December 06, 2022

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For insurers, the battle over cloud is over

In the advisory world, when facing a question about technology infrastructure and IT architecture, the correct answer is often (and painfully) “it depends.” This is due to a variety of complex factors.

Photo of Stuart Rose

Stuart Rose

Strategic Advisor on Aite-Novarica’s P&C Insurance practice

Person uses cell phone to take picture of vehicular damage.

In this piece:

  • Barriers for cloud adoption

  • Driving factors for cloud transitions

  • Cloud usage by business and IT

  • Advantages of cloud computing

In the advisory world, when facing a question about technology infrastructure and IT architecture, the correct answer is often (and painfully) “it depends.” This is due to a variety of complex factors.

When discussing cloud platforms, there is no ambiguity. In 2023, and beyond, the direction is clear. The war over cloud has ended, and cloud won.

In less than five years, insurers have gone from highly skeptical to fully embracing cloud-first strategies. So if cloud is the winner, how did we get here in such a short period of time?

Let’s start by defining what cloud computing is. A cloud computing platform allows insurance companies, with the help of software vendors, to create and host applications in the cloud without being concerned about the infrastructure the application will run on.

Let’s also note that Software as a Service (SaaS) is not necessarily cloud.

Many insurers and software vendors use the term “cloud computing” and SaaS interchangeably. SaaS applications are subscription-based licensed software. They are typically deployed on a cloud platform, but they need not be always.

Barriers for cloud adoption in insurance

There are many advantages of cloud computing, but at the same time, change is not easy. There are still many challenges insurers face when they migrate to cloud computing.


Most insurers feel that cloud computing provides greater levels of security compared to on-premises or hosted systems. But cloud computing is not a magic bullet, and insurers still need to carefully plan their approach to security and access management.

Total cost of ownership

Cloud computing should not be viewed as a cost reduction exercise. The advantages are in capacity, flexibility and cost variability, by turning things off or reducing computing power when it is not fully utilized. In fact, research shows that identical resources may cost more in the cloud than on-premises. So insurers who are not optimizing their cloud usage may actually see costs increase.


Just because the solution is cloud-based does not make integration easier. The added complexity of cloud architecture can make it more challenging to integrate cloud-based applications with on-premises internal legacy systems.

Legacy systems

In many instances, transiting legacy systems to the cloud is not possible, especially if those legacy systems are based on outdated technologies such as Assembly, COBOL, RPG and VSAM.

The war over cloud has ended, and cloud won.

— Stuart Rose, Strategic Advisor, Aite-Novarica Group

Driving factors for cloud transitions

Despite these obstacles, according to research by Aite-Novarica Group, by the beginning of 2022 the percentage of insurers using cloud has risen to more than 90%, and there is more to come. Nearly three-quarters of insurers plan to expand their use of cloud computing in the next 18 months.

The factors driving this increase in cloud adoption include:

Core application ecosystems

As insurers expand the core functionality with an ecosystem, they will need cloud API gateways that manage the interfaces between core applications and third-party solutions.

Getting out of the data center business

Cloud provides nearly limitless capacity for storing data. Plus, it provides massive computing power to run applications and execute complex tasks.

Data lake houses

The amount of data insurers collect and store daily continues to increase, especially unstructured data such as digital images and videos. Cloud provides insurers with the ability to store and process large volumes of data without a predetermined structure.

Artificial intelligence (ai) and machine learning

Cloud providers are introducing new services and capabilities to analyze and derive value from the growing volumes and variety of available data.

Emerging technologies

Cloud is not simply an infrastructure initiative. Cloud can help insurers future-proof their IT investments by providing them with the platform to take advantage of emerging technologies from AI to quantum computing.

Cloud usage by business and it

While IT departments, CIOs and CTOs are driving the adoption of cloud computing, business departments still need to buy into this decision. The business areas and applications embracing cloud the most are:


Enhancing the claims process is a key strategic objective for every insurer. Cloud is transforming the claims process by enabling automation and touchless claims. For example, cloud helps enable the computing capacity for analyzing photos and digital images for accurate property damage estimations.


Often associated with claims, insurance fraud is now, unfortunately, prevalent throughout the policy lifecycle. Cloud is enabling advanced detection tools such as AI and network analysis tools to analyze all insurance data to find hidden fraud patterns and connections between known fraudsters and criminals.

Digital initiatives

Research by Aite-Novarica Group found that digital engagements, especially via portals, is the most common application built or deployed on cloud platforms.

Ai and analytics

Insurance has always been a data-driven industry, but today’s insurance executives want greater insights into the data. Using AI and analytics, insurers can increase new sales revenue, improve the customer experience, better understand the risk and more accurately price the risk.

Advantages of cloud computing

Whatever the technology, obtaining business value and getting a return on investment is paramount. The key benefits of cloud computing are:

Ease of maintenance and reliability

Eliminating physical servers is a clear benefit, but probably more important is the availability. Cloud providers’ servers can sometimes go down, but generally they have better uptime than most insurers’ internal systems.

Capacity and flexibility

Access to high-capability computing resources on-demand is the most significant advantage. Plus, the ability to ramp up and down usage based on business requirements is nearly as beneficial.

Speed to market

Insurance is highly competitive. The capability to develop and roll out new applications and products is another clear benefit of cloud computing.

Ability to integrate with partners

Cloud platforms enable insurers to easily build ecosystems through native APIs and third-party solutions that leverage cloud architectures.

The advantages and business benefits of cloud computing are obvious for most insurers. But maximizing the value of cloud computing requires good planning. The battle over cloud is over, and it is clear that cloud has won.