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Cloud Technology for Insurers - Part 3


In the previous part of our article series we have provided an overview of the different deployment models and service models of the cloud. In this part, we will look at the many advantages cloud can offer over classical in-house datacenters.

Enterprise Agility

As explained in part 1 of this article series, Amazon pioneered cloud technology to overcome bottlenecks in their software development processes. Today, cloud can boost agility even more than was the case at the time of its inception. This is the case because the number of different cloud services has exploded in the meantime. The big public cloud providers offer a large palette of versatile building blocks that can be deployed within minutes and assembled like Lego bricks. Particularly convenient is the fact initial experiments with new cloud services can be performed at low cost.

Cost Savings

One of the biggest advantages of implementing a public cloud is the cost savings involved with IT infrastructure. For two reasons, cloud technology can significantly reduce the costs for IT infrastructure, required software, online backups and data storage. First, public cloud providers can leverage massive economies of scale due to their resource pooling (one of key features of cloud as discussed in part 1 of this article series). Second, when a pay-as-you-go pricing model is leveraged, cloud users only pay for the resources they use, i.e. in an ideal case IT infrastructure cost can even be treated as a variable rather than a fixed cost.


For classical in house datacenters software updates are time and resource intensive. If a software update is released, a system administrator needs to manually download and implement it. This includes carving out time for a specific server to be down to implement the upgrade and test the system. The entire process can take up to an entire day, and if it needs to be done when no employees are accessing the service, the system administrator needs to spend time on the weekend or late at night to fix the issue.


Another appealing advantage for customers is the much greater processing power that a public cloud can offer to customers. This is of course especially advantageous for customers relying on computational heavy processes like insurance companies. Due to the seemingly unlimited resource pool cloud users can add extra computational resources if required or shut them down during times when they are not needed. The same principle applies for other IT components as well. For example, if a company runs out of storage when adding files, they can simply add more storage, and only the amount which is required. Capacity in regards to on premise IT infrastructure is not as flexible as the cloud.


Usage of cloud service also brings the advantage of increased security. Many companies struggle with the implementation of proper security measures and policy. Cloud providers take a great concern in providing the best security of their infrastructure. However, as discussed in the previous article, responsibility for security can never be fully delegated to the cloud provider. Rather, there always is a shared responsibility for security between the cloud user and the cloud provider.

In the next part of this article series, we will present an overview on the challenges the use of cloud poses for insurers. Each challenge and appropriate solution strategies will then be discussed in more detail later in the series.

Ingo Muschick
Partner & Managing Director US
 Ingo Muschick
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