What challenges does the insurance sector face during the migration to the cloud?

First and foremost, there are legitimate concerns about the privacy and security of highly sensitive data related, for example, to customers’ finances, assets or health and medical history. It becomes necessary to apply compliance verification mechanisms for transferred data, security mechanisms against loss of transferred data and the use of encrypted security and advanced access control to avoid breaches both during and after the migration to the cloud. In this case, the advantages of a private cloud over a public cloud should be considered, as a private cloud provides the possibility to have more control over where data is collected and stored, a higher guarantee of its permanent deletion and, in addition, the possibility for the provider to be controlled and audited by the insurance company itself as well as by industry regulators.

Integrating safety with innovation

Another challenge is the need for the insurance company to thoroughly verify the cloud provider’s compliance with all applicable data security, privacy, risk management and corporate governance regulations. With regard to the insurance industry in Poland, one should bear in mind, among others, the National Cyber Security System Act, the Personal Data Protection Act (GDPR), various industry guidelines of the UKNF, or the EU DORA Directive on Digital Operational Resilience, which is about to enter into force.

Modernisation or conservatism?

The existing local IT ecosystems, built up over many years, which contain so-called ‘legacy’ systems, are also a significant challenge. It may not be possible to move such systems to the cloud without replacing or ‘rewriting’ them based on another technology that is tailored to the cloud environment. The cost of such an operation may be too high, so it is more beneficial to keep such systems outside the cloud environment until they are no longer needed or their replacement becomes absolutely necessary for business or technical reasons. Of course, appropriate APIs need to be created to enable integration between the cloud environment and legacy systems ensuring a seamless flow of data without negatively impacting existing business processes.

Finally, the potential resistance of the organisation to change, e.g. due to employees becoming accustomed to older environments or as a result of business process modifications, must be taken into account. The implementation of cloud computing systems itself may require new skills from system users. Proper change management in the transition to the cloud (e.g. dedicated user training, proper communication and internal marketing) therefore becomes important.

An insurance company should also take into account that its customers may be hesitant to trust cloud-based insurance services. The challenge, therefore, may be to choose the right partner to work with, with experience and security certifications, who will inspire confidence in customers and ensure a high level of service delivery.

Innovative horizons

The clear advantage of the benefits over the outlay of carrying out a cloud migration process means that insurance companies will be increasingly keen to adopt this solution. A number of analyst and research firms (e.g. HTF Market Intelligence, MarketWide Research, Markets and Markets) predict that the average annual growth rate of investment in cloud technologies for the insurance industry globally will be at 20 per cent for the next few years. The use of new, disruptive technologies such as artificial intelligence AI, blockchain or the Internet of Things IoT in cloud computing by insurance companies will become one of the necessary enablers for their sustainable competitive advantage. Thus, it can be considered that cloud technology is becoming an important catalyst for digital transformation and innovation in the insurance industry.