Kpmg Insurance Briefing Cloud 10 11

7/31/2019 Kpmg Insurance Briefing Cloud 10 11

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1 | Insurance BrIeFInG / October 2011

I Bifiga mov to lod omptig hvtfomtiol impt o i

Itodtio

Cloud computing is more than information technology (IT),

it is an enabling force for insurance companies to reengineer

their corporate strategy efficiently and effectively. Insurance

executives should consider how cloud computing can bring

new opportunities to reduce costs by improving internal

operations, and new opportunities to create revenue

streams by providing new cloud-based services.

Some insurance providers are already using cloud technology

extensively. Many others have projects either underway

or planned, and the results of these efforts are changing

business processes and transforming existing insurance

business models.

Wht i lod omptig?

The cloud computing model provides Internet-based data

access and exchange coupled with Internet-based access to

low-cost computing and applications. It is a model for enabling

convenient, on-demand access to a shared pool of virtual

computing resources, including networks, servers, storage,applications, and services with minimal management effort

or service provider interaction.

Cloud computing has the potential to change business

processes in a fundamental way and is enabling the

transformation of business models at a pace and scale not

possible before. Enabling cloud computing allows for greater

flexibility in IT function and scale at a lower cost and in a

shorter time than traditional IT systems. It is usually offered

as a subscription service or is billed on usage. This model

enables organizations to adopt new information systems

in days or weeks, rather than in months or even years.

Otob 2011

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of

the KPMG network of independent member firms affiliated with KPMG InternationalCooperative (KPMG International), a Swiss entity. All rights reserved. Printed in the U.S.A.


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2 | Insurance BrIeFInG / October 2011

I idty po

cot vig thogh impovd bi po

Although IT has largely driven the discussion around cloud

computing, the discussion around its broader business

impact is only beginning. Cloud technology can enable

virtualized business applications, processes, and services,

and this virtualization replaces the need to invest in physical

IT infrastructure or software. The resulting cost savings can

have a transformational impact on business models and

strategy, as it allows organizations to focus resources on

core competencies and to respond more quickly to changes

in the market.Under the infrastructure as a service (IaaS) model, insurance

firms can lease or rent IT infrastructure to improve and

outsource internal functions. This can increase speed to market

and reduce IT development costs, as IT projects that usually

take several months or even years to implement can now be

implemented within a few weeks or months, and usually at

less than half the cost of an internal server. For example, an

insurance firm might own and operate its call center while

outsourcing processes like claims processing through the

cloud. The firm would be able to add or reduce IT capacity

based on the volume of claims processed. In addition, large

insurance companies looking to enhance their enterprise risk

capabilities could use third-party sources through the cloud.

Under the software as a service (SaaS) model, insurers can leverage

third-party tools such as customer relationship management, credit

services, and business information services. These cloud services

often allow insurance companies to implement the same systems

and processes across the organization but without the large

investment in capital and time usually required for the development

of new systems.

Under the platform as a service (PaaS) model, insurers can lease

or rent the layer between the infrastructure and the software from

third-party sources. Database management and application design,

for example, could be offered as part of a PaaS model. Privacy and

security concerns have caused insurers to be slower in adopting

some of the platform as a service (PaaS) offerings. As organizations

overcome these concerns, PaaS could provide an opportunity

to move core business applications into the cloud. This could

significantly change the costs to insurers in updating technology.

Cloud computing enables elastic capacity, which allows

companies to increase or decrease their capacity needs quickly.

This provides increased agility in responding to the changing

market; greater flexibility in combining people, processes, and

technology; faster results in recognizing business value; and

reduced costs in deploying new technology. Organizations can

use or provide cloud computing in three main service models:

infrastructure as a service (Iaas), software as a service (SaaS),and platform as a service (PaaS).

As with any new approach to business services and technology,

the adoption of cloud technology requires a careful examination

of potential operational risks and challenges. For example,

companies need to consider data security, privacy, regulatory

compliance, and several other issues. Organizations could

develop a sustainable competitive advantage by recognizing

risks related to cloud technology and managing them effectively

Cloud

Environment= Internet-based data

access & exchange+ Internet-based access to low-cost

computing & applications

Virtualized Technology

Virtualized

Processes

Virtualized

Organization

Speed to MarketImprove Working

Capital

Reduced Invested

Capital

Reduced Cost of

Goods SoldReduced SG&A

Virtualized Business Models

Opportunities to leverage

commoditized enterprise

applications and

economies of scale

Impt of lod o i ompi

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of



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Insurance BrIeFInG / October 2011 | 3

Id v thogh w vi

Cloud computing can help insurance companies find

opportunities to increase revenue by enabling them to change

their business models and become a service provider through

an SaaS or a IaaS model.

For example, insurance companies could provide cloud-based

services to independent insurance agents or other companies.This could include cloud-based agent management systems

in which an agent can use the firms systems to manage its

portfolio business. For other commercial users, an insurance

firm could use cloud computing to provide services such

as processing insurance claims, which would otherwise be

processed by its human resources department. As with the

outsourcing example, the volume of its cloud-based IT capacity

would change with the volume of insurance claims.

Insurers could find another revenue opportunity by embedding

insurance purchases through other Web sites. For example,

some companies are selling travel insurance directly through

travel Web sites. This could be extended into other insurance

lines such as auto insurance, which could be sold at auto

dealers or through auto Web sites. These types of opportunities

have the potential to change the business model for where and

how insurance companies sell and manage their products.

nxt tp

Cloud computing provides powerful new opportunities for

companies across the entire insurance industry. As with

any new business or IT approach, it introduces new risks

and challenges. However, cloud computing can also offer

measurable cost and revenue benefits for firms that can build

actionable and phased strategies.

Insurance executives can follow some recommended next

steps to begin considering how they can use cloud computing in

their businesses:

Form a senior leadership council with representatives from

across the organization to explore potential cost savings or

revenue enhancing opportunities

Document where or if these services are already being used

in the company

Choose one or two small, non-critical opportunities to help

build knowledge and experience around managing cloud

implementations

Develop a business case for further investment

Learn what competitors are doing to ensure that your firm is

not falling behind in cloud computing and is not missing out

on any first-mover advantages.

Cloud is not the futureits now. Its an

enabling force for business evolution

that goes beyond technology, allowing

organizations to reengineer the companys

corporate strategy more efficiently and

effectively.

2011 KPMG LLP, a Delaware limited liabilit y partnership and the U.S. member firm of



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The information contained herein is of a general nature and is not intended to address the circumstancesof any particular individual or entity. Although we endeavor to provide accurate and timely information,there can be no guarantee that such information is accurate as of the date it is received or that it willcontinue to be accurate in the future. No one should act upon such information without appropriateprofessional advice after a thorough examination of the particular situation.

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG networkof independent member firms affiliated with KPMG International Cooperative (KPMG International),a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and cutting throughcomplexity are registered trademarks or trademarks of KPMG International. 24980NSS

cott :

L J. Hy

National Sector Leader, Insurance

[email protected]

212-872-3383

roli s. colldo

National Marketing Director, Insurance

[email protected]

404-979-2285

cotibtig tho:

Joth M. coh

Principal, IT Strategy & Performance

[email protected]

212-954-5815

Jo c. Fdm

Principal, IT Enablement

[email protected]

kpmg.om

Documents

Kpmg Insurance Briefing Cloud 10 11