The Case for Performing Resource-Intensive Calculations in the Cloud: Learning from Early Adopters

by Jamie Macgregor, August 19, 2015
Industry Trends
Global

Abstract

Cloud adoption across the insurance industry for core processes is still in its infancy. Many insurers simply are not ready to jump into the cloud movement with both feet, especially when it concerns core processes and customer data. However, there is one area of their core business where insurers appear to be more willing to explore, and that is not related to ancillary support services, such as HR. This area is resource-intensive calculations, such as actuarial and risk modeling.

In the report The Case for Performing Resource-Intensive Calculations in the Cloud: Learning from Early Adopters, Celent explores how early adopters are starting to utilize the cloud for risk modeling, pricing, and actuarial modeling.  Areas of focus within the report include:

  • The model deployed, whether on premise or off premise, whether for development or production, and whether for bursting or everyday use.
  • The business case and realized result, including hard and soft measures.
  • Security implications, real and perceived.
  • New capabilities required and existing capabilities rechanneled.
  • Implementation approach.
  • Stakeholder engagement.

Qualitative interviews were held with five early adopters, across Europe and North America.

This report aims to provide a deeper understanding of both the financial and practical implications faced by insurers when considering moving to the cloud for their resource-intensive actuarial and risk modeling calculations. The report is intended to provide a balanced argument for insurers considering how to develop their own business case, learning from those who have already made the move.

 

“Cloud adoption across the insurance industry for core insurance processes is still in its infancy. Many insurers simply are not ready to jump into the cloud movement with both feet, especially when it concerns core processes and customer data,” says Jamie Macgregor, Senior Vice President of Celent’s Insurance practice and author of the report. “However, for some, actuarial and risk modeling represents one of the more readily accepted use cases. Early adopters are starting to apply the technology to good effect and, in doing so, opening the debate internally for further adoption as they become ever more comfortable.”

Learning from early adopters, venturing into the cloud for actuarial and risk modeling can provide some insurers with a simpler entry point. It can also be an opportunity to provide a significant capability uplift for both business and IT teams, enabling greater control over environments that, for some firms, have historically been managed outside of IT. Finally, the experiences of the five early adopters involved in this study suggest that the benefits can be significant, providing risk and cultural acceptance can be managed.

This report was commissioned by Microsoft, which asked Celent to design and execute the study on its behalf. The analysis and conclusions are Celent’s alone, and Microsoft had no editorial control over the final report contents.

This 24-page report contains four tables and two figures. 

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

Introduction

2

 

Key Research Questions

3

 

Method

3

The Incoming Tide?

5

 

Current Insurer Attitudes and Adoption Levels

5

 

Considerations

7

Experiences from Early Adopters

10

 

Original Rationale: Factors Driving Adoption

10

 

Laying the Foundations: Deciding Which Model to Choose

10

 

Implementation; Factors Driving the Timeline

11

 

Benefits Achieved: Extending Beyond Just Cost

11

 

Challenges: Things That Get in the Way

13

 

Unintended Consequences: Additions to the Business Case

14

Lessons Learned

16

Final Thoughts

18

Leveraging Celent’s Expertise

19

 

Support for Financial Institutions

19

 

Support for Vendors

19

Related Celent Research

20

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