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Cloud Services
in Insurance
Ashok Goudar
Senior Enterprise Architect
MphasiS
Contents
Introduction 3
Current IT Landscape 4
Cloud enabled Insurance IT Landscape 5
Insurance Cloud Adoption Areas 8
Infrastructure Clouds 9
Platform Clouds 9
Extended Data Centers with Private IaaS, PaaS Clouds 9
Insurance Software Clouds (SaaS) 11
Enterprise Insurance SaaS 12
Cloud Computing Journey 13
Pricing Models 13
Insurance Application Compatibility 14
Cloud Implementation 15
Conclusions 16
Appendix 18
Cloud technology is rapidly gaining acceptance
in many insurance organizations across the
globe. Cloud based services are seen as
promising IT options for achieving Operational
Expenditure (OPEX) savings in the long run.
Reducing OPEX is the fundamental business
driver for bottom line improvements.
Constraints in IT budgets and Capital
Expenditure (CAPEX) investments require IT
managers and CIOs to look at low cost cloud
services as potentially viable IT options for the
delivery of required services. In other
instances, in many large insurance service
organizations, the historical accumulation of IT
hardware and software assets has resulted in
underutilized and extra IT infrastructure, which
not only demands higher operational budgets
to maintain, but also make the overall IT
enterprise slow to respond to any dynamic
business changes in the insurance domain. In
the meanwhile, technology innovations in
massive computing and virtualization
technology areas have enabled the insurance
organizations to consider modern and efficient
IT service provisioning alternatives including
virtualization and cloud computing which
Introduction
Cloud Services in Insurance White Paper I I 3
promise to deliver required IT services with
relatively lower initial investments (CAPEX) and
lower operational costs. Insurance
organizations, irrespective of their size, by the
very nature of their increased dependency on IT
services to achieve business advantage, are
actively pursuing efficient cloud and virtual
computing technologies that can deliver
continued IT services with relatively lower entry
costs and reduced operational costs. Also, the
dynamic nature of the insurance business often
impacted by fast changing market conditions,
demand faster and on demand provisioning of
IT services and IT infrastructure, to which cloud
and virtualization technologies are well suited.
The capabilities to provide scalable and highly
available IT services with relatively lower initial
investment and lower continued operational
costs have made the cloud and virtualization IT
computing models very attractive to insurance
IT CIOs and IT managers. In the current market
conditions the emergence of tested and proven
cloud computing models such as public clouds,
1
private clouds and enterprise clouds providing
an array of cloud services on a variety of cloud
service offerings, such as IaaS (Infrastructure
as a Service), PaaS (Platform as a Service) and
SaaS (Software as a Service) are increasingly
being adopted in insurance organizations.
In this context, during the course of this paper,
we discuss the keys of virtualization and cloud
computing technology models that are
increasingly being considered for adoption by
many organizations in the industry. The paper
also highlights the areas of business and IT
domains in an insurance organization, to which
the cloud computing models can be
successfully employed to derive the business
benefits associated with cloud computing.
1
Enterprise clouds are purpose built, highly available, resilient and data centre hosted computing service clouds (Infra, PaaS and SaaS), which can
service computing needs of multiple clients within the enterprise. Basically such clouds are built to scale upwardly and horizontally, leveraging to
virtualization technologies.
Current IT Landscape
In general, at the moment, in many insurance
organizations, the usage of cloud based IT and business
services are very limited, but certainly gaining
momentum. The current IT business and IT landscape
(state) of a typical insurance organization constitutes of
the following:
In-house business applications and services: The
major business processes and services are supported by
in-house deployed applications, managed by in-house
service delivery teams. Such business processes and
applications span across the enterprise business units
catering to wide areas of business domains comprising of
underwriting, claim handling, common shared business
functions and a variety of corporate services including
customer relationship management functions.
4 I Cloud Services in Insurance White Paper I
Figure 1
Such business applications and services are used by
customers, business users, business operational users,
and partners and are supported usually by in-house IT
system administration and service delivery teams,
augmented by additional IT outsourcing partners.
Large scale business transformation and IT
implementation programs: In majority of large scale
insurance organizations, including some medium sized
insurance carriers, many business and IT transformation
initiatives are handled through large scale implementation
projects and programs, typically spanning about 12 to 18
months. Such transformations usually involve multiple
business units and their respective IT departments
including application development, IT infrastructure and IT
service delivery teams. In such large scale initiatives, the
time to bring any new enterprise wide business solutions
and services, typically involve around 12 to 18 months. In
addition to large transformation initiatives, organizations
also undertake a number of small sized projects which
are usually floated to ensure upgrades, enhancements
and improvements to the existing IT and business
services.
Exclusive IT environments: Many times, it is a general
practice, that each and every business and IT project is
delivered through a set of exclusive IT environments
including development, testing, staging, performance
testing, pre production and production environments that
are built on exclusive non sharable hardware and
software components. Usually, such exclusive
environments are created to mitigate any interdependency
risks between various phases with a project and also
across any associated and dependent projects. In
majority of cases, such environments were built when
virtualization technology was not yet matured enough to
consider for production deployments.
Non Cloud Based Insurance Enterprise
Cloud Services in Insurance White Paper I I 5
Project (or program) specific IT budgeting and
infrastructure procurement: As a general and well
adopted practice, each and every project or a programme
funding is secured through exclusive project specific
budgets covering hardware, software, implementation
resource (teams) and service delivery costs. Each project
in turn will have its own spending on IT hardware,
software and service delivery infrastructure, and as a
commonly accepted practice, exclusive IT environments
are created to support project execution and service
delivery once the project moves into production. In other
cases, it is likely that businesses might be sponsoring
each individual project on an exclusive basis, covering
application development, IT infrastructure and IT service
delivery costs.
Extra capacity in IT infrastructure: In some insurance
organizations, due to existing and commonly accepted IT
delivery practices (which are well proven over a period of
time), it may happen that in some of the IT environments
which were created to support individual projects and
applications, the recycling and reutilization of resources is
limited. Due to the exclusive nature of application specific
production environments from where the IT service
delivery is provisioned, the IT infrastructure is more prone
to get fragmented and underutilized, where significant
amount of processing resources remain unallocated (non
utilized) in the servers. Over a period of time, one can see
a set of mutually exclusive production environments
sitting side by side, supporting multiple business
applications, often having substantial computing
resources which can be reutilized.
Heavy weight IT upgrades and Infrastructure
refreshes: In some cases, where IT systems are
operating at full capacity, requiring either horizontally or
vertically scaled upgrades, it may take considerable time
to achieve system upgrades, often coupled with
application down times (service outages) and application
redeployment. Such IT upgrades and refreshes may have
to continue as the OS and the application software
requires upgrading and the load on the system also
keeps on growing. Such upgrades can be often time
consuming and require a considerable amount of
planning and coordination to bring them into the
respective production environments.
Need for higher IT budgets: In many insurance
businesses, it is quite common that large scale business
transformation programmes require higher levels of initial
investments. The recent technology innovations, higher
service level expectations, market driven changes and
new set of business requirements, can all make the
business transformation programme essential, but also
quite expensive to rollout, requiring higher levels of
financial sponsorships.
The large scale business transformation programme,
demanding higher levels of CAPEX (Capital Expenditure)
and OPEX (Operation Expenditure), may often require
sponsorship from the business units, and require sound
business case coupled with compelling ROI models. At
times, in medium sized or highly federated and regionally
based insurance organizations, some of the essential
business transformation programmes, although critical to
business competitiveness, may find it difficult to find the
right levels of sponsorships.
Outsourced business processes and IT services:
Many large scale and medium sized insurance
organizations have successfully adopted cost effective
and efficiency driven outsourcing models including BPO
and IT services outsourcing. Frequently, such outsourced
arrangements include shared IT infrastructure services
between the enterprise and its outsourced partners. In
practice, often such outsourced models require some
levels of initial investments and continued association of
IT services which may include additional provisioning of IT
infrastructure to the outsourced partners.
The existing and emerging cloud technologies are
promising enough to address some of the key areas of an
IT landscape in a typical insurance organization. In the
next section we will discuss the key characteristics of a
cloud technology enabled IT landscape in an insurance
organization.
A cloud technology enabled insurance organization is
likely to be well positioned to address some of the
existing IT and business constraints which are quite
prominent in many insurance organizations. The cloud
technologies are increasingly being seen as business
enabling technologies, which can help the insurance
businesses not only to bring new business solutions with
relatively lower initial investments, but also to maintain
and sustain current business and IT operations with
relatively lower operational costs. In this section, we
briefly highlight the key characteristics of a cloud
technology enabled insurance organization.
Cloud provisioned business services and
applications: In a typical cloud technology empowered
insurance organization, the business applications and
services are catered by various cloud platforms that are
operational, either in-house or as a part of external cloud
service providers. The insurance business applications
and services, supporting underwriting, claim, shared
services and a variety of corporate functions are delivered
either from locally built cloud IT infrastructure or through
externally available cloud application services such as
SaaS (Software as a Service) platform clouds. Such
business application services are built (provisioned) using
either some or all of the following cloud computing
models:
Insurance IT infrastructure as a service
(IaaS) cloud: In this model, various insurance
business application and services are built and
hosted by leveraging to an on demand IT
infrastructure cloud, which supports multiple
Cloud enabled Insurance
IT Landscape
6 I Cloud Services in Insurance White Paper I
business units in the organization. Such a cloud
infrastructure may be available within the
organizations data centre or are procured from
external infrastructure cloud providers.
Insurance services built on leveraging
platform as a service (PaaS) infrastructure:
In some organizations, some of the insurance
business applications and services are built and
hosted on a purpose built platform service cloud,
which is either available internally within the
organization or available through an external cloud
service provider. In such an arrangement, the
required IT computing sources are tapped from the
PaaS cloud and IT computing elements are
provisioned on a demand and need basis.
Usually, PaaS hosted business application services
require lower initial investments and lower
operational costs. Such PaaS services are available
in a self service model, where application
environment instances can be configured and utilized
as per the computing needs. The PaaS clouds in
addition to basic infrastructure computing resources,
also provision the application software that can
support both design time and run time computing
requirements.
Insurance services leveraging to purpose built
software services: Insurance business
applications and services are also available on what
is called as a SaaS model, where the entire
insurance business application or a service is
available as a software service from the cloud, to
which business users can log in and conduct their
day to day business transactions as if they are
transacting them on an exclusive business
application service. Such insurance business
application services are either available within a large
enterprise (that can support multiple business units
across the globe) as a SaaS cloud or catered from
external cloud service providers who specialize in
insurance services. A variety of insurance business
services such as underwriting services, claim
handling services, CRM services and commonly used
shared insurance services are now gradually being
offered as SaaS services. The insurance SaaS
services usually require lower initial investments and
lower operational costs, and hence appear quite
promising to many business units and their IT
departments in an insurance organization.
Figure 2
Cloud Enabled Insurance Enterprise
Cloud Services in Insurance White Paper I I 7
On demand infrastructure provisioning reduced
project implementation timelines: In a cloud enabled
insurance organization, the usual business and IT project
implementation timelines are drastically reduced as the
required infrastructure for non production and production
environment is provisioned in a demand and readymade
fashion, avoiding the complete cycles of hardware and
software procurement, hardware environment building
and provisioning. As the infrastructure is available upfront,
tailor made and also scalable as per the business needs,
the usual application services are developed and hosted
with reduced timelines which will further enable the
business units to bring new business models and
solutions in an agile manner responding quickly to the
dynamic market conditions.
Lower project or programme budgets: In many
successfully cloud enabled insurance organizations, the
regular project or programme budgets are usually low,
compared to those of non cloud based insurance
organizations. This is mainly because of the lower initial
investments required for building the IT infrastructure and
application services. Also due to relatively lower
operational costs of the applications and IT infrastructure
that is provisioned out of cloud.
Operational costs proportional to business
volumes: As a cloud enabled insurance enterprise,
leverages to better costing and pricing models while
securing the required services from the cloud, the
operational costs are usually low and are proportional to
the business transaction volumes. This is mainly because
many of the cloud services are priced on the "pay as you
go" model which in turn result in initial lower investments
and proportionately manageable operating costs that are
directly dependent upon business volumes.
Increased reuse and sharing due to virtualization:
Reuse and shareability index is usually very high in cloud
enabled insurance organizations. At an enterprise level,
this will result in even higher levels of reuse and sharing
of enterprise resources (hardware, software and
workforce). In a successfully cloud enabled insurance
enterprise, one can see common clouds for key insurance
services that are shared across multiple business units in
the organization. Some of the key common shared
insurance services that are often provisioned as cloud
services include Common Fax Services, Common Search
Services, Common Scanning Services, Common Mass
Printing and Distribution Services, Telephony and SMS
clouds, Common Payment Services, Common Message
Gateway Services, etc.
Lean and efficient IT departments: In the long run,
the cloud technology enables the insurance organizations
to maintain a lean but highly agile and efficient IT
organization, that can provide IT services in an on-
demand basis and agile basis, further enabling the
business units to consider a variety of innovative
business solutions, that can be quickly brought into
operations as per the need basis.
Consolidated IT infrastructure: Cloud enabled
insurance organization can achieve a consolidated and
optimum IT infrastructure that can cater to the business
needs on an on demand basis. Such a consolidation will
reduce the IT infrastructure fragmentation that is usually
seen in many large IT organizations. Infrastructure
consolidation will also result in reduced operational,
maintenance, and data centre costs. IT infrastructure
consolidation through cloud technologies is expected to
promote green IT practices due to lesser but efficient
usage of hardware and software footprint.
Rationalized application portfolio: In a successfully
cloud enabled insurance organization, one can see higher
degrees of business application and service
rationalization which will avoid data duplications and
application rekeying at multiple levels across different
business units in the organization. Optimally rationalized
insurance business applications can result in substantial
reduction in service procurement costs and also reduce
associated operational costs.
Virtualization at all layers: Virtualization will be a key
characteristic of a cloud enabled insurance organization,
in which the virtualization technology is leveraged to its
fullest extent. Such an organization will usually benefit
from various virtualization technologies that are applied to
server, OS, software, data, application, business process
network and security layers.
As insurance organizations start improving their adoption
of cloud technologies, the key characteristics discussed
in this section become more visible and evident in those
organizations.
8 I Cloud Services in Insurance White Paper I
Insurance Cloud
Adoption Areas
The cloud computing technologies find their applications
across multiple sections of an insurance organization.
Emerging cloud computing models are increasingly being
adopted at an enterprise level which are further
propagated at regional or department level adoption of
cloud computing models. The key areas where cloud
technology finds its immediate applications are discussed
below.
IT application development: Most compelling usage of
cloud computing model in an insurance organization, is in
its IT application development services which are usually
delivered as a part of regional IT services, with
governance model exercised by its enterprise IT teams.
Various IT application development environments are
provisioned through relatively inexpensive cloud
infrastructure available either through enterprise in-house
cloud or through public infrastructure clouds. Due to the
low risk associated with such environments, they are the
ideal candidates to provision from either an enterprise
cloud or a public cloud.
IT application testing: Application testing services
require multiple testing environments till the application
code is ready to be promoted to production. Such testing
environments are ideal candidates for cloud provisioning
of the environment.
IT application production environments: IT
application production hosting environments are other
key candidates, for cloud infrastructure provisioning. The
performance, data security and other associated
constraints are more prominent with production
environment, and hence such environments are
considered to be provisioned by in-house enterprise or
private clouds rather than public clouds. However, some
organizations do provision their production environment
from proven public clouds. More over, the public cloud
service providers have enhanced their security models,
making such clouds more appealing to production
environments.
Desktop and application provisioning: Virtualization
based cloud technology is widely being used for
provisioning virtualized desktops in large organizations
and also to provision high performance application
provisioning services through specialized application
clouds. Some of the highly critical business applications
are currently provisioned to high performance application
provisioning clouds to remote business users.
Shared data services: Expensive database software
license costs and also increased server hardware costs
makes the organization consider purpose built shared
data service clouds which can support multiple
applications through their data storage needs. Such data
virtualized clouds can provide relatively inexpensive data
storage services to the business applications. They will
also reduce the overall software license costs associated
with the business applications.
IT infrastructure shared storage: The storage
clouds built on high performance SAN infrastructure are
widely being used for providing storage services to
multiple applications in insurance organizations. The
commonly shared storage infrastructure cloud can
support multiple application storage needs both in terms
of application storage and data storage. Such storage
clouds also support the end users for their storage
requirements and file systems needs.
Common computing platform clouds: Nowadays,
insurance data centers have started leveraging a variety
of common computing clouds built on recent
virtualization and hardware technologies. Such platform
cloud services include archiving cloud services, firewall
cloud services, load balancing cloud services, file system
clouds, LDAP clouds, etc.
Collaboration technology clouds: These are
variations of Platform as a Service clouds or Software as
a Service clouds, which provide a variety of collaboration
functionalities including emails, chats, sms, enterprise
twitter etc., that are provisioned to employees at relatively
economical pricing models. Such collaboration clouds are
widely being used in many insurance organizations.
IT business applications: IT business applications are
also being offered as cloud based services, often termed
as Software as Services to the end business users.
Such business application services are provisioned
through publically available SaaS cloud service providers.
Such SaaS applications are usually offered on transaction
based pricing models and on user based licenses. In the
insurance industry, many of the commonly used business
functions are now provided through a variety of SaaS
services. Such SaaS clouds are now, quickly finding their
applications, in small and medium insurance
organizations.
Shared and common corporate applications:
In addition to insurance industry specific SaaS services,
the commonly used shared applications such as CRM,
enterprise resource planning, HR services etc are know
being offered as SaaS services, which are relatively cost
effective, compared to non cloud hosting of such
applications within the insurance organizations data
centers.
Cloud Services in Insurance White Paper I I 9
Infrastructure Clouds
Platform Clouds
Among the many definitions, an infrastructure cloud is
best defined as an IT computing infrastructure resource
pool from which the IT infrastructure services and
components are provisioned as services. This happens
in an on demand and self service model to the consuming
client, which includes end users and IT applications in an
organization and also external customers. Such an
infrastructure cloud model is also termed as IaaS, which
implies that such cloud services are capable of providing
IT infrastructure as services to the concerned clients.
Generally, the services offered as part of the IaaS cloud
computing model include hardware infrastructure in terms
of processor containers (servers), network resources,
storage resources, data resources, data archiving
resources, data backup resources etc. Such IaaS clouds
provide tailor made computing instances with defined
characteristics in term of CPUs, processing speed, RAM,
allocated storage etc.
In an insurance organization, the IaaS computing model
can be resourced from an externally available cloud, such
as public cloud or from custom built enterprise clouds or
private clouds within an organization, which can provide
Iaas services. Such infrastructure clouds are facilitated
though modern cloud enabled data centers. Individual
project teams, business units, source the required
environments (non production and production instances)
from such infrastructure clouds. Generally, the computing
resources are offered to the customers in a utility and
pay as you go based pricing models.
In this cloud computing model, tailor made computing
platforms with prebuilt hardware and software
specifications, including any application specific software
and frameworks, are offered as cloud services and such
services are termed as Platform as a Service cloud
(PaaS). In PaaS, on top of infrastructure computing
services, the platform provisions the required prebuilt run
time solution environments, into which application
components, packages and services can be deployed
and operationally monitored and managed. The PaaS
pre-built solution environment usually consists of:
Special operating systems: Those are usually run on
top of underling native or guest operating systems.
Messaging software servers and clients: These can
support message based solutions.
Applications servers: These provide run time container
in which the actual solution components are executed.
Ex. J2EE servers, Java Servers, Legacy Servers, .Net run
time, etc.
Web servers: Web server run time containers
supporting web server hosting Ex IIS, apache, HIS and so
on.
Database servers: These can provide DBMS
functionality for application solution components and
services.
Special purpose computing servers: These can
provide specific business functionality, such as ERM,
BPM, CRM and other business functions.
In an insurance organization, individual project,
programme teams or business units can leverage such
prebuilt custom made environment to run their
applications and services. Such cloud services models,
enable the application teams to focus on application
development, testing and deployment, where as runtime
computing platform is provided by the cloud. The PaaS
clouds offer multiple benefits to the customers which
include:
Quick and faster environment provisioning
Centralized management of computing environments
Efficient horizontal and vertical scaling as load factors
increase
Centralized version control and patch management
Centralized environment security hardening
Faster application development and testing cycles
Centralized management and monitoring, leveraging to
state-of-the-art infrastructure monitoring facilities
Relatively cheaper pricing models, flexible pricing
model based on the services included in the offering
Currently, the PaaS services are provided by multiple
vendors in the market with a variety of pricing models
and PaaS services. Insurance organizations are now
considering such PaaS clouds for their non production
environments, which are utilized by multiple distributed
teams. Also, such PaaS clouds are used as an extension
to existing data centre services. In small and medium
sized insurance businesses, PaaS clouds become even
more relevant, as they have potential to provide much
required computing power, without the need for heavy
financial investments.
Availability of secured and reliable private and public
cloud services, from multiple cloud services vendors,
have provided new options for insurance organizations to
quickly expand their data centre capacities by
augmenting with new cloud based IaaS and PaaS
services. Such extensions are necessary to protect the
current IT investments in large insurance carriers.
Public private cloud extension: The private cloud
services provide options for linking existing data centers
with externally provided private cloud, which operates as
if it was part of the data centre, although physically
separated. The secured VPN based connectivity options
and flexible secured networking services in private
Extended Data Centers
with Private IaaS, PaaS
Clouds
10 I Cloud Services in Insurance White Paper I
clouds, enable the insurance data centers to easily
integrate and extend their computing resource across the
boundary of the data centers. The recent network
virtualization technologies such as VLAN virtualization
enable the extension of network addressing schemes to
public cloud, ensuring the smooth integration between
the insurance organizations data centre and public cloud
computing nodes (instances). In such an arrangement,
the IP network addresses of computing nodes in the
cloud become part of the data centre network addressing
schemes, and enabling the complete connectivity
between data centre nodes and cloud nodes.
Enterprise private cloud extension: Some private
cloud service vendors provide products and services
which will enable the insurance organizations to quickly
build in house private clouds which can work closely with
their existing infrastructure. The private cloud offerings
include Data Centre in the Box type of products, which
can be quickly rolled out and connected to existing data
centre infrastructure. Some of the private cloud offerings
provide configurable computing and management
instances with flexible operating system options and
flexible storage options.
Physical host independency virtual instance
portability: The current virtualization technology allows
to delink the virtualized computing instances from their
physical hosts, and thus making it possible to port the
virtual computing server instances from one physical host
to another, still retaining the network addresses. Such
portability options make virtualized cloud environments
highly flexible when it come to code promotion,
application migration and service level upgration. Such
virtual instance portability capabilities also help in
reducing the application down times and to improve the
service levels.
Figure 3
Cloud Services in Insurance White Paper I I 11
Insurance Software
Clouds (SaaS)
In this model the entire business applications and their
services are offered as cloud services, where such
business application run in a centralized cloud platforms
built on PaaS and IaaS models. In such a cloud, the
business application software is offered as a service to
the end customers who will access those application
services through their respective access accounts.
In the insurance industry many of the standard business
applications and services are now being offered as
Figure 4
SaaS services by a variety of cloud service providers. The
SaaS clouds relieve of their business customers from the
need to develop and maintain the business applications
and services and enable them to focus on the business
transactions instead.
The SaaS applications and services are executed within
the SaaS application infrastructure, which also holds the
business data pertaining to the business transactions that
were carried out using the business applications.
At times, such business data may need to be integrated
back with other core applications within the insurance
organization. A successful adoption SaaS service
depends upon the following aspects:
Quality of services of the SaaS services, including
application performance
Availability of SaaS services
Scalability of SaaS services
Security of the Business Data
Regulatory compliance of SaaS services
Integration needs of SaaS business data back to the
enterprise systems.
Pricing models
Training services
Distributed Security Single sign-on
In insurance organizations, SaaS services can be
successfully incorporated with other existing applications
and services including any in-house cloud services.
Insurance
SaaS
Providers
12 I Cloud Services in Insurance White Paper I
Figure 5
Enterprise Insurance
SaaS
In large, globally distributed insurance organizations,
operating in multiple lines of businesses, the enterprise
SaaS cloud computing can become quite advantageous
when it comes to provision uniform, standardized,
consistent and cost effective business application and
services to various business units in the organization.
Such large scale SaaS clouds can provide business
applications to individual business units on Saas pricing
model, thus promoting reusability and shared service
usage accorss the organization. Such enterprise SaaS
services can also reduce individual business unit level IT
footprint and promote centralization of shared IT services
in the organization. For instance, a marketing SaaS
application provisioned by an enterprise SaaS platform,
can service multiple business units across the enterprise.
Building such enterprise SaaS service may require higher
initial investments, which can be recovered over a period
of time, as more and more business units subscribe to
such SaaS services.
Insurance - Enterprise - SaaS
Cloud Services in Insurance White Paper I I 13
Cloud Computing
Journey
Generally in an insurance organization cloud computing
adoption can be a gradual implementation process,
starting from initial proof of concept verification, basic
virtualization implementation and then moving towards
higher degree of cloud computing with external as well as
internal clouds. Also, in many organizations, initially low
risk computing applications or platforms are considered
to be provisioned by external clouds, before moving high
risk production environments into external cloud
platforms. From the business processes point of view,
initially non core business processes and application
services are ideal candidates for cloud implementation.
As the confidence in cloud infrastructure and services
increases, more and more core business processes are
likely to move towards cloud computing. Many small and
medium sized businesses may prefer external clouds
compared to in-house large private clouds, due to
relatively higher levels of initial investments required for
building large scale enterprise level clouds or private
clouds.
Figure 6
Pricing Models
Currently, in the market, cloud services are offered on a
variety of competitive pricing models, many of which are
based on fundamental pricing principles such as:
Customers pay only for the services consumed
Customers have options to choose from multiple price-
differentiated and service-differentiated services
Volume based and metered service pricing
Such pricing models make cloud services easily
adoptable by many insurers, as the entry costs of cloud
computing is relatively at lower levels. Also such
transaction and consumption based pricing models offer
lower operational and maintenance costs in the long run.
The major IaaS, PaaS and SaaS vendors offer cloud
services which are priced, based on the following service
options,
Processor architecture 32 bits or 64 bits
RAM allocation 2 GB, 8 GB, 16 GB and so on
Cloud Computing Priorities - Journey
14 I Cloud Services in Insurance White Paper I
Processor speed 1.4 GZH, 1.6 GZH, 2.6 GZH so on
Storage allocation 10 GB, 20 GB, 100 GB, unlimited
storage, so on
Operating system Lunix variants, Windows variants,
Unix Variants
Type of instances On demand instance, reserved
instances
Backup frequency Data back up features included
Data archiving options Data Archival and Data
Retrieval services employed
Exclusive or public cloud Based on the nature of the
instances either public instances or private instances
Availability levels Availability level of services and
instances (virtual machine instances)
Data integration options Services offering data
integration between the cloud instances and consumers
IT systems
Transaction based Number of user transactions
conducted, normal transactions, peak hour transactions,
off peak transactions
Service usage Priced based on the service usage,
billed as per service consumption
Special purpose software Services are charged
based on the usage of special purpose software used in
the cloud instances (virtual machines)
Development tools Development tools and data base
software included in the cloud also determine the pricing
User accounts Service priced based on user account
and licenses
The vendors offer cloud services on a variety of service
feature combinations giving the customers wide array of
cloud service options to choose from.
Traditionally, insurance application and business services
have been grouped into front office, middle office, back
office and shared application services, depending upon
the usage of those applications and services. By the
nature of the business transactions involved, the front
office insurance transactions are usually conducted in real
time and performance and availability of such services
and applications is extremely critical to conduct day to
day business operations. On the other hand, the middle
office insurance services and operations usually involve
relatively lesser degree of direct customer interactions
and availability and performance of such services is
relatively less critical compared to front office services.
Back office insurance operations are conducted on an
offline basis (with respect to real time transactions),
Insurance Application
Compatibility
primarily by the back office employees and staff
members. The back office operations are extremely
critical to insurance business; however performance,
availability and other critical service levels of such
services are relatively low compared to that of front office
services. The shared insurance services are common
services within the organization, which are utilized by
various department and business units in the enterprise.
Some of those common services are also used by
external partners including agencies, brokers, OPS, TPAs
and any other IT service providers. The service levels in
terms of performance, availability, security of such
services is usually higher; however any disruption of such
service is not likely to have direct impact on the business
operations and to the customer service operations.
While choosing a particular suitable cloud computing
model for insurance services, the following service level
parameters play a critical role:
Performance of a service In terms of response time,
support for concurrent users, peak hour responses.
Security of a service Security of a service plays a
critical role in deciding a particular clouding computing
model. The data privacy act (DPA) requirements, PCI-DSS
compliance and any such other regulatory security
requirements can play a major role on deciding where the
particular service is hosted and provisioned to the users.
Availability and reliability of a service The
availability and reliability of a service is extremely critical
for conducting real time insurance business transactions,
especially those which involve customers and financial
transactions.
Scalability of a service The ability of the service to
handle increased load as the business volumes grow is
very important to business critical insurance services.
Disaster recovery and business continuity Ability
to recover the services and continue the business
processes from alternative locations is extremely critical
to insurance business services and operations.
Auditing and logging In some services, due to the
nature of their business criticality, the auditing and
logging of such service usage is very critical from both
auditing and compliance point of view.
Service integration and interdependency The
processing and integration dependency of a service with
other services, can be a critical factor in determining the
hosting model of such a service. Such dependencies may
mandate deployment of such services closer to their
dependent services.
Cloud Services in Insurance White Paper I I 15
Figure 7
Cloud Implementation
As of now, the cloud computing technology
implementation in insurance organization is limited to few
areas and is not extended widely accorss the enterprise.
The most immediate candidates that are being explored
for cloud implementation are low risk testing and
development environments, leveraging to external clouds
wherever feasible. The actual production deployments of
external clouds is slowly increasing, but not at a speed
as it was anticipated. There are several reasons for this
slow adoption rate, few of which were discussed in the
earlier sections. Among the key insurance application
portfolios, non critical and non core applications and
services are being considered for cloud deployment,
mainly due to the low operational risks and low service
level agreements associated with such application
portfolios.
The core insurance applications pertaining to policy life
cycle administration, claims management, HR, Admin,
analytical reporting, etc. are slow in getting promoted to
cloud environments, especially to public clouds. The
reasons are many and include lack of control on IT
governance, data security concerns, integration
requirements, etc. The table 2 included in the appendix of
this document briefly highlights the cloud computing
adoption patterns currently being visible in the insurance
carrier organizations.
Small and medium sized insurance businesses:
In such organizations, the implementation of cloud
services that are based on IaaS, PaaS or SaaS models, is
relatively faster compared to large insurance businesses.
Small and medium sized businesses can quickly move to
cloud computing models, as the need to protect the
current IT infrastructure investments is relatively low and
hence such organizations have greater freedom and
flexibility to move quickly to adopt new computing but
cost effective models. Also, the size of the IT budgets
(relatively lower) in SMBs, make them to consider cloud
based computing model from where more IT services can
be provisioned with comparatively lower CAPEX and
OPEX requirements. In SMBs, building enterprise scale
in-house cloud computing platform would be very useful,
however the initial investment (CAFEX) requirements may
present few financial constraints in adopting enterprise
in-house cloud platforms. Currently, few cloud vendors
have rolled out SMB focused IaaS, PaaS computing
platforms, which can be quickly rolled out to SMBs, to
create medium sized in-house private clouds.
The SaaS based clouds are more appealing to SMBs, as
they allow those businesses to quickly deploy new IT
based business solutions, with low initial investments and
low operational costs. The data integration needs in such
organizations is relatively lower compared to large
Insurance businesses with larger IT application and
infrastructure footprint.
16 I Cloud Services in Insurance White Paper I
Table: Key Service Level Factors Cloud Computing
Performance Response Time, Concurrent users,
Peak Load Support
Service Security - Authentication, Authorization,
Transport level security, Storage security
Service Data Centre Security
Service Availability Support
Service Support Window provisioning
Service Scalability
Service Auditing and Logging facility
Service Integration Dependency Impact
Service DR and Business Continuity Provision
Performance of the cloud services as per required
SLAs
Cloud Service Security features required for security
compliance
Security in Cloud Data Centers for security
compliance such as SOX, DPA, PCI DSS
Availability of cloud services, in terms of cloud
resilience
Cloud Service Support
Scalability of cloud services in terms of horizontal
and vertical scaling
Auditing, Logging and Metering facilities
Need for integrating the data in cloud back to
organizations IT systems
DR and Business Continuity Provision measures
employed in the cloud
Conclusions
In the recent years, cloud computing has matured
enough to become part of the mainstream IT computing
and is widely being accepted by many organizations in
the insurance industry. Certainly, the lower initial
investment requirements for public cloud usage (CAPEX)
and the lower operational costs (OPEX) have been seen
as the key financial advantages of a cloud computing
model. At the same time, the faster implementation and
ondemand service provisioning aspects of cloud
computing models are considered to be essential to build
and promote agile business operations within an
insurance organization. As of now, many insurance
businesses have been using proven and traditional IT
services to cater their business operations and have been
successfully leveraging to SOA technologies as a part of
their business technology model. As a next leg in the
technology journey, insurance organizations have now
started seeing a value in cloud computing models and
have seriously started evaluating usage of cloud
computing technologies. Although at this stage, the cloud
adoption in insurance organization is at a lower side, but
over the next few years, cloud computing implementation
is expected to increase significantly in insurance
organizations. The key cloud computing models such as
IaaS, Infrastructure as a Service, PaaS, Platform as a
Service and SaaS, Software as a Service, are all finding
their applications in an insurance organization. The recent
advancements in network technology, processor
architecture have further fuelled the growth cloud
computing models, which can be practically adopted by
an organization. Insurance organizations can find cloud
computing models as a promising option to adopt
efficient IT provisioning models that can consolidate the
infrastructure and provision computing resource in an
agile and on demand fashion. Such an on demand clouds
can help insurance organizations to optimize their IT
footprint and also enable those organizations to efficiently
manage the operational costs involved. The SaaS cloud
models are fast becoming viable low cost alternatives for
insurance organizations to adopt a variety of on demand
business solutions that are economical both in terms of
initial investments and also in terms of lower ongoing
operational costs. The data and application security has
been always seen as a constraining factor in adoption of
cloud services within an insurance organization. The
stringent data privacy acts regulations and guidelines
have further put additional security demands on cloud
computing models. In the recent past, the cloud service
providers have been able to address the security
Insurance Application Service Level Factors Description - Cloud Relevance
Cloud Services in Insurance White Paper I I 17
concerns associated with cloud services, and as a result,
the acceptance of cloud computing models is significantly
increasing. The service availability and service quality
levels of cloud services also play a critical part in
determining the acceptance of cloud services for a
particular business in an insurance organization. Cloud
service providers have been offering highly available
cloud services at desired quality of service levels, which
make those services business grade and easily utilized as
a part of real time business operations. The cloud
technology is being applied to almost every aspect of IT
computing at this stage and as a result, a variety of the
cloud services are currently available in the market, which
can be easily accommodated either fully or partially, into
an existing IT operations of an insurance organization.
Going forward, insurance organizations are going to be
benefited by optimal implementation of cloud services
and associated computing models as a part of their
overall IT and business services operations. New
technology advancements are further likely to improve
the cloud service offerings, which in turn result in
increased cloud adoption levels in the insurance industry.
It may not be wrong to say that cloud journey in
insurance industry has just begun and there is a long
way to go, as far as cloud computing and its successful
rollout in insurance industry is concerned.
Business
Service Or
Application
Table: Insurance Services Cloud Suitability
Application
Category
Internal Cloud
and SaaS
Public Cloud
(PaaS, IaaS)
External
SaaS
Virtualization
Technology
Pricing Model
Development
Environments
Testing Environments
Front Office
Marketing Agency
and Distribution
Front Office Sales,
Marketing,
Service Support
Front Office Policy
Admin, Underwriting,
Quotes, Binding,
Renewals, Rating
Front Office Claims
Handling
Middle Office
Reinsurance,
Risk Management,
Billing, Payments
Back Office Reporting,
Financial Accounting,
HR Admin, BI Analytics,
Re-porting, Compliance
Shared Services Doc
Mgmt, Email, Fax,
SMS, Printing,
Messaging, etc
All
All
Prod
Prod
Prod
Prod
Prod
Prod
Prod
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes Integrations
Limited
Limited
Limited
Server, OS, Platform,
Application
Business Application
Business Application,
Application Platform
Processor, Storage,
Node Based. (Based
on environment
specs. User account
based). Also based
on nature of
computing instances.
User License Based,
Business Volume,
Transaction Based.
User License Based,
Business Volume,
Transaction Based.
Yes
Yes
Appendix
About the Author
Ashok Goudar
Senior Enterprise Architect Europe, MphasiS an HP company
Ashok Goudar is an experienced professional operating in the consultancy
services industry for the last 17+ years. He has an in depth experience in
business technology/architecture consultancy and programme/
engagement management services. Prior to joining MphasiS in 2008,
Ashok Goudar had worked in EMEA, NA and India regions with two other
(TCS, Infosys) consulting service organizations in the capacity of business
technology architectural consultancy and IT management roles. His
experience includes enterprise solutions (BPM, SOA, Cloud, CRM, SCM,
BI/KW and Web) covering Applications, Infrastructure and IT service
delivery space applied to Insurance, Finance, Retail and Telco domains.
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ABOUTMPHASIS.
MphasiS is a $1 billion global service provider, delivering technology
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