In this blog, we discuss the intricacies of cloud adoption challenges for insurance firms and discuss data security, legacy system integration, and cost optimization. We also discuss strategies for successful migration and maintaining compliance.
A total of 91 percent of banks and insurance firms are currently migrating to the cloud in some form, replacing traditional infrastructure with scalable, flexible resources in cloud environments. Cloud migration offers significant benefits like cost optimizations, effective resource management, and increased security, but for highly regulated industries like insurance, a full migration is not without challenges.
Successful cloud adoption requires robust security measures, integration with legacy systems, and stringent compliance with industry regulations. Working with an expert cloud migration partner makes this transition smoother and more successful. Let's look at some of the detailed challenges insurance companies face when it comes to cloud adoption.
Key Challenges in Cloud Adoption for Insurance Companies
Insurance companies manage vast amounts of personal data, such as policy information, claims history, associated legal or medical information, credit card transactions, financial statements, and more. These diverse types of data are critical to day-to-day operations, but moving to a cloud environment requires changes to infrastructure, networks, access controls, firewalls, and more, leading to cloud security challenges.
Data Security and Compliance Concerns
A total of 74 percent of security professionals cite cloud security concerns as their main worry. Given the large quantities of personally identifiable information (PII) and financial data, it's no surprise insurance firms want to maintain rigid control over their records.
Integration With Legacy Systems
Many insurance leaders claim their main cloud management hurdle is integration with legacy systems, as insurance firms have decades of traditional infrastructure to modernize and move. For example, an insurance company's mainframe administration system might manage decades of policy information, claims data, customer data, and more.
If this system uses outdated programming language, singular architecture, or outdated data formats, it's challenging to platform all this information while modernizing it in the cloud.
Cost Management and Optimization
Like most industries, insurance firms seek to optimize IT spending, allocate budget and resources efficiently, and save money on technology. When migrating to the cloud, cost management is crucial to efficiently store data and process workloads. It's important to balance resources to match needs and implement auto-scaling for higher demand periods.
While data security, legacy system integration, and cost management are concerns, several strategies can effectively mitigate them.
Ensure Robust Data Security and Compliance in Cloud Migration
Data security and regulatory compliance are mission-critical for insurance companies to migrate to the cloud successfully. Consumers want to know their data is protected, and any sort of breach could be “door-shutting” for businesses.
Implement Multilayered Security Measures
The good news is cloud providers offer multilayered security measures like advanced network protections, continuous monitoring, end-to-end data encryption, secure backups, and strict user permissions. Blending sophisticated measures with employee bus practices like multifactor authentication, security awareness training, and role-playing scenarios around social engineering creates a multi-layer defense approach.
Adhere to Industry-Specific Regulations and Security Audits
Most industry regulations like GDPR and HIPAA require detailed audit trails to monitor access to restricted data. Cloud providers automatically create and update these logs so your business is more prepared for quarterly or annual compliance audits.
Now that you have a comprehensive overview of data security, let's discuss best practices for successful legacy system integrations.
Strategies for Successful Legacy System Integration
Insurance firms spend 70 percent of their IT budget on maintaining legacy systems, which slows down innovation and digital transformation, wastes money, and reduces network performance.
Over time, this maintenance can significantly impact business performance and growth, allowing competitors to capture market share and leading to customer churn. Consumers also want innovative, modern insurance products. Legacy systems most likely can't offer the speed, mobile-friendliness, or capability to work with other programs.
Phased Migration Approach
With multiple systems on legacy architecture, it's a massive undertaking to platform all at once. A phased migration approach moves one or two systems at a time, reducing the likelihood of business downtime and improving the customer experience. Each migration is followed by testing and validation to ensure optimal performance.
Use Hybrid Cloud Solutions
A hybrid cloud approach allows immovable, critical systems to remain on-premise or in legacy infrastructure while testing environments, data warehouses, or customer-facing software-as-a-service (SaaS) applications move to public or private clouds. This best-of-both-worlds approach enables scalability and cost efficiency for more modern systems without forcing your business to migrate traditional architecture before it's ready.
Use APIs and Microservices Architecture
Microservices break down siloed, traditional infrastructure into smaller independent applications, allowing for a simpler modification of outdated applications. APIs can then communicate in real time to cloud servers or third-party vendors, allowing insurance companies to increase their reliability, build faster deployments, and gradually migrate to the cloud over time.
Insurance firms must balance the need for modernization and traditional architecture while monitoring cost management.
Optimize Cloud Costs for Insurance Firms
Cloud cost optimization involves analyzing cloud usage, using built-in tools like Azure Cost Management, auto-scaling, and using reserved and spot instances to help streamline costs and save money.
It's one of the top considerations for successful cloud migration, and when done properly, it can reduce unnecessary IT spending and allocate budget to the most imperative tools and resources. A total of 52 percent of IT professionals report cost savings after cloud migration, and it can reduce overall IT costs by almost 17 percent.
Implement Cloud Cost Management Tools
Most cloud providers have built-in cost management tools to monitor spending, identify patterns, and visualize opportunities to reduce costs.
Most interfaces are user-friendly and easy to understand, providing high-level pre-configured views and detailed customer reports. This helps visualize spending, identify opportunities for improvement, and project costs as your business grows.
Right-Sizing Cloud Resources
Right-sizing cloud resources means auto-scaling up and down too tightly to match usage needs. For example, during open enrollment season, health insurance providers experience major increases in server capacity as potentially hundreds of thousands of users attempt to register at the same time.
Dynamically increasing server capacity reduces downtime and improves revenue by making it easy for customers to sign up for new policies.
Use Reserved Instances and Spot Instances
Reserved and spot instances are one of the best ways to optimize cloud costs. Reserved instances are used for core business functionality, making up a stable and consistent system that you purchase for longer periods of time. Spot instances help use unused cloud capacity at a lower price for tasks like testing or data processing.
Harness Cloud Adoption for Your Insurance Firm
Tackling cloud migration challenges is a core part of a successful migration strategy, and insurance firms face unique challenges around data security, legacy systems, and cost management. However, the long-term benefits often outweigh the short-term frustrations, leading to faster digital transformation, a more competitive business, more productive and profitable employees, and a more secure network infrastructure.
For insurance firms facing a more complex future with increasingly demanding customer expectations, continued compliance pressures, increasing cyber security threats, and the need for advanced analytics, cloud adoption sets your business up to successfully navigate the future.
[cta bg="blue" button="Read the Story" link="https://centricconsulting.com/client-stories/driving-cloud-transformation-and-employee-innovation-at-hilldrup/"]Our security engagement with Hilldrup turned into a cloud transformation project that lowered costs and freed up employee’s time.[/cta]
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