I   Cloud Services              Are Your    Insurance Processes     Cloud-Compatible?                                     ...
years. According to International Data Research, the worldwide market for cloud computing will grow to              $44.2 ...
Cognizant Cloud Offerings                                                               I   Cloud assessment & evaluation ...
Complex workflows can be modeled as cost-effective BPaaS solutions on the cloud, potentially replacing              the bu...
Cloud Portability Index (Illustrative)                               Social Networking                            Agency M...
Cloud Adoption Plan after Cloud Portability Analysis                                             Phase 1                  ...
References         I   Judith Myerson, “Cloud Computing vs. Grid Computing,” IBM Web site, March 2009,             http://...
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Are your insurance processes cloud compatible?


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How to identify processes, conduct cloud portability analysis and roll out a cloud adoption plan.

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Are your insurance processes cloud compatible?

  1. 1. I Cloud Services Are Your Insurance Processes Cloud-Compatible? How to identify processes, conduct cloud portability analysis and roll out a cloud adoption plan. By Koduri Suman, Karuppasamy Kumaraguruparan, Rajamony Arul Aaron and Ramya Balakrishnan The insurance industry was riding on strong fundamentals, good earnings and sustained performance until the 2008 economic downturn. With many financial institutions losing their solid footing, insurers did not escape the financial turmoil. As insurance companies try to regain lost ground, they are challenged by both external and internal forces to continually reinvent and innovate. Insurers seek technology to help weather economic storms and build stronger customer relationships. While traditional IT solutions exist, there is always room for improvement, as companies seek innovative and agile IT solutions with minimal costs and overhead. Cloud computing solutions have the potential to emerge as a strategic initiative for insurers. Insurance processes and applications have the potential to be moved to the cloud, and these solutions can be leveraged by insurers of any size. Worldwide insurance industry revenue is about 6% of the global GDP,1 totaling trillions of dollars. With the emergence of technology and the popularity of the securities market, the industry has been experiencing a paradigm shift in market dynamics and customer expectations. In addition to the current economic situation, insurers are challenged by external forces, such as demand for better and safer products, intense competitor pressure in a price-driven market and government regulation/compliance, as well as internal forces, such as ever-changing organizational structures, company growth (linear or non-linear) and decreasing levels of human resources. As insurance products are becoming increasingly commoditized, the pace of technology adoption becomes the biggest differentiating factor. We strongly believe that cloud computing will be a differentiating factor for insurers due to this technology’s selling points: Low entry costs, subscription-based pricing, elastic scalability, reduced operating costs, lower energy costs and a self-service model. Cloud Offerings After being in the “Technology Trigger” section of the Gartner 2008 hype cycle, cloud computing is already in the “Peak of Inflated Expectations” category in 2009, with mainstream adoption expected in the next two5 INSURANCE INSIGHTS http://cognizant.com
  2. 2. years. According to International Data Research, the worldwide market for cloud computing will grow to $44.2 billion by 2013, from $17 billion in 2009. All the buzz around cloud computing and the investments made by leading industry players, such as Amazon, Microsoft, Salesforce.com and Google, not only reiterate the fact that the technology is here to stay, but also that it could take a direction the industry has yet to witness. In plain terms, cloud computing is a paradigm shift in terms of designing, developing, deploying, scaling, managing, provisioning and monitoring software solutions. There are many challenges of cloud computing that need to be evaluated against the benefits before adopting the technology, including the maturity of applications to port into the cloud, cloud deployment needs, data ownership, data privacy, security, corporate governance, auditing and vendor lock-in. One of the challenges for businesses such as insurance to adopt cloud computing is to make informed decisions on the type of cloud and service they need. Public clouds (like Amazon) are more prevailing in terms of acceptance and use, but organizations are also looking at private clouds, which are confined to the organization’s infrastructure, as well as hybrid variants, like virtual clouds. Regardless of cloud type, the solutions themselves take different dimensions, such as SaaS (software as a service), PaaS (platform as a service), IaaS (infrastructure as a service), BPaaS (business process as a service), etc. Cognizant and the Cloud We have devised a Cloud Adoption Plan (CAP) by utilizing our proprietary Cloud Portability Analysis (CPA) framework, as well as suggestions on the synergies with emerging technology trends and solutions that drive the industry today. SOA, BPM, virtualization, grid computing and high-performance computing are just a few of the technologies that must be planned in parallel with cloud computing. The CPA framework helps insurance companies assess the maturity of applications and processes to derive the Cloud Portability Index. Insurer preferences, along with index values of applications, help insurers plan their transition into the cloud. CAP recommends various alternatives for the transition of the selected processes and applications into the cloud. SOA, BPM, virtualization, grid computing and high-performance computing are just a few of the technologies that must be planned in parallel with cloud computing. We have positioned ourselves as a cloud service provider, with our “Cognizant Cloud” initiative to embrace the emerging technology. The service offerings on this cloud include business process and software solutions envisioned from our vertical offerings. Given our deep domain knowledge in the insurance space, serving top insurers across the globe, we are well-positioned to provide innovative cloud solutions that will redefine the way customers provide insurance solutions today. Our service offering in the cloud computing space addresses the following three broad service lines: I Strategy & Consulting (Plan) I Develop & Deploy (Build) I Maintain & Operate (Run)http://cognizant.com INSURANCE INSIGHTS 6
  3. 3. Cognizant Cloud Offerings I Cloud assessment & evaluation Plan I I Cloud enablement service Setting up private and hybrid clouds I SaaS enablement I Single to multi-tenant deployment accelerator Build I I Cloud cache framework Private cloud solution I High performance batch solution I Usage metering framework Cloud backup and restore solution Run I I Cloud test bed solution I SaaS enalbement solutions Figure 1 Our Cloud Center of Excellence (CoE) addresses the cloud computing needs of clients and partners. The CoE works with multiple teams across industries to develop solution accelerators and frameworks to migrate existing applications to the cloud. It also has solutions that can convert an existing customer infrastructure into a private cloud to maximize returns from customer investments. We have developed test beds for the cloud, with scenarios that will ensure verification of quality of service and service level agreements. We also assist customers in assessing their cloud needs and providing a strategic roadmap in terms of selecting the right approach and cloud deployment strategy. Insurance Cloud In the near future, we potentially see the low-cost entry of cloud as appropriate for small and medium-size businesses (SMB). In terms of business processes, “creating a new quote,” “quick quote,” “submitting a claim – FNOL” and “lead management” are near-term candidates, given the nature of their business functionality and related services that need to be made available to those processes. For a large insurance company, the core systems such as “policy management,” “underwriting,” “claims,” “billing,” and “agency management” can be migrated to the cloud model. There are many immediate opportunities for building cloud-based solutions that will benefit the insurance industry. We have developed test beds for the cloud, with scenarios that will ensure verification of quality of service and service level agreements. Cloud solutions can work for insurers of any size. SMB insurers can operate on proven applications, providing them with low-cost entry into the market. These insurers can introduce cost optimization by hosting their services on the cloud. Larger firms that have invested heavily in multiple, complex and outdated systems can leverage cloud computing to streamline their systems. Private enterprise clouds and hybrid clouds show promise to large insurers, as they have complex systems and workflows, and they are very concerned about how quickly a cloud service provider can respond to an outage. Large insurers like to have more control over their operational procedures, and this naturally leads to more promise on private enterprise clouds and hybrid clouds.7 INSURANCE INSIGHTS http://cognizant.com
  4. 4. Complex workflows can be modeled as cost-effective BPaaS solutions on the cloud, potentially replacing the business process management (BPM) solutions in today’s environment. Policy administration systems, which typically have a set of complex workflows, are good candidates to be developed as a cloud-based solution. Service providers can offer the BPaaS solution following an ITIL-based process. Some of the potential systems that can be built leveraging cloud computing technologies are: I Campaign management: Developing, launching and managing targeted marketing campaigns. I Agency management: Agent registration, licensing, lifecycle administration, ability to submit and write business, dividend and commission payment. I New business processing: Collection and registration of information related to new policies that are issued. Interfaces with core insurance systems like underwriting, rating and policy administration. I Rating: Calculation of premiums, using policy data entered by the customer. Operates independently and uses a rate computation engine to calculate the premium. Cloud computing should not be seen as being limited to light-weight applications like data capture, CRM or sales force automation. Similar to insurance systems, some of the key insurance business processes can also be built on the cloud. These solutions can functionally match traditional industry solutions, while providing more flexibility and scalability. Some of the potential insurance business processes that can be built leveraging cloud are: I Acquire customer: A process by which new business is gained by proposing adequate products to meet customers’ needs and requirements. I Acquire agent or provider: A process by which an agent or provider registers with the insurer. I Administer claims: A process to handle claims, from anticipation, to recording, opening and closing. I Provide quote: A process that provides a real-time quotation for an insurance policy on data provided by the customer. I Inquire billing information: A process that enables querying of the policy data store and providing the information to the user. All these components or systems are fairly independent and deal with a specific function in the insurance value chain. As an independent module, these systems can be built on a SaaS or BPaaS model. Cloud Portability Analysis Framework Our Cloud Portability Analysis framework measures the portability index of applications based on specific parameters. The parameters have been chosen considering the business processes and criticality of the insurance industry and also to gauge both quantitative and qualitative values of an application. Figure 2 illustrates the Cloud Portability Index score using the framework for a large insurer with moderate IT adoption (see next page). Cloud Adoption Plan Our Cloud Adoption Plan provides a roadmap to insurers for a smooth transition onto the three types of cloud, namely, private, virtual and public. Figure 3 shows a three-phased cloud adoption plan to move applications onto the cloud (see next page). Insurers can transition applications from private to virtual to public as the riskhttp://cognizant.com INSURANCE INSIGHTS 8
  5. 5. Cloud Portability Index (Illustrative) Social Networking Agency Management Acquire Customer Statements Customer Relationship Management Document Processing Rating Reserves Management Investments Cloud Portability Index (CPI) Score: 0 1 2 3 4 5 CPI below 2.5: No portability CPI between 2.5 and 4: CPI above 4: Private or Virtual Public cloud Figure 2 Phased Migration - Cloud Adoption Plan Private Cloud Phase 1 I Move most applications onto a private cloud I Involves identifying reusable services, centralizing infrastructure and modernization of the legacy systems I Vendor participation helps smooth transition to cloud Virtual Cloud Phase 2 I Applications on private cloud could be transitioned to virtual cloud over a period of time I Strict SLAs, security and regulations for hosting the virtual cloud I To mitigate risk, multiple vendors could be utilized Go Public Phase 3 I Huge transition and needs careful evaluation I Most favored by small insurers: Ease of entry and no overhead in setting up infrastructure and applications. I Public cloud is highly scalable and agile, with huge bandwidth Figure 39 INSURANCE INSIGHTS http://cognizant.com
  6. 6. Cloud Adoption Plan after Cloud Portability Analysis Phase 1 Phase 2 Phase 3 Type / Service Private Virtual Public @ Insurer @ Dedicated Vendor @ Global Provider I Underwriting/Rating I Claims Processing I Marketing I Litigation Management I Agency Management I Social Networking IaaS I Investments I Policy Processing I Advertising PaaS I System of Records I Billing I New Agency Setup I Business Support I Reserves Management I Rating/Quoting I CRM I Investments I Policy Issue/Processing I Agency Marketing I Commissions I Claims Processing I Social Networking SaaS I Business Critical Data I Agency Management I Advertising I Billing I Comparative Raters I Licensing & Appointments I Acquire Customer I Production Management I Customer Service I Acquire Agent I Ticketing Systems I Claims Support I Financial Services I Imaging/Scanning Services I Bill Collection/Payments I Third Party Data BPaaS I Documents Processing I Statements I Administer Claim I Print Delivery I Provide Quote IaaS: Infrastructure as a Service SaaS: Software as a Service PaaS: Platform as a Service BPaaS: Business Process as a Service Figure 4 gets mitigated at each level and insurers realize the benefits of the cloud. Also in the cloud, insurers can choose the type of service based on the levels of sharing of infrastructure, platform, software and business process as a service. The Cloud Portability Analysis and Cloud Adoption Plan, combined with the prerequisites of the insurer, cumulatively help the insurer plan a roadmap to embrace cloud technology. Figure 4 illustrates how insurance services fit into the cloud stack. It applies to a large insurer with moderate IT adoption. Conclusion Our Cloud Portability Analysis framework and Cloud Adoption Plan are the right tools for insurers to access the maturity of applications and embrace the cloud. Cloud computing is destined to become part of almost every organization’s IT strategy. Innovative insurers can either develop solutions on the cloud or utilize services available from solution providers that can position them to be a market leader. By leveraging cloud computing in conjunction with a knowledgeable cloud computing consulting partner, insurers can benefit from the cloud. Footnotes 1 Plunkett Research Ltd., http://www.plunkettresearch.com/Industries/Insurance/InsuranceTrends/tabid/239/Default.aspxhttp://cognizant.com INSURANCE INSIGHTS 10
  7. 7. References I Judith Myerson, “Cloud Computing vs. Grid Computing,” IBM Web site, March 2009, http://www.ibm.com/developerworks/web/library/wa-cloudgrid/ I Christian Vecchiola, Suraj Pandey and Rajkumar Buyya, “High-Performance Cloud Computing: A View of Scientific Applications,” http://www.buyya.com/papers/HPCC-ISPAN2009-Keynote.pdf I Mark Teter, “Six Myths About Cloud Computing,” Advanced Systems Group, June 2010, http://blog.virtual.com/2010/6-myths-of-cloud-computing-number-4-and-5 I “Cloudy with a Chance of Profits,” Insurance & Technology, June 2010. I Andy Scurto, “The Power of Cloud,” Insurance Networking News, December 2008, http://www.insurancenetworking.com/issues/2008_56/insurance_technology_cloud_computing_ser vers_mainframes11525-1.html I “The Insurance Industry Enters the Cloud Era,” Microsoft Web site, May 2009, http://www.microsoft.com/presspass/features/2009/May09/05-18ACORD2009.mspx Koduri Suman is a Consultant within Cognizant Business Consulting and has expertise in the life insurance and annuities domains, focused on policy administration systems, requirements engineering and IT transformation. He holds certifications from LOMA and AAPA in addition to a master’s degree in management. Koduri can be reached at Suman.Koduri@cognizant.com. Karuppasamy Kumaraguruparan is a Senior Architect within Cognizant’s Insurance Practice. He is a TOGAF Certified Practitioner and has expertise in cloud computing, SOA, Web 2.0, mobility and open source platforms. Karuppasamy can be reached at Karuppasamy.Kumaraguruparan@cognizant.com. Arul Aaron Rajamony is a Manager with Cognizant’s Insurance Practice, with expertise in new business models, underwriting and pricing, cloud computing, application modernization and COTS product implementation. He can be reached at ArulAaron.Rajamony@cognizant.com. Ramya Balakrishnan is an Associate Consultant within Cognizant Business Consulting and has expertise in the property and casualty insurance domain. Her background is in specialty lines, underwriting and billing. She holds a master’s degree in management and has a CPCU certification. Ramya can be reached at Ramya.Balakrishnan2@cognizant.com.11 INSURANCE INSIGHTS http://cognizant.com