Cloud Services in Insurance: A Primer

by Tom Scales,  James O'Neill, January 29, 2015
Industry Trends
Global

Abstract

Few technologies are as well known — and as frequently misunderstood — as cloud computing. Cloud services may top the list of technology buzzwords used by in corporate boardrooms, by Wall Street analysts, and within insurance IT organizations, but there seems to be little clarity or consistency in the use of the term, and even less common understanding of the underlying concept.

With this in mind, Celent has embarked on a series of reports focused on opportunities and best practices for utilization of cloud computing in financial services. This first report is aimed at providing insurance executives a solid foundation in understanding the enabling technologies, business models, and opportunities (and risks) of embarking on a cloud services project.

“Cloud computing has such potential in our industry. The combination of increased computing power at lower, variable, cost is huge. It is a trend and process we will continue to follow,” says Tom Scales, a research director with Celent’s Life, Health and Annuity Insurance practice and coauthor of the report. “The next step is for the software vendors for a broader range of functions, such as policy administration, to get on board.”

This 38-page report contains six figures and two tables.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

Introduction

2

Overview of Cloud Computing

3

 

Origins

3

 

Rent Instead of Buy

4

 

Just in Time Data Center Capacity

5

 

Ad Hoc Provisioning

5

 

An Example

5

Behind the Curtain: Enabling Technologies

8

Cloud Computing Models: A Taxonomy

11

 

Essential Characteristics

11

 

Deployment Models

12

 

Services Models

14

 

New Models

17

 

When “Cloud” Is Not Cloud

17

Benefits for Financial Institutions

19

 

Financial Benefits

19

 

Operational Benefits

19

 

Ecological Benefits

20

Limitations and Risks

22

 

Security

22

 

Vulnerability of the VM?

23

 

Service-Level Agreements

24

 

Compliance and Verification

24

 

Application Readiness

25

 

Data Compatibility

25

 

Data Mobility

26

Implementation Strategies

28

 

Private Cloud

28

 

Community or Virtual Private Clouds

29

 

Encrypt and Encrypt Again … Repeat

29

 

Processing Non-Sensitive Data

30

 

Big Data

30

What’s Next

32

Leveraging Celent’s Expertise

33

 

Support for Financial Institutions

33

 

Support for Vendors

33

Related Celent Research

34

Sign in to download reports and access personalized information