of data, and data cleansing, can all be moved to cloud computing in Wave 1. The analytics and models will remain in-house.”

Claims management: “Document management systems and all other support systems for claims (e.g. OCR, indexing, and data storage) can be moved to the cloud during Wave 1. The claims management systems will be Wave 2 since they are complex and perceive as mission-critical and differentiating. When cloud computing matures, these systems can be migrated. However, there will be reluctance from insurers.”

Customer service: “Customer service systems will move to SaaS. However, because of the focus on customer service, client retention, and service as a differentiator, there will be resistance to move this to cloud computing. This is likely to be in Wave 2 or even Wave 3.”

Actuarial services: “Actuarial systems, mathematical tools, and analytics (e.g. using Excel or other desktop packages) are likely to remain in-house and under actuaries' control. Databases, modeling systems such as RMS for earthquakes and other perils, and predictive analytics systems are all candidates for Wave 1 migration to cloud computing.”

Human resources: “HR systems for payroll, benefits, and learning & development can be moved to cloud computing in Wave 1.”

Information technology: “Data storage is a good candidate for Wave 1. Document management and enterprise content management systems are likely to be part of Wave 1. E-mail and workflow systems are also candidates for Wave 1.”

Finance and accounting: “OLAP, analytics, financial analyses, profitability reporting and other similar systems are likely to remain close to the finance communities (meaning under their control). They are likely to be migrated in Wave 3 unless the analytics are included in the financial systems (e.g. SAP).”

Legal: “Software for case management and other legal functions will more likely adopt an SaaS model as part of Wave 1. The databases may also be moved separately to cloud computing in Wave 1.”

Enterprise risk governance, security, audit and compliance: “The large amount of data resulting from asset/liability management, risk assessments, security assessments, and audit can be moved to cloud computing (Wave 1) but primarily for storage. In most firms, there is in-house software used for risk governance, security, audit, and compliance. Asset liability management systems and databases are candidates for Wave 1.”

This piece originally appeared on the Insurance Networking News (INN) web site.

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

Readers are encouraged to respond to Joe using the “Add Your Comments” box below. He can also be reached at

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on do not necessarily reflect those of Insurance Networking News.


Register or login for access to this item and much more

All Information Management content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access