Cloud migration strategy for insurance: Lessons from an industry leader

The cloud is key to unlocking more business value for insurance companies. For traditional organizations, however, getting more apps in the cloud, faster, with a favorable ROI is challenging. This post describes some of the obstacles standing in their way — and what one leading insurer is doing to overcome them and accelerate their cloud migration. You can go straight to our savings analysis by clicking here.

»A case study: Learning from a leading insurer’s experience

Not every insurance company operates in the same way, but they all deal with similar pressures, opportunities, and realities. This is especially true when it comes to digital transformation and hybrid/multi-cloud journeys. We had several business analysis conversations with a leading insurance organization going through this exact journey, and these were some of the insights from our work together.

»High pressure to modernize

At the time we met with this company’s leaders, the organization had already made tremendous strides in its cloud migration. Over 50% of the company’s applications were in the cloud, and many new innovations had been deployed. But the company still depended on legacy systems, complicated IT tools, and many manual processes. Market conditions are now pushing the company to modernize much of its remaining infrastructure.

The pressure was coming from the rise in insurtech startups — such as Lemonade, Next Insurance, Mercury Insurance, and others — as well as tech giants entering the market. These companies target a key demographic (young buyers) and put margin pressure on the core offerings of traditional insurers.

Customer expectations are shifting as a result of these new entrants. Consumers are pushing for digital, personalized, and seamless experiences. For example:

• Mobile apps to manage policies, file claims, and purchase coverage
• Chatbots for handling customer service requests
• Other capabilities are now considered basic table stakes

Consumers, especially younger buyers, will switch to companies that offer the best experiences without hesitation.

»A phased approach to innovation

To drive new business, the company plans to explore innovative offerings and business models. A few examples of modern innovations include:

• Embedding travel insurance in booking apps
• Parametric insurance for predefined events like natural disasters
• IoT systems that reward safe driving or monitor water leaks at home

In order to build and launch new innovative business models, however, company leaders realized that they needed first to build the foundation and then deploy innovations over time using a phased approach.

To modernize its technology foundation and accelerate its cloud migration, this company is focusing on several key areas.

»Speed

To increase speed, the leaders are —

• Implementing infrastructure automation and lifecycle management via infrastructure as code (IaC) across all business units.
• Establishing standard operating (and onboarding) patterns and consistent workflow with self-service, incorporating machine image management, identity, and networking.
• Incorporating governance in standard patterns to make the easiest path the most secure, and to reduce barriers when adopting new methodologies and workflows.
• Reviewing third-party vendor arrangements, aligning incentives to drive consistent process adoption, and accelerate innovation.

»Efficiency

To increase efficiency, the company is —

• Enforcing infrastructure compliance through policy automation to reduce technical debt.
• Encouraging cross-BU collaboration through infrastructure pattern creation and sharing.
• Reducing the burden of reactive manual compliance through automated infrastructure updates with a standardized, immutable approach.
• Reviewing cross-charging approach to incentivise and reward cloud adoption.

»Risk

To reduce risk from cyber threats, company leaders plan to —

• Continue business unit and security collaboration to prescribe minimum infrastructure standards, incorporating security controls and governance.
• Create standard machine image capabilities and integrate them into developer workflows using policy to enforce minimum standards.
• Unify identity brokering across AWS, Azure, and private datacenters.
• Automate network and security infrastructure changes.

»Effectiveness

To improve the effectiveness of its people, the company is focused on —

• Upskilling where needed.
• Making more processes org-wide and minimizing the amount of “snowflake” processes unique to individual BUs and locales.
• Making migrating to the cloud ‘easy’ for business units.
• Managing operating model impacts on the scopes of various roles and their new expectations.
• Continually reinforcing shared goals and alignment.

»Value to be realized

Through these modernization initiatives, company leaders see the potential for real savings.

• Up to 42,000 annual administration hours avoided (equivalent to approximately 20 full-time employees)
• An estimated 14% reduction in risk worth $850K each year
• Tens of thousands of hours of productivity improvement through standardization and elimination of manual processes, as well as double-digit reduction in risk through increased security and governance:

Company leaders say that once these initiatives are completed, the company will be much better positioned to compete by moving more apps to the cloud, taking advantage of cloud-native capabilities, and accelerating application delivery through automation with built-in security.

»Learn more

Although this is one company’s experience, it’s a common story we hear within the industry — legacy mindsets, technical debt, and inconsistent infrastructure processes and governance are hampering innovation. For more information on how to deliver more business value from the cloud through standardization and automation, read our guide: Deliver innovation at scale with The Infrastructure Cloud.

If you’d like to chat with HashiCorp about how we can help modernize your approach to cloud and provide significant potential savings and velocity gains, drop us a line.