(Michael A. Jackowski, global managing director of Accenture Software for P&C insurance.).

There's no doubt about it: Cloud—in conjunction with mobility and advanced analytics—is transforming the value proposition that P&C insurance companies offer their customers. Insurers facing competitive pressures from traditional and non-traditional rivals are adapting such technologies quickly to deal with a new and more demanding environment.

Insurers are using the cloud to help drive two fundamental changes. First, they are using cloud with other new technologies to reinvent their business mode. They are redefining core competencies, offering new services and building new networks of partners. Second, they are creating direct, multichannel relationships with customers, with the goal of exchanging value—in the form of services and lower rates—for real-time data that can be used to accurately gauge risk.

There are three areas, in particular, where cloud is having a significant impact:

1) Usage-based insurance (UBI) enabled by telematics. Telematics—channeling real-time data from cars to insurers—is a decade-old idea which took flight due to the cloud. Many major carriers have telematics initiatives underway today. In a few short years, what was a competitive advantage will become a requirement for competing in the automobile insurance market, and early adopters will migrate to using cloud-based real-time analytics, not historical predictions, as the foundation of underwriting and pricing.

Beyond the device itself that customers—eager to realize an up to 40 percent reduction in premiums—have been quick to embrace there are many facets of telematics-based services that insurers must address. For example, they must accumulate, process, and analyze data from potentially millions of cars, as well as build websites so that consumers can view their own driving behavior. Real-time client data from telematics is generating a stream of new services and generates information needed to eliminate false or exaggerated third-party claims.

2) Core transaction processing in the cloud. Insurers have been using niche cloud services such as auto-estimating packages for over a decade and medical bill processing has been in the cloud for 10 to 15 years. Carriers are also accustomed to outsourcing key business capabilities, leveraging the Internet to exchange information with their providers. This trend is picking up speed as of late, as carriers outsource key business functions and application such as salvage, subrogation, and first notice of loss (FNOL).

Transaction processing systems, however, are another matter. These systems are core to the current business model, and carriers have long resisted outsourcing, claiming that they could do the work better than anyone else. They have shown little interest in having their core systems at risk of open consumption in the public cloud. The immaturity of the technology has been another barrier. Early adopters of cloud transaction processing discovered that solutions were too rigid, with hard-coded rules and few options. Insurers balked at dumbing down their business to match the requirements of the software. Now, however, insurers are starting to trust established cloud brands to secure their data. Core transaction processing is beginning to migrate to the cloud, and, as it does, carriers' speed-to-market increases as the complexity of their IT environment drops.

3) Multichannel consumer outreach. Every carrier is trying to figure out how to do a better job taking care of customers and allowing them to conduct their insurance business on their own terms, anytime and anywhere. Doing that means jettisoning front-end legacy systems—which are slow and inefficient—and following in the footsteps of their retail industry counterparts.

The multichannel solutions on the drawing board are invariably cloud-based. Carriers are starting to architect social platforms and communities as vehicles for creating value, segmenting customers, and gathering ideas from open innovation with the public. They also recognize the opportunity that social media presents to target customers with dedicated offers for insurance.

The transformative potential of the cloud is great. Insurance has been a no-growth industry in which companies expand only by taking market share from competitors. Now, new services are proliferating, with no limit in sight, other than carriers' creativity and their ability to forge partnerships.

Perhaps most significantly, the cloud offers insurance carriers the opportunity to change the way customers see them, from providers of bitter-but-necessary medicine to creators of value. By reinventing their business model to provide a new set of products and services, fueled by real-time data flows, carriers can sidestep clear threats on the horizon. At the same time, they can regain customers' trust by putting the customer—end customers as well as enterprise customers—at the center of their products and services. As cloud computing, mobility and analytics advances continue, all of above can be done at a reasonable cost and in record time.

(Michael A. Jackowski is global managing director for Accenture Software for P&C insurance. More information on Jackowski can be found at http://insuranceblog.accenture.com/author/michael-jackowski/)

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