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Spotlight: Is cloud the key to adaptability and flexibility at speed?

cloud computing

Many insurers are burdened with legacy technology infrastructure that is slow to adapt to the changing needs of policyholders. Padraig Floyd explores how some insurers are modernising by leveraging cloud-native, container-based solutions for a bottom-up approach to innovation.

The insurance industry may have a long and illustrious history. While that offers depth and breadth of experience, it contributes little to – and can even become obstructive –  to necessary reform, such as the digital transformation projects. With this in mind cloud is on everyone’s lips, but even if the industry accepts it is a ‘no brainer’, how are businesses approaching this great leap forward?

“We’re using a hybrid approach of on-premises and cloud capabilities to transform our IT services to a reliable, scalable, and secure ecosystem,” says Eoin Grace, deputy head of IT, Markerstudy Group. “This gives us the flexibility needed to innovate quickly, creating proofs of concept for new technology and to develop minimum viable products so we can understand the value we can gain from new technology and ways of working.” Markerstudy has spent several years adapting its processes, says Grace. Agile working practices were adopted across teams, then departments and now across the wider business.

The first push into cloud came two years ago while initiating a new project to replace its insurer rating system. The team was set up to operate using devops methodology and pushed all new services into the cloud. They haven’t looked back, says Grace, and two years on, the service is still helping shape new and legacy developments as they innovate across all business areas and transform to the cloud.

He adds container-based solutions have revolutionised the company’s approach to both hosting and development practices, by completely decoupling hosting from the development teams, allowing them to focus on writing code, relieving pressure, and addressing a shortage of available resources: “Containerised solutions have also enabled us to host on any platform, within the on-premises data centres or any of the major cloud providers. Not only does this allow it to become cloud agnostic but also allows us to sweat our investments in our own data centres.”

Doing what is necessary

Dan Berry, chief underwriting officer at GRP, says the business had to decide whether to fully commit to cloud. What sealed the deal was that a cloud-native platform would deploy updates, continuously. “We felt we would be in a position where we are continually moving forward, as opposed to one of having to try to leave behind the quarterly development approach,” says Berry, “or balance between the two if we adopted a hybrid approach.”

For Barrington Clarke, head of devops at Zurich, there is “a perennial problem” of developing technology to try and match the speed of the business.” I think cloud allows us to close that gap,” he says. “That’s the bottom line.” It lowers the barrier for innovation and experimentation because it is low risk, with low investment costs to experiment with technologies in a safe environment. “If they work, we can take it to the next level and productise it. If they don’t, we can say we’ve learned something new. Cloud allows us to understand not just the technology, but also the processes that go behind it and how they would impact on our customers,” he says.

A dedication towards using cloud and even cloud-native technology doesn’t mean avoiding a hybrid approach [with hybrid here meaning application development that includes cloud-native (agile) and legacy (waterfall)]. Sometimes, you have to use a hybrid approach, whether you want it or not. 

“There is no official process, sometimes you just have to adopt a hybrid approach, because large companies have complex technical landscapes,” says Clarke. This has been adopted on some very large digital transformation projects, combining a very fast, agile delivery on a number of work streams, with waterfall delivery on others. “You have to embrace that, and you can’t be a purist because it’s the reality of the situation. With the right people, the right training, and a recognition that there’s going to be more management effort required around those friction points, you can develop a successful way of working. But it means adjusting your agile delivery to match that linear delivery.”

Don’t build your house on sand

Infrastructure that would enable “more agile environments” was one of the key drivers behind AIG Life’s migration into Amazon Web Services. “Being able to relinquish the technical debt we had by hosting and managing a status centre internally means we can be more nimble. It allows us to manage costs much more effectively, provides a platform of contemporary capabilities that we can future leverage as it relates to our software development lifecycle, and allows us to compete in the marketplace,” says Michael Sasaki, chief information officer, AIG Life. “It’s really just the foundation.”

The focus was on providing sound foundations for the development of the systems, so the transition was more “lift and shift” without adding bells and whistles. “We didn’t spend much time on app modernisation or any contemporary development to make use of containerisation or automated continued integration/continuous deployment workflows. There were a number of time pressures but also the ability to move some systems.” He adds the move has since allowed AIG Life to upgrade quickly, receive better system response and improve performance. This is important as it has provided capabilities that were not in place before the move.

Sasaki is keen to emphasise that AIG Life wasn’t hampered by mainframes, but the move has enabled the business to exploit technologies that improve the consumer experience – integrating phone, voice, audio, video and text messaging into processes to provide a level of service that customers are now becoming more accustomed to receiving from providers in the entertainment or medical sectors. “In order for us to meet that demand and meet that expectation as an industry, we need to modernise.”

The sky is the limit

The next stage of AIG Life’s development will entail a programme of application rationalisation and modernisation. “This means looking at whether we have the right systems, the right applications with the right architecture that define our go forward strategy,” says Sasaki. This, he adds, means looking at it not as an IT or business initiative, but whether the organisation is putting consumer experience first.
Once that has been determined, it will look to the systems it needs to procure or develop to be able to support that strategy. “We will look to mature our devops and deploy a microservices architecture to enable us to move much more quickly in response to the market or customer experience.”

Mandy Walton, CEO of Enterprise Centres of Excellence at Marsh Commercial, says her company was “on an evolutionary journey” before Covid-19, but the crisis accelerated the process and has forced changes. “The biggest change is one of mindset,” says Walton. ”In that the insurance industry as a whole has to behave like the retail industry. The customer is now telling us how they want to buy, when they want to buy, rather than doing things on our terms.” This has developed into a group-wide rethink about silos in the business. Not just within products, processes and technology, but mindsets.

For instance, corporate partners with affiliate networks were handled on a country-by-country basis. If they were UK-based or headquartered, that was a UK relationship. But that’s changed to open up relationships internationally. “We’re moving accounts from Asia to the UK, UK to Asia to Australia etc., by bringing together not only our technology, but local knowledge and skills,” says Walton. “It builds a stronger foundation and a more consistent service. In the last 12 months, it has seen double digit growth and we’re talking hundreds of millions, all because we’re dealing with clients on a global level.”

Remember where you came from

Meanwhile, moving to the cloud and having the ability to develop and launch new and innovative products rapidly can bring with it some interesting existential questions.

A core element of digital transformation is to deliver a better product and service to the end customer, says GRP’s Berry. But just because you can develop new and innovative products in different areas or form partnerships with other platforms doesn’t mean that you automatically should. “We have to be very mindful of our current distribution channel,” says Berry. “We are not going to disintermediate our distribution channel. However, if we were developing in new areas in the future, and the next big thing was holiday cover for flip flops, which hadn’t been distributed through our traditional channel in the past, there might be options for that kind of growth.”

Clarke expects momentum to increase behind transformation projects but says there is a major challenge many companies are simply unaware of. “One of the barriers to going fast is a lack of understanding about their digital maturity and, as a result, where to target their investment and effort,” says Clarke. “Companies need to ask themselves not how much, but what’s the value? Also, consider the value of these capabilities, in particular the top-down ones, because there might not be an immediate demand for them. Even so, those capabilities are a good foundation to enable bottom-up development.”

Winning hearts and minds

Culture remains a key obstacle to successful transformation, says Clarke. External companies will talk about tool sets when it comes to devops etc., but tool sets are the easy bit. He is something of an evangelist for project learning and understanding and the approach his team uses is one of vanguard projects and taking people on a journey. “Some will be doubtful if they haven’t tried an agile or devops approach before, but if they are supported properly, they will become advocates and never want to go back to old ways,” says Clarke. “There is no point in looking at a linear delivery with a fixed point in the future anymore. It is just impossible. Vanguard or lighthouse projects prove and demonstrate the new ways of working.”

This chimes with the views of Callum Rimmer, founder of pay as you go motor insurer, By Miles. Naturally, he is an advocate for a modular approach, but he argues that the problem isn’t so much legacy, as understanding how to manage legacy, as transformation is not a one-time project. “What you really need to get your head around is that if you want to have a future, you must build solutions that you know you will have to throw away every two to three years,” says Rimmer.

Insurers need to understand that what they know now won’t be sufficient in two years’ time and will require things to be updated or replaced. A modular approach using decoupled microservices will allow new components to speak to one another provided communication channels are retained, he  continues: “Take a very modular micro service approach to the way you build things, and you constantly evolve, iterate, change with your ability to make change That helps protect you from getting too bogged down in a massive monolithic legacy system, which makes it very hard to innovate for the future.”

Grace at Markerstudy agrees that cultural change is essential if businesses are to adapt to the new digital world. But now, at least, the technology exists for insurers to innovate and grow – provided they embrace the cloud and create sustainable and resilient business models. “Open APIs are vital for our industry, and companies that do not join this journey will struggle,” adds Grace. “Modern ecosystems are a web of interconnected smaller systems, and APIs are the connective tissue that hold it all together.”

Sponsor view

Jeff Picozzi, global insurance lead, Red Hat

For insurance companies, the cloud represents a great many things. The cloud can help insurers deliver new products and services, improving the customer experience, increase scalability, and reduce costs. Still, like most things, the devil is in the details, and how you build your cloud infrastructure will impact the efficacy of your cloud strategy. 

Most insurers are not debating whether they should or should not adopt the cloud. Instead, it is more about finding the right balance between what applications can and should be built and deployed on the public cloud v private cloud v on-premises – without creating more silos between them.

We at Red Hat have worked with many insurance organisations as they start or continue their journey to the cloud. Our experience has shown that taking a view from the ground floor (the infrastructure layer) can help insurers build a flexible foundation, incorporating heritage systems with a modern container-based hybrid cloud.  This infrastructure allows you to connect and integrate your systems into a single, unified hybrid environment. In addition, it provides a consistent foundation for building and deploying applications across on-site and cloud infrastructure as needed.

An open hybrid cloud environment with an effective container platform helps deliver cloud-native capabilities such as self-service provisioning of preapproved resources on-demand, eliminating wait times, and speeding development and operations. The flexibility of a container-based open hybrid cloud also offers a broad, consistent set of tools, libraries, and runtimes so developers can work with their preferred tools, which is critical for attracting and retaining much sought-after talent.

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