Use of cloud technology in both the private and public sectors has accelerated over the last 12 months, as businesses become more aware of the agility, scalability and cost efficiencies that it can deliver to their operations.
Recent research from the Cloud Industry Forum shows that 48% of organisations polled already consciously use cloud computing in some form and 85% expect adoption of cloud services to increase in the next 12 months.
Insurance administration solutions specialist, RDT, launched the first rating engine in the cloud in February 2011 after close collaboration with Microsoft. This innovation allows existing customers to leverage their investment in RDT’s Landscape solution and take full advantage of the flexibility and scalability ‘on-demand’ processing power available via the cloud.
As the application of cloud technology begins to penetrate the insurance sector, early concerns – largely relating to data security, compliance and connectivity – are being allayed. Rather than being held back by a ‘fear of the unknown’, insurers are starting to tune into the very real benefits that can be realised by adopting cloud technology. The reduction in technology costs realised through the cloud will have an immediate and positive impact on an insurers’ bottom line: users do not face any up-front capital investment in technology infrastructure and are only required to pay for the processing power that they actually use.
New entrants to the insurance market, unencumbered by legacy technology have typically been able to react to market opportunities swiftly, often gaining competitive advantage. Cloud technology, to a degree, levels the playing field for established insurers working with historic systems allowing discreet functionality to be built that compliments those systems. Whereas previously the cost of bringing a new product to market could be prohibitive, the cloud offers a low cost entry point that allows organisations to trial a service via ‘pay as you go’ data processing. Insurers looking to capitalise on their distribution model using multiple channels, including aggregator sites, to reach their market, have access to scalable processing power, as and when it is required to deal with any heightened demand – without hidden charges. Maintenance and disaster recovery costs are also reduced as the service is fully maintained and managed by Microsoft.
Whilst the benefits associated with cloud technology are becoming more apparent, some concerns still remain. One area is the storing and accessing of data in the cloud and associated issues around data security and compliance. The EU Directive on Data Protection, which places restrictions on data location and the exporting of data outside the EU, has potential impact on the physical location of cloud data centres. The Directive is currently under review and reforms are expected in early 2012 which will offer greater clarity on this issue. RDT’s Landscape rating engine in the cloud does not store customer data provided and EU customers will use the Microsoft data centres in Europe meaning they are fully compliant with all current EU and FSA data management regulations.
Since launching its rating engine in the cloud less than a year ago, RDT has already experienced a groundswell of interest from early adopter customers including G6 insurers and those looking to expand their distribution models. With over 15 insurers currently using Landscape, which supports all channels to market, an insurance community in the cloud is keenly anticipated.