Hey, You! (How Do I Get) Off of…(This)…Cloud?

Cloud computing and Software as a Service (SaaS) offer significant advantages and paths to valuable operating models.However, as with all opportunities, an optimum solution requires that a devil’s advocate position factor into transition planning.One area for the advocate to explore is the exit strategy for an insurer in a cloud computing and/or SaaS arrangement.

Typical outsourcing/multisourcing agreements include provisions regarding vendor insolvency, material breaches of contract, etc.As the recent General Motors bankruptcy demonstrates, no company is immune from default. Is there an escrow arrangement that provides protection to the insurer is the vendor goes out of business?Other critical areas to consider include: what are the material changes that will trigger exit clauses? For example, if a SaaS vendor changes a service provider they are using, does this represent a material change in the contract with the insurer?How does an insurer evaluate the political risks inherent in a vendor’s operations based on the countries they operate in today?How will this risk be assessed and managed on an ongoing basis as political events change?

Specific to insurance, however, special focus must be given to the data requirements of long tail lines like Workers Compensation.How will data be protected and accessible for decades into the future? For example, will data required for payments to be made still be available for decades into the future?How will state and, possibly, federal data requirements be satisfied in a service model?

Agreements can be structured to satisfy these and other concerns, but insurers pursuing the SaaS and cloud approaches must ask themselves what will happen if, for some reason one day, they want to “get off of that cloud”.