The P&C insurance industry is approaching a cloud adoptiontipping point. Insurers are migrating strategic applications to thecloud in addition to non-core applications such as email and webconferencing that have become commonplace. The potential forcloud-based claims technology to create new value and competitiveadvantage is emerging. The potential for insurers to misfire andselect second-rate technology looms.

According to Aite Group, a $36 billion opportunity exists forAmerican P&C insurers to embrace innovative claims technology.Advances in mobile devices, wireless connectivity and cloudsoftware including mobile apps, all combine to present P&CInsurers with the opportunity to re-think and re-define the claimssettlement experience in 2014.

Some early adopters of cloud-based claims technology are alreadytapping into the billion-dollar opportunity through automation,real-time collaboration, re-wired processes and integrated mobileworking. However, some insurers are experiencing sub-standardservices as established P&C claims software companies migratelegacy platforms to the cloud. Technology companies that havetraditionally realized success in the P&C claims sector arestruggling to roll out cloud services–showcased by repetitivedowntime and reverting to earlier software versions.

Not all clouds are created equal
Withbillions at stake–claims, purchasing and IT leaders need toexercise caution in their P&C claims technology partnerselection. Fundamental differences exist in data ownership andmanagement, technology integration capabilities and pricing andsubscription models. 

Given the transformational shift that cloud computing offers,organizations are naturally concerned about the potential risksfrom a move to the cloud. But, cloud-based claims technologydeployments are inevitable. Without significant upfront effort fromthe most senior and strategic claims decision-makers, benefits ofenhanced collaboration, scalability and accessibility will bereplaced with downtime, sluggish integration with spiraling costsand data limitations. 

P&C technology companies that are new to the cloud areunfortunately turning their customers into guinea pigs as they workthrough software bugs to find their way in the cloud and migratefrom legacy technology environments. 

Migration from the local data center to the cloud can becomplicated: error-prone, time consuming and costly for traditionaltechnology companies. The migration process requires a lot ofconguration update operations and even one incorrect update cancause the whole system to fail.  Dependencies among themany enterprise system components are complicated and can be veryeasily broken in the migration process–creating securitythreats.

Fixing bugs and updating patches in the cloud requires adifferent development mentality and culture than a traditionalsoftware licensing model. In the license model, the process offixing bugs and updating patches is more predictable and linear. Inthe cloud, each update affects all customers and in turn forces thesoftware developer to become much more process and qualityconscious in addition to increasing agility.  

Outside of the insurance industry, a similar struggle is takingplace with traditional technology companies that are trying tocatch up to younger, faster and more innovative 'born-in-the-cloud'players. Oracle is a prime example. In an attempt to remaincompetitive in the cloud, it has spent over three billion dollarsin the past three years alone, to battle Salesforce andWorkday.

If it was simple and straightforward for a traditionaltechnology company to change gears, migrate to the cloud and createa cloud culture–Oracle would have figured it out–rather thanrepeatedly opening its check book.

Getting the Basics Right
A traditionalclient-server licensing and pricing mentality is lingering in theP&C claims sector and is restricting innovation. Believe it ornot, some P&C claims technology providers aren't offeringstandardized cloud services in line with today's norms like'pay-as-you-go' usage-based pricing. The status quo for claimstechnology purchases has been to lock insurers into long-term rigidcontracts. Insurers that are duped with sales tactics tostay-the-course with traditional pricing will suffer.

Data Ownership and Control
Insuranceclaims and related data are being generated at an unprecedentedrate–and this trend is expected to continue for the foreseeablefuture.

The current value of claims data for Insurance carriers isuntapped. The future value of claims data and related insight issomewhat unknown. As a starting point for all strategies, carriersmust have full ownership of their data to realize its futurepotential. Relinquishing any ownership of data to a cloudtechnology provider is similar to paying a mortgage with no hopesof ever owning the land and building–or prospering from futureon-site activities.

The ownership and control of data should include reporting,database queries, interaction through APIs and any transfers toexternal environments such as a data warehouse.

Drastic fluctuations in claims volume and ongoing regulatory andmonetary changes require a flexible data management approach tomaintain customer satisfaction and increase loyalty. Carriers mustbe wary of technology providers that restrict data ownership,access and usage.

API: The Achilles Heel of TechnologyIntegration
Application Programming Interface(API)–The API is the Achilles Heel of technology integration andshould be evaluated in detail. 

Integration with major first notice of loss (FNOL) and claimsmanagement systems (CMS) such as Accenture, Guidewire, SAP andcustom in-house systems should be evident with any cloud-basedclaims technology installation.

Data should automatically synchronize so it is always up-to-dateacross devices and locations. Validation of data quality andsources will increase accuracy of the claims data. Strategies tocreate a bi-directional data flow with CMS can reduce data entryand human error. 

Increasingly sophisticated techniques such as workflownotifications and queue mechanisms, defined by industry andbusiness requirements can help avoid delays and backlogs betweenclaims stakeholders.

Integration of a cloud-based claims estimating and processingsolution should generally require a carrier to dedicate one or twoIT staff–with an average integration realized in 10 weeks. Themention of third-party systems integrators should set off alarmbells and raise immense doubts about the cloud technology.

Technology Adoption &ROI
Implementation of new technology will require anintegrated strategy to convert new users and engage keystakeholders. A trend related to successful deployments is theemergence of an internal champion with the ability and authority todrive the technology implementation.

Success and ROI however, will be determined by the ability ofinsurers to evaluate, understand and expose the gap between thetrue P&C cloud technology leaders and companies that are onlyengaging in "cloud washing" marketing campaigns.