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Take Insurance To New Heights - Accenture Cloud Readiness Survey in Insurance

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Insurance carriers can address cloud concerns and accelerate the transition to the cloud by taking action steps outlined in our report. Read more: https://www.accenture.com/ca-en/insights/financial-services/tech-advisory-cloud-readiness-insurance

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Take Insurance To New Heights - Accenture Cloud Readiness Survey in Insurance

  1. 1. TAKEINSURANCETO NEW HEIGHTSDiscover how insurers use the speed and flexibility of cloud to reach for new growth Accenture Cloud Readiness Survey in Insurance Financial Services Technology Advisory: Perspective on Cloud
  2. 2. Insurance companies— not generally known as technology pioneers—were initially hesitant to move key applications and business functions to the cloud. New research titled “Accenture Cloud Readiness Survey in Insurance” shows that insurers have embraced the cloud and have already transitioned many business applications to a cloud environment. In addition, surveyed insurers have begun making plans and, in some cases, have taken the first steps to move core platforms to the cloud, although many insurers still have a long way to go on that front. 2
  3. 3. In the past, insurers cited privacy and security concerns, as well as the complexities posed by migrating away from legacy systems, as reasons to keep key operations and applications in-house. Now, like other financial services firms, they find they need to deploy customer-facing applications to drive growth, an objective for which the cloud is ideally suited. And, as the Accenture Cloud Readiness Survey in Insurance has found, insurers are turning to the cloud to derive significant benefits in terms of cost savings, speed to market, capacity and flexibility. In our global survey of 50 insurance company executives including chief information officers, chief technology officers, and chief information security officers (conducted as part of a broader financial services sector study) we found that: Insurers are further along in their cloud strategy and implementation than might have been expected, given the industry’s reputation for being relatively slow-moving in terms of innovation. In many cloud-related areas, insurers are in fact outpacing their banking counterparts. In similar research into cloud readiness in the banking industry, we found that only 26 percent of banks said that core cloud practices and critical tools were in place and have ongoing measures of efficiencies for continuous improvement.1 In comparison, 46 percent of insurers said that they had reached this state of maturity. Only 14 percent of those surveyed said they have not yet developed a cloud strategy, nor even begun to think about the cloud. 5years 90% 11% 56% 68% The time in which nearly all insurance executives envision a digitally transformed financial services industry of insurers have a coherent, long-term plan for technology innovation that reaches across their entire company of the average IT budget will be earmarked by insurers for the cloud over the next 3 years of insurers have developed and implemented a new IT operating model to support the transition to the cloud of insurers have done formal planning and analysis of how to move legacy applications to the cloud 3
  4. 4. THEBENEFITS OFTHECLOUD The cloud helps accelerate the process of bringing new products and services to market, but it also helps insurers integrate mergers and acquisitions, lower overall IT costs, improve reliability and deliver better customer service. Different insurers see different benefits from the cloud, depending in part on geography and in part on their current level of adoption. Among North American insurers, Novarica, Inc. has found that improved capacity, flexibility and speed, along with fewer demands for maintenance, are among the most important perceived benefits.2 This is especially true for carriers that already have most of their infrastructure on the cloud. North American insurer Liberty Mutual Insurance said it realized infrastructure savings of minimum 30 percent by moving to a single cloud-based platform, in addition to accelerating time to market, increasing security, providing access from a range of devices, and offering bilingual capabilities in its business benefits unit.3 4
  5. 5. Figure 1: Benefits of Cloud Overall, cost savings is the benefit most frequently cited by insurers in our survey (as seen in Figure 1 below). One example: Towergate Insurance, one of Europe's largest independently owned insurance intermediary, realized a 30 percent year-on-year run rate cost reduction from 2017 onward after migrating its core applications to the public cloud.4 We have found that insurers also see unexpected benefits from the cloud, such as better use of data, leading to better analytics and improvements in risk assessment and pricing. Cloud capabilities offer greater speed to market and stronger support for innovation through DevOps and agile methodology. Cloud is a key element in major technology trends re-shaping the insurance industry, as identified in Accenture’s annual Technology Vision 2019 report.5 For example, one of the five major trends noted for 2019 is “Get to Know Me,” which relates to insurers seeking to “unlock” unique consumers and unique opportunities. More than eight in ten (84 percent) insurance executives surveyed for the Technology Vision 2019 report agree that digital demographics give their organizations a new way to identify market opportunities for unmet customer needs. Cloud provides a way of organizing, analyzing and accessing this digital insight. The Technology Vision 2019 report cited “Human + Worker” as another key trend, with each worker empowered by their skills and knowledge plus a new set of tech-driven capabilities. Insurers should adapt technology strategies to support a new way of working in the post-digital age, and the cloud is playing a pivotal role. 0% 32% 38% 40% 42% 44% 44% 46% 48% 58% Other Ability to scale up and down when needed (elasticity) Greater agility Ability to launch applications faster Better security Ability to provision IT capacity faster Less systems and applications downtime (planned and unplanned) Free up internal resources More visibility into and control of IT usage Cost savings Source: Accenture Cloud Readiness Survey in Insurance, June 2019 5
  6. 6. DESIGNINGA CLOUDSTRATEGY Since cloud capabilities are expected to underpin insurers’ future efforts in product development, operations management and customer service, a cloud strategy has become an essential part of their overall business strategy. Growth now increasingly depends on cloud adoption, so insurers should have a clear strategy developed in collaboration with the business units to add new cloud-based capabilities (and to move existing capabilities to cloud platforms). But they should also be aware that migration to the cloud can be a complex undertaking with many organizational dependencies. The cloud has become an enterprise-wide endeavor. Nearly two-thirds (60 percent) of respondents to the Accenture Cloud Readiness Survey in Insurance said they are looking at a corporate-wide business case when it comes to the cloud, while only 36 percent said they still looked at the cloud on a case-by-case, project-by-project basis. And more than half (58 percent) of insurers said they have a cloud strategy execution map, with KPIs to measure progress. (An additional 42 percent have a cloud strategy execution map without KPIs.) All respondents said that the transition to the cloud would require a new IT operating model, and, as mentioned, 56 percent have already defined such a model for implementation. An additional 36 percent are in the process of defining the model, while only eight percent have not yet begun the process. Even with this progress, however, 64 percent of insurers say that less than half of their lines of business (LOBs) are currently using cloud. 6
  7. 7. Figure 2: Planned Cloud Expenditures The respondents said they will back their strategic planning with significant spending on the cloud. As seen in Figure 2 below, nearly 11 percent of insurers’ IT budgets will be earmarked for the cloud over the next three years. Interestingly, nearly two-thirds (62 percent) of respondents said that their IT teams and their line of business (LOB) executives had discussed cloud strategy and were in alignment about planned activities. The remaining 38 percent said preliminary discussions among IT and LOB executives were under way. 2% 8% 64% 38% 28% 46% 6% 8% Currently Over the next 3 years 16 – 20% 11 – 15% 6 – 10% 1 – 5% 9.9% 10.7%Average % spend Source: Accenture Cloud Readiness Survey in Insurance, June 2019 20-point increase in the next 3 years 7
  8. 8. TACKLINGCLOUD APPLICATIONS Some insurers have hesitated in their move to the cloud due to concerns about keeping their core systems highly functional. Now, however, they can take a “cloud-enabled” approach to migrating key applications. They can work with multiple vendors to confidently migrate to the cloud while maintaining the effectiveness of core systems throughout the journey. And carriers are learning how to capture greater value from their investment capital to smooth the transition from old businesses to new ones. Insurers recognize the need to modernize applications for the cloud. Four out of five (80 percent) of respondents to the Accenture Cloud Readiness Survey in Insurance said they had already developed a strategy for application modernization, and nearly all who have not developed such a strategy said this is planned for the next 12 months. Only two percent said no such plans were under way. Similarly, more than two-thirds (68 percent) of respondents have done formal planning and analysis of legacy applications for migration to the cloud, and the remaining 32 percent plan to do so in the next 12 months. Nearly two-thirds (60 percent) of insurers surveyed have conducted code-level assessments and have confirmed the application migration type and effort, while two-thirds (66 percent) have developed a cloud-native application development strategy. As is the case with formal planning and analysis, 32 percent plan to do this in the next 12 months, while only two percent have no plan in place. And insurers are well-advanced in their evaluation of software-as-a-service providers, with 40 percent currently evaluating providers and 60 percent having completed their evaluation. 8
  9. 9. Figure 3: Candidates for Cloud Migration It is important to note, however, that there is a significant gap between aspirations and reality in terms of cloud strategy. While many respondents have plans and/or pilot programs in place, few companies have completed work on major cloud applications. Core platform transformation in key areas such as policy administration and claims management is rarer still. However, insurers have identified a mix of critical applications as candidates for migration to the cloud. Figure 3 below shows databases are the leading candidate, followed by analytics and business intelligence, and the company website. Next in line are enterprise resource planning (ERP), customer relationship management (CRM) and e-mail, followed by human resources, collaboration and e-commerce. 6% 8% 4% 2% 2% 6% 36% 22% 32% 20% 26% 22% 14% 14% 12% 6% 30% 48% 28% 44% 34% 30% 34% 26% 20% 24% 28% 30% 32% 32% 38% 48% 52% 58% 62% 70% eCommerce and online tools Collaboration/ content management platforms HR Custom business application CRM Email ERP Website Analytics/business intelligence Database Already moved to cloud Currently moving to cloud Planned to move to cloud in the next 12 months No plan to move to cloud in the next 12 months Source: Accenture Cloud Readiness Survey in Insurance, June 2019 9
  10. 10. Insurers’ evaluation of other application- related services might best be described as uneven. We found, for example, that more than half of Accenture Cloud Readiness Survey in Insurance respondents have evaluated platforms-as-a-service and/or vendors, but only 38 percent have completed their evaluation of application development services. They do, however, show a relatively high degree of sophistication in software development, with 64 percent using agile methods and 56 percent using DevOps. More than eight in ten (84 percent) insurers are using cloud-based internet of things (IoT) and over half (52 percent) use cloud- based analytics solutions. Insurers also use serverless technologies (44 percent), cloud- based artificial intelligence (22 percent) and microservices (16 percent) to some extent. Importantly, 88 percent of respondents said they have developed a strategy for application programming interfaces (APIs), with 30 percent saying they have a comprehensive set of API-related services and a standardized governance and management model for consistent operations. Another 42 percent have identified API owners and sponsorships to understand associated levels of responsibility. As Figure 4 illustrates, insurers are adopting a variety of tools to “optimize” the use of cloud services, with automation, self-service and orchestration tools among the most prevalent. While 66 percent of respondents said they have implemented such tools, only 22 percent have implemented tools for measuring the business value of cloud services provided, and only eight percent have in place tools for granular metering and charge-backs to business units and teams consuming cloud services. Figure 4: Use of Tools to “Optimize” Cloud Services Implemented Being implemented Planned to implement in the next 12 months No plan to implement 4% 2% 44% 28% 18% 4% 12% 44% 48% 32% 42% 22% 8% 22% 50% 54% 66% Cloud-related automation, self-service and orchestration tools Standardized ROI and business-case tools to evaluate the costs and benefits of cloud resources Monitoring and reporting tools across private, hybrid and public cloud applications and services Tools for measuring the business value of the cloud services you provide Tools for granular metering and charge-back to business units/teams consuming cloud services Source: Accenture Cloud Readiness Survey in Insurance, June 2019 10
  11. 11. Earlier Accenture research found that 60 percent of insurance companies replace their legacy infrastructure every three to six years.6 This means insurers can optimize their IT replacement cycles with a migration to the cloud. Similarly, the cloud can help reduce unnecessary capital expenditures and reduce the number of data centers, improving asset utilization. We found that insurers surveyed as part of the Accenture Cloud Readiness Survey in Insurance demonstrated good progress in addressing organizational, infrastructure and talent issues related to cloud transition. For example, more than half of insurers have identified the appropriate internet-as-a-service solution, while 38 percent are still at the evaluation stage. And nearly three-quarters (74 percent) have implemented the metering and billing of cloud consumption, while the rest plan to do so in the next 12 months. Almost half (48 percent) of respondents said they have completed the end-to-end operational management and control of on-premises cloud technologies and integration of tools into a unified cloud management platform (CMP), while 38 percent said they plan to start this process in the next 12 months. Almost all (94 percent) of respondents use or plan to use a CMP. Among infrastructure-related functions, insurers have initially focused on moving data backup and archiving, security and disaster recovery to the cloud, as seen in Figure 5 below. Insurers are leaning to cloud for security to standardize, govern and automate capabilities like anti-virus, security patches and access control. Figure 5: Movement of Infrastructure-Related Functions to the Cloud Already moved to cloud Currently moving to cloud Planned to move to cloud in the next 12 months No plan to move to cloud in the next 12 months 2% 2% 30% 20% 14% 16% 6% 4% 2% 36% 38% 42% 36% 24% 26% 22% 34% 40% 44% 48% 68% 70% 76% Workplace Business continuity Network Servers Disaster recovery Security Data backup/archiving Source: Accenture Cloud Readiness Survey in Insurance 11
  12. 12. ORGANIZATION ANDTALENT A majority of insurers surveyed for the Accenture Cloud Readiness Survey in Insurance have or plan to have a dedicated team in charge of the definition and execution of their cloud strategy, with 60 percent saying such a team is in place and 24 percent saying such a team will be in place within the next 12 months. But, despite the proliferation of complex, business-wide cloud cases among insurers, only half of respondents see their skills related to cloud strategy as “mature” and even fewer regard cloud applications (36 percent), development (32 percent) and infrastructure (12 percent) as mature. Nevertheless, 58 percent of respondents said they have a dedicated team in place to help cloud users, and 30 percent plan to have such a team in place within 12 months. Scale, in terms of IT training, is another important consideration for surveyed insurers. It is one thing to train teams to help cloud users and another thing altogether to train and/or re-skill large IT teams in areas including data, security, and core platforms such as policy administration and claims. 12
  13. 13. MANAGING THECLOUD Despite the importance of a comprehensive inventory of cloud use within the organization, only half (50 percent) of the Accenture Cloud Readiness Survey in Insurance respondents said they have completed such an inventory (although 34 percent plan to do so in the next 12 months). As is the case with cloud strategy, the absence of a cloud use inventory may present obstacles to executing company-wide cloud cases. Cloud security is another identified vulnerability for insurers. Only 36 percent saw their current policies on cloud-related security as being mature. However, 58 percent said they had completed a planning process for cloud security, and 32 percent said they had begun planning on this topic. Over half (54 percent), meanwhile, have completed planning on cloud-related regulatory processes. While cloud security remains a concern, we have observed that, in practice, insurers that work with cloud providers gain confidence in the security capabilities of the top providers and come to believe that the move to cloud results in significant security advantages. External research supports this conclusion, as well. 13
  14. 14. ACTIONSTEPS Many insurers have completed critical steps in the transition to the cloud and others are well along the way. Major concerns remain, however, including shortages of talent with needed skills and/or experience and important applications such as HR and e-commerce which have low rates of movement to the cloud. As our Accenture Cloud Readiness Survey in Insurance indicates, insurers have made good progress in developing cloud strategies and in adopting the needed tools and technologies for moving production to the cloud at scale. 1. Set priorities In addition to thinking about applications that can readily be moved to the cloud, insurers should be engaged in analysis to identify cloud-based applications that can have immediate business impact. 3. Assess processes and tools For insurers, to effectively move production to the cloud at scale, automation, self-service and orchestration are key, in addition to a mindset that prizes fast, broad-based production. 2. Build skills Given the shortage of “mature” talent, insurers should invest in talent and training as well as technology when setting cloud budgets. 4. Strengthen the links between IT and business Insurers should be thinking about extending the cloud’s reach into LOBs, where the cloud is still under-represented. There has been good progress in getting IT and LOBs talking but more should be done. Insurers can address these concerns by taking the following action steps: To fully realize cloud’s potential, however, insurers would have to overcome barriers including shortages of key talent, ongoing security concerns, and harmonizing the efforts of IT and the LOB to increase efficiency and accelerate the development of profitable new products and services. Resources in areas such as training, specific implementation skills, and scaling up once the cloud is in place are readily available from third parties, freeing insurers from permanently staffing in these disciplines. The barriers to cloud implementation are falling quickly and, as our research indicates, insurers are moving to exploit this transformative technology. 14
  15. 15. References 1. “Accenture Cloud Readiness Report – Banking,” Accenture, September 2018. Access at: https://www.accenture.com/ t20181029T101708Z__w__/us-en/_acnmedia/ PDF-85/Accenture-Technology-Advisory- Cloud-Readiness-Banking.pdf#zoom=50 2. “Cloud Adoption in Insurance: Trends and Issues,” Novarica, March 2018. Access at: https://novarica.com/cloud-adoption- insurance-trends-issues 3. “Liberty Mutual uses New Technologies and Agile Approach to Develop Cloud- Based Solution Providing Competitive Advantages,” Liberty Mutual portal. Access at: https://www.libertymutualgroup.com/ about-liberty-mutual-site/news-site/Pages/ Cloud-based-Platform-for-Benefits-Business- Unit.aspx 4. “Accenture Completes Cloud-Based IT Transformation for Towergate, Helping Insurance Broker Improve Its Operations and Reduce Annual IT Costs by 30 Percent,” Accenture news release, September 25, 2017. Access at: https://newsroom. accenture.com/news/accenture-completes- cloud-basted-it-transformation-for- towergate-helping-insurance-broker- improve-its-operations-and-reduce- annual-it-costs-by-30-percent.htm 5. “Accenture Technology Vision 2019,” Accenture 2019. Access at: https://www. accenture.com/ca-en/insights/technology/ technology-trends-2019 “Accenture Technology Vision for Insurance 2019,” Accenture 2019. Access at: https:// www.accenture.com/ca-en/insights/ insurance/technology-vision-insurance 6. “Insurers, Next Time You Replace Your Legacy Systems, Migrate to Cloud,” Accenture, October 21, 2016. Access at: https://insuranceblog.accenture.com/ insurers-next-time-you-replace-your-legacy- systems-migrate-to-cloud 15
  16. 16. About Accenture Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 482,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Its home page is www.accenture.com About Accenture Research Accenture Research shapes trends and creates data-driven insights about the most pressing issues global organizations face. Combining the power of innovative research techniques with a deep understanding of our clients’ industries, our team of 250 researchers and analysts spans 23 countries and publishes hundreds of reports, articles and points of view every year. Our thought-provoking research–supported by proprietary data and partnerships with leading organizations such as MIT and Singularity–guides our innovations and allows us to transform theories and fresh ideas into real-world solutions for our clients. Visit us at www.accenture.com/research. Disclaimer This document is intended for general informational purposes only and does not take into account the reader’s specific circumstances and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this document and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals. Copyright © 2019 Accenture. All rights reserved. Accenture and its logo are trademarks of Accenture. 190699 Contact us Chad Duncan Managing Director Accenture Financial Services, Technology Advisory Lead, North America chad.duncan@accenture.com Darcy Dague Managing Director Accenture Financial Services, Insurance, North America darcy.v.dague@accenture.com Siki Giunta Managing Director Accenture Technology, Cloud Strategy Lead, Global siki.giunta@accenture.com Douglas Chandler Research Manager Accenture Research Cloud & Infrastructure, Global douglas.chandler@accenture.com André Schlieker Research Senior Manager Accenture Research Insurance, Global andre.schlieker@accenture.com Accenture Financial Services Technology Advisory Connect with Us Follow Us Stay Connected

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