cloud services insurance

8/12/2019 Cloud Services Insurance

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W h i t P

Cloud Servicesin Insurance

Ashok Goudar

Senior Enterprise Architect

MphasiS


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Contents

Introduction 3

Current IT Landscape 4

Cloud enabled Insurance IT Landscape 5

Insurance Cloud Adoption Areas 8

Infrastructure Clouds 9

Platform Clouds 9

Extended Data Centers with Private IaaS, PaaS Clouds 9

Insurance Software Clouds (SaaS) 11

Enterprise Insurance SaaS 12

Cloud Computing Journey 13

Pricing Models 13

Insurance Application Compatibility 14

Cloud Implementation 15

Conclusions 16

Appendix 18


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Cloud technology is rapidly gaining acceptance

in many insurance organizations across the

globe. Cloud based services are seen as

promising IT options for achieving Operational

Expenditure (OPEX) savings in the long run.

Reducing OPEX is the fundamental business

driver for bottom line improvements.

Constrain ts in IT budgets and CapitalExpendi ture (CAPEX) investments require IT

managers and CIOs to look at low cost cloud

services as potentiall y viable IT options for the

delivery of required services. In other

instances, in many large insurance service

organizations, the historical accumulation of IT

hardware and software assets has resulted in

underuti lized and extra IT infrastructure, which

not only demands higher operationa l budgets

to maintain, but also make the overall IT

enterprise slow to respond to any dynamicbusiness changes in the insurance domain. In

the meanwhile, technology innovations in

massive computing and virtualization

technology areas have enabled the insurance

organizat ions to consider modern and efficient

IT service provisioning alternatives including

virtuali zation and cloud computing which

Introduction

Cloud Services in Insurance White PapeI

promise to deliver required IT services with

relatively lower initial investments (CAPEX) and

lower operational costs. Insurance

organizations, irrespective of their size, by the

very nature of their increased dependency on IT

services to achieve business advantage, are

actively pursuing efficient cloud and virtualcomputing technologies that can deliver

continued IT services with relatively lower entry

costs and reduced operational costs. Also, the

dynamic nature of the insurance business often

impacted by fast changing market conditions,

demand faster and on demand provisioning of

IT services and IT infrastructure, to which cloud

and virtualiza tion technologies are well suited.

The capabilit ies to provide scalable and highly

availab le IT services with relatively lower initial

investment and lower continued operationalcosts have made the cloud and virtuali zation IT

computing models very attract ive to insurance

IT CIOs and IT managers. In the current market

conditions the emergence of tested and proven

cloud computing models such as public clouds,1private clouds and enterprise clouds providing

an array of cloud services on a variety of cloud

service offerings, such as IaaS (Infrastructure

as a Service), PaaS (Platform as a Service) and

SaaS (Software as a Service) are increasingly

being adopted in insurance organizations.

In this context, during the course of this paper,

we discuss the keys of virtualization and cloud

computing technology models that are

increasingly being considered for adoption by

many organizations in the industry. The paper

also highlights the areas of business and IT

domains in an insurance organization, to which

the cloud computing models can be

successfully employed to derive the business

benefits associated with cloud computing.

1Enterprise clouds are purpose built, highly available, resilient and data centre hosted computing service clouds (Infra, PaaS and SaaS), which canservice computing needs of multiple clients within the enterprise. Basically such clouds are built to scale upwardly and horizontally, leveraging tovirtualization technologies.


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Current IT Landscape

In general, at the moment, in many insuranceorganizations, the usage of cloud based IT and businessservices are very limited, but certainly gainingmomentum. The current IT business and IT landscape(state) of a typical insurance organization constitutes of

the following:In-house business applications and services:Themajor business processes and services are supported byin-house deployed applications, managed by in-houseservice delivery teams. Such business processes andapplications span across the enterprise business unitscatering to wide areas of business domains comprising ofunderwriting, claim handling, common shared businessfunctions and a variety of corporate services includingcustomer relationship management functions.

I Cloud Services in Insurance White PaperI

Figure 1

Such business applications and services are used bycustomers, business users, business operational users,and partners and are supported usually by in-house ITsystem administration and service delivery teams,augmented by additional IT outsourcing partners.

Large scale business transformation and IT

implementation programs: In majority of large scaleinsurance organizations, including some medium sizedinsurance carriers, many business and IT transformation

initiatives are handled through large scale implementationprojects and programs, typically spanning about 12 to 18months. Such transformations usually involve multiplebusiness units and their respective IT departmentsincluding application development, IT infrastructure and ITservice delivery teams. In such large scale initiatives, thetime to bring any new enterprise wide business solutionsand services, typically involve around 12 to 18 months. In

addition to large transformation initiatives, organizationsalso undertake a number of small sized projects whichare usually floated to ensure upgrades, enhancementsand improvements to the existing IT and businessservices.

Exclusive IT environments:Many times, it is a generalpractice, that each and every business and IT project isdelivered through a set of exclusive IT environmentsincluding development, testing, staging, performance

testing, pre production and production environments thatare built on exclusive non sharable hardware andsoftware components. Usually, such exclusiveenvironments are created to mitigate any interdependencyrisks between various phases with a project and alsoacross any associated and dependent projects. Inmajority of cases, such environments were built whenvirtualization technology was not yet matured enough toconsider for production deployments.

Non Cloud Based Insurance Enterprise


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Project (or program) specific IT budgeting and

infrastructure procurement:As a general and welladopted practice, each and every project or a programmefunding is secured through exclusive project specificbudgets covering hardware, software, implementationresource (teams) and service delivery costs. Each projectin turn will have its own spending on IT hardware,software and service delivery infrastructure, and as a

commonly accepted practice, exclusive IT environmentsare created to support project execution and servicedelivery once the project moves into production. In othercases, it is likely that businesses might be sponsoringeach individual project on an exclusive basis, coveringapplication development, IT infrastructure and IT servicedelivery costs.

Extra capacity in IT infrastructure:In some insuranceorganizations, due to existing and commonly accepted ITdelivery practices (which are well proven over a period oftime), it may happen that in some of the IT environmentswhich were created to support individual projects andapplications, the recycling and reutilization of resources is

limited. Due to the exclusive nature of application specificproduction environments from where the IT servicedelivery is provisioned, the IT infrastructure is more proneto get fragmented and underutilized, where significantamount of processing resources remain unallocated (nonutilized) in the servers. Over a period of time, one can seea set of mutually exclusive production environmentssitting side by side, supporting multiple businessapplications, often having substantial computingresources which can be reutilized.

Heavy weight IT upgrades and Infrastructure

refreshes: In some cases, where IT systems areoperating at full capacity, requiring either horizontally orvertically scaled upgrades, it may take considerable timeto achieve system upgrades, often coupled withapplication down times (service outages) and applicationredeployment. Such IT upgrades and refreshes may haveto continue as the OS and the application softwarerequires upgrading and the load on the system alsokeeps on growing. Such upgrades can be often timeconsuming and require a considerable amount ofplanning and coordination to bring them into therespective production environments.

Need for higher IT budgets:In many insurancebusinesses, it is quite common that large scale businesstransformation programmes require higher levels of initialinvestments. The recent technology innovations, higher

service level expectations, market driven changes andnew set of business requirements, can all make thebusiness transformation programme essential, but alsoquite expensive to rollout, requiring higher levels offinancial sponsorships.

The large scale business transformation programme,demanding higher levels of CAPEX (Capital Expenditure)and OPEX (Operation Expenditure), may often requiresponsorship from the business units, and require soundbusiness case coupled with compelling ROI models. At

times, in medium sized or highly federated and regionallybased insurance organizations, some of the essentialbusiness transformation programmes, although critical tobusiness competitiveness, may find it difficult to find theright levels of sponsorships.

Outsourced business processes and IT services:Many large scale and medium sized insurance

organizations have successfully adopted cost effectiveand efficiency driven outsourcing models including BPOand IT services outsourcing. Frequently, such outsourcedarrangements include shared IT infrastructure servicesbetween the enterprise and its outsourced partners. Inpractice, often such outsourced models require somelevels of initial investments and continued association ofIT services which may include additional provisioning of ITinfrastructure to the outsourced partners.

The existing and emerging cloud technologies arepromising enough to address some of the key areas of anIT landscape in a typical insurance organization. In thenext section we will discuss the key characteristics of acloud technology enabled IT landscape in an insurance

organization.

A cloud technology enabled insurance organization islikely to be well positioned to address some of theexisting IT and business constraints which are quiteprominent in many insurance organizations. The cloudtechnologies are increasingly being seen as businessenabling technologies, which can help the insurancebusinesses not only to bring new business solutions with

relatively lower initial investments, but also to maintainand sustain current business and IT operations withrelatively lower operational costs. In this section, webriefly highlight the key characteristics of a cloudtechnology enabled insurance organization.

Cloud provisioned business services and

applications: In a typical cloud technology empoweredinsurance organization, the business applications andservices are catered by various cloud platforms that areoperational, either in-house or as a part of external cloudservice providers. The insurance business applicationsand services, supporting underwriting, claim, sharedservices and a variety of corporate functions are deliveredeither from locally built cloud IT infrastructure or throughexternally available cloud application services such asSaaS (Software as a Service) platform clouds. Suchbusiness application services are built (provisioned) usingeither some or all of the following cloud computingmodels:

Insurance IT infrastructure as a service(IaaS) cloud:In this model, various insurancebusiness application and services are built andhosted by leveraging to an on demand IT

infrastructure cloud, which supports multiple

Cloud enabled Insurance

IT Landscape


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business units in the organization. Such a cloud infrastructure may be available within the organizations data centre or are procured from

external infrastructure cloud providers.

Insurance services built on leveraging

platform as a service (PaaS) infrastructure:

In some organizations, some of the insurance

business applications and services are built andhosted on a purpose built platform service cloud,which is either available internally within theorganization or available through an external cloudservice provider. In such an arrangement, therequired IT computing sources are tapped from thePaaS cloud and IT computing elements areprovisioned on a demand and need basis.Usually, PaaS hosted business application servicesrequire lower initial investments and loweroperational costs. Such PaaS services are availablein a self service model, where applicationenvironment instances can be configured and utilizedas per the computing needs. The PaaS clouds in

addition to basic infrastructure computing resources,also provision the application software that cansupport both design time and run time computingrequirements.

Insurance services leveraging to purpose builtsoftware services: Insurance businessapplications and services are also available on whatis called as a SaaS model, where the entireinsurance business application or a service isavailable as a software service from the cloud, towhich business users can log in and conduct theirday to day business transactions as if they are

transacting them on an exclusive businessapplication service. Such insurance businessapplication services are either available within a largeenterprise (that can support multiple business unitsacross the globe) as a SaaS cloud or catered fromexternal cloud service providers who specialize in

insurance services. A variety of insurance businessservices such as underwriting services, claimhandling services, CRM services and commonly usedshared insurance services are now gradually beingoffered as SaaS services. The insurance SaaSservices usually require lower initial investments andlower operational costs, and hence appear quitepromising to many business units and their ITdepartments in an insurance organization.

Figure 2

Cloud Enabled Insurance Enterprise



On demand infrastructure provisioning reduced

project implementation timelines:In a cloud enabledinsurance organization, the usual business and IT projectimplementation timelines are drastically reduced as therequired infrastructure for non production and productionenvironment is provisioned in a demand and readymadefashion, avoiding the complete cycles of hardware andsoftware procurement, hardware environment buildingand provisioning. As the infrastructure is available upfront,tailor made and also scalable as per the business needs,the usual application services are developed and hostedwith reduced timelines which will further enable thebusiness units to bring new business models andsolutions in an agile manner responding quickly to thedynamic market conditions.

Lower project or programme budgets:In manysuccessfully cloud enabled insurance organizations, theregular project or programme budgets are usually low,compared to those of non cloud based insuranceorganizations. This is mainly because of the lower initialinvestments required for building the IT infrastructure and

application services. Also due to relatively loweroperational costs of the applications and IT infrastructurethat is provisioned out of cloud.

Operational costs proportional to business

volumes:As a cloud enabled insurance enterprise,leverages to better costing and pricing models whilesecuring the required services from the cloud, theoperational costs are usually low and are proportional tothe business transaction volumes. This is mainly becausemany of the cloud services are priced on the "pay as yougo" model which in turn result in initial lower investmentsand proportionately manageable operating costs that aredirectly dependent upon business volumes.

Increased reuse and sharing due to virtualization:Reuse and shareability index is usually very high in cloudenabled insurance organizations. At an enterprise level,this will result in even higher levels of reuse and sharingof enterprise resources (hardware, software andworkforce). In a successfully cloud enabled insuranceenterprise, one can see common clouds for key insuranceservices that are shared across multiple business units inthe organization. Some of the key common sharedinsurance services that are often provisioned as cloudservices include Common Fax Services, Common SearchServices, Common Scanning Services, Common MassPrinting and Distribution Services, Telephony and SMSclouds, Common Payment Services, Common Message

Gateway Services, etc.

Lean and efficient IT departments:In the long run,the cloud technology enables the insurance organizationsto maintain a lean but highly agile and efficient ITorganization, that can provide IT services in an on-demand basis and agile basis, further enabling thebusiness units to consider a variety of innovativebusiness solutions, that can be quickly brought intooperations as per the need basis.

Consolidated IT infrastructure:Cloud enabledinsurance organization can achieve a consolidated andoptimum IT infrastructure that can cater to the businessneeds on an on demand basis. Such a consolidation willreduce the IT infrastructure fragmentation that is usuallyseen in many large IT organizations. Infrastructureconsolidation will also result in reduced operational,maintenance, and data centre costs. IT infrastructure

consolidation through cloud technologies is expected topromote green IT practices due to lesser but efficientusage of hardware and software footprint.

Rationalized application portfolio:In a successfullycloud enabled insurance organization, one can see higherdegrees of business application and servicerationalization which will avoid data duplications andapplication rekeying at multiple levels across differentbusiness units in the organization. Optimally rationalizedinsurance business applications can result in substantialreduction in service procurement costs and also reduceassociated operational costs.

Virtualization at all layers:Virtualization will be a keycharacteristic of a cloud enabled insurance organization,in which the virtualization technology is leveraged to itsfullest extent. Such an organization will usually benefitfrom various virtualization technologies that are applied toserver, OS, software, data, application, business processnetwork and security layers.

As insurance organizations start improving their adoptionof cloud technologies, the key characteristics discussedin this section become more visible and evident in thoseorganizations.



Insurance Cloud

Adoption AreasThe cloud computing technologies find their applicationsacross multiple sections of an insurance organization.Emerging cloud computing models are increasingly being

adopted at an enterprise level which are furtherpropagated at regional or department level adoption ofcloud computing models. The key areas where cloudtechnology finds its immediate applications are discussedbelow.

IT application development:Most compelling usage ofcloud computing model in an insurance organization, is inits IT application development services which are usuallydelivered as a part of regional IT services, withgovernance model exercised by its enterprise IT teams.Various IT application development environments areprovisioned through relatively inexpensive cloudinfrastructure available either through enterprise in-housecloud or through public infrastructure clouds. Due to the

low risk associated with such environments, they are theideal candidates to provision from either an enterprisecloud or a public cloud.

IT application testing:Application testing servicesrequire multiple testing environments till the applicationcode is ready to be promoted to production. Such testingenvironments are ideal candidates for cloud provisioningof the environment.

IT application production environments:ITapplication production hosting environments are otherkey candidates, for cloud infrastructure provisioning. Theperformance, data security and other associatedconstraints are more prominent with production

environment, and hence such environments areconsidered to be provisioned by in-house enterprise orprivate clouds rather than public clouds. However, someorganizations do provision their production environmentfrom proven public clouds. More over, the public cloudservice providers have enhanced their security models,making such clouds more appealing to productionenvironments.

Desktop and application provisioning:Virtualizationbased cloud technology is widely being used forprovisioning virtualized desktops in large organizationsand also to provision high performance applicationprovisioning services through specialized application

clouds. Some of the highly critical business applicationsare currently provisioned to high performance applicationprovisioning clouds to remote business users.

Shared data services: Expensive database softwarelicense costs and also increased server hardware costsmakes the organization consider purpose built shareddata service clouds which can support multipleapplications through their data storage needs. Such datavirtualized clouds can provide relatively inexpensive datastorage services to the business applications. They willalso reduce the overall software license costs associatedwith the business applications.

IT infrastructure shared storage:The storageclouds built on high performance SAN infrastructure arewidely being used for providing storage services tomultiple applications in insurance organizations. Thecommonly shared storage infrastructure cloud cansupport multiple application storage needs both in termsof application storage and data storage. Such storageclouds also support the end users for their storage

requirements and file systems needs.

Common computing platform clouds:Nowadays,insurance data centers have started leveraging a varietyof common computing clouds built on recentvirtualization and hardware technologies. Such platformcloud services include archiving cloud services, firewallcloud services, load balancing cloud services, file systemclouds, LDAP clouds, etc.

Collaboration technology clouds:These arevariations of Platform as a Service clouds or Software asa Service clouds, which provide a variety of collaborationfunctionalities including emails, chats, sms, enterprisetwitter etc., that are provisioned to employees at relatively

economical pricing models. Such collaboration clouds arewidely being used in many insurance organizations.

IT business applications:IT business applications arealso being offered as cloud based services, often termedas Software as Services to the end business users.Such business application services are provisionedthrough publically available SaaS cloud service providers.Such SaaS applications are usually offered on transactionbased pricing models and on user based licenses. In theinsurance industry, many of the commonly used businessfunctions are now provided through a variety of SaaSservices. Such SaaS clouds are now, quickly finding theirapplications, in small and medium insurance

organizations.

Shared and common corporate applications:

In addition to insurance industry specific SaaS services,the commonly used shared applications such as CRM,enterprise resource planning, HR services etc are knowbeing offered as SaaS services, which are relatively costeffective, compared to non cloud hosting of suchapplications within the insurance organizations datacenters.



Infrastructure Clouds

Platform Clouds

Among the many definitions, an infrastructure cloud isbest defined as an IT computing infrastructure resourcepool from which the IT infrastructure services andcomponents are provisioned as services. This happensin an on demand and self service model to the consumingclient, which includes end users and IT applications in anorganization and also external customers. Such aninfrastructure cloud model is also termed as IaaS, whichimplies that such cloud services are capable of providingIT infrastructure as services to the concerned clients.Generally, the services offered as part of the IaaS cloudcomputing model include hardware infrastructure in termsof processor containers (servers), network resources,storage resources, data resources, data archivingresources, data backup resources etc. Such IaaS cloudsprovide tailor made computing instances with definedcharacteristics in term of CPUs, processing speed, RAM,allocated storage etc.

In an insurance organization, the IaaS computing model

can be resourced from an externally available cloud, suchas public cloud or from custom built enterprise clouds orprivate clouds within an organization, which can provideIaas services. Such infrastructure clouds are facilitatedthough modern cloud enabled data centers. Individualproject teams, business units, source the requiredenvironments (non production and production instances)from such infrastructure clouds. Generally, the computingresources are offered to the customers in a utility andpay as you go based pricing models.

In this cloud computing model, tailor made computingplatforms with prebuilt hardware and softwarespecifications, including any application specific softwareand frameworks, are offered as cloud services and suchservices are termed as Platform as a Service cloud(PaaS). In PaaS, on top of infrastructure computingservices, the platform provisions the required prebuilt runtime solution environments, into which applicationcomponents, packages and services can be deployedand operationally monitored and managed. The PaaSpre-built solution environment usually consists of:

Special operating systems:Those are usually run ontop of underling native or guest operating systems.

Messaging software servers and clients:These cansupport message based solutions.

Applications servers:These provide run time containerin which the actual solution components are executed.Ex. J2EE servers, Java Servers, Legacy Servers, .Net runtime, etc.

Web servers:Web server run time containerssupporting web server hosting Ex IIS, apache, HIS and soon.

Database servers:These can provide DBMSfunctionality for application solution components andservices.

Special purpose computing servers:These canprovide specific business functionality, such as ERM,BPM, CRM and other business functions.

In an insurance organization, individual project,programme teams or business units can leverage suchprebuilt custom made environment to run theirapplications and services. Such cloud services models,

enable the application teams to focus on applicationdevelopment, testing and deployment, where as runtimecomputing platform is provided by the cloud. The PaaSclouds offer multiple benefits to the customers whichinclude:

Quick and faster environment provisioning

Centralized management of computing environments

Efficient horizontal and vertical scaling as load factorsincrease

Centralized version control and patch management

Centralized environment security hardening

Faster application development and testing cycles Centralized management and monitoring, leveraging to

state-of-the-art infrastructure monitoring facilities

Relatively cheaper pricing models, flexible pricingmodel based on the services included in the offering

Currently, the PaaS services are provided by multiplevendors in the market with a variety of pricing modelsand PaaS services. Insurance organizations are nowconsidering such PaaS clouds for their non productionenvironments, which are utilized by multiple distributedteams. Also, such PaaS clouds are used as an extensionto existing data centre services. In small and mediumsized insurance businesses, PaaS clouds become even

more relevant, as they have potential to provide muchrequired computing power, without the need for heavyfinancial investments.

Availability of secured and reliable private and publiccloud services, from multiple cloud services vendors,have provided new options for insurance organizations to

quickly expand their data centre capacities byaugmenting with new cloud based IaaS and PaaSservices. Such extensions are necessary to protect thecurrent IT investments in large insurance carriers.

Public private cloud extension: The private cloudservices provide options for linking existing data centerswith externally provided private cloud, which operates asif it was part of the data centre, although physicallyseparated. The secured VPN based connectivity optionsand flexible secured networking services in private

Extended Data Centers

with Private IaaS, PaaS

Clouds



clouds, enable the insurance data centers to easilyintegrate and extend their computing resource across theboundary of the data centers. The recent networkvirtualization technologies such as VLAN virtualizationenable the extension of network addressing schemes topublic cloud, ensuring the smooth integration betweenthe insurance organizations data centre and public cloudcomputing nodes (instances). In such an arrangement,

the IP network addresses of computing nodes in thecloud become part of the data centre network addressingschemes, and enabling the complete connectivitybetween data centre nodes and cloud nodes.

Enterprise private cloud extension:Some privatecloud service vendors provide products and serviceswhich will enable the insurance organizations to quicklybuild in house private clouds which can work closely withtheir existing infrastructure. The private cloud offeringsinclude Data Centre in the Box type of products, which

can be quickly rolled out and connected to existing datacentre infrastructure. Some of the private cloud offeringsprovide configurable computing and managementinstances with flexible operating system options andflexible storage options.

Physical host independency virtual instance

portability: The current virtualization technology allows

to delink the virtualized computing instances from theirphysical hosts, and thus making it possible to port thevirtual computing server instances from one physical hostto another, still retaining the network addresses. Suchportability options make virtualized cloud environmentshighly flexible when it come to code promotion,application migration and service level upgration. Suchvirtual instance portability capabilities also help inreducing the application down times and to improve theservice levels.

Figure 3


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Figure 5

Enterprise Insurance

SaaSIn large, globally distributed insurance organizations,operating in multiple lines of businesses, the enterpriseSaaS cloud computing can become quite advantageouswhen it comes to provision uniform, standardized,consistent and cost effective business application andservices to various business units in the organization.Such large scale SaaS clouds can provide businessapplications to individual business units on Saas pricingmodel, thus promoting reusability and shared serviceusage accorss the organization. Such enterprise SaaS

services can also reduce individual business unit level ITfootprint and promote centralization of shared IT servicesin the organization. For instance, a marketing SaaSapplication provisioned by an enterprise SaaS platform,can service multiple business units across the enterprise.Building such enterprise SaaS service may require higherinitial investments, which can be recovered over a periodof time, as more and more business units subscribe tosuch SaaS services.

Insurance - Enterprise - SaaS



Cloud Computing

JourneyGenerally in an insurance organization cloud computingadoption can be a gradual implementation process,starting from initial proof of concept verification, basic

virtualization implementation and then moving towardshigher degree of cloud computing with external as well asinternal clouds. Also, in many organizations, initially lowrisk computing applications or platforms are consideredto be provisioned by external clouds, before moving high

risk production environments into external cloudplatforms. From the business processes point of view,initially non core business processes and applicationservices are ideal candidates for cloud implementation.As the confidence in cloud infrastructure and servicesincreases, more and more core business processes arelikely to move towards cloud computing. Many small andmedium sized businesses may prefer external clouds

compared to in-house large private clouds, due torelatively higher levels of initial investments required forbuilding large scale enterprise level clouds or privateclouds.

Figure 6

Pricing ModelsCurrently, in the market, cloud services are offered on avariety of competitive pricing models, many of which arebased on fundamental pricing principles such as:

Customers pay only for the services consumed

Customers have options to choose from multiple price-differentiated and service-differentiated services

Volume based and metered service pricing

Such pricing models make cloud services easilyadoptable by many insurers, as the entry costs of cloudcomputing is relatively at lower levels. Also suchtransaction and consumption based pricing models offerlower operational and maintenance costs in the long run.

The major IaaS, PaaS and SaaS vendors offer cloudservices which are priced, based on the following serviceoptions,

Processor architecture 32 bits or 64 bits

RAM allocation 2 GB, 8 GB, 16 GB and so on

Cloud Computing Priorities - Journey



Processor speed 1.4 GZH, 1.6 GZH, 2.6 GZH so on

Storage allocation 10 GB, 20 GB, 100 GB, unlimitedstorage, so on

Operating system Lunix variants, Windows variants,Unix Variants

Type of instances On demand instance, reserved

instances

Backup frequency Data back up features included

Data archiving options Data Archival and DataRetrieval services employed

Exclusive or public cloud Based on the nature of theinstances either public instances or private instances

Availability levels Availability level of services andinstances (virtual machine instances)

Data integration options Services offering dataintegration between the cloud instances and consumersIT systems

Transaction based Number of user transactionsconducted, normal transactions, peak hour transactions,off peak transactions

Service usage Priced based on the service usage,billed as per service consumption

Special purpose software Services are chargedbased on the usage of special purpose software used inthe cloud instances (virtual machines)

Development tools Development tools and data basesoftware included in the cloud also determine the pricing

User accounts Service priced based on user accountand licenses

The vendors offer cloud services on a variety of servicefeature combinations giving the customers wide array ofcloud service options to choose from.

Traditionally, insurance application and business serviceshave been grouped into front office, middle office, backoffice and shared application services, depending uponthe usage of those applications and services. By the

nature of the business transactions involved, the frontoffice insurance transactions are usually conducted in realtime and performance and availability of such servicesand applications is extremely critical to conduct day today business operations. On the other hand, the middleoffice insurance services and operations usually involverelatively lesser degree of direct customer interactionsand availability and performance of such services isrelatively less critical compared to front office services.Back office insurance operations are conducted on anoffline basis (with respect to real time transactions),

Insurance Application

Compatibility

primarily by the back office employees and staffmembers. The back office operations are extremelycritical to insurance business; however performance,availability and other critical service levels of suchservices are relatively low compared to that of front officeservices. The shared insurance services are commonservices within the organization, which are utilized byvarious department and business units in the enterprise.

Some of those common services are also used byexternal partners including agencies, brokers, OPS, TPAsand any other IT service providers. The service levels interms of performance, availability, security of suchservices is usually higher; however any disruption of suchservice is not likely to have direct impact on the businessoperations and to the customer service operations.

While choosing a particular suitable cloud computingmodel for insurance services, the following service levelparameters play a critical role:

Performance of a service In terms of response time,support for concurrent users, peak hour responses.

Security of a service Security of a service plays acritical role in deciding a particular clouding computingmodel. The data privacy act (DPA) requirements, PCI-DSScompliance and any such other regulatory securityrequirements can play a major role on deciding where theparticular service is hosted and provisioned to the users.

Availability and reliability of a service Theavailability and reliability of a service is extremely criticalfor conducting real time insurance business transactions,especially those which involve customers and financialtransactions.

Scalability of a service The ability of the service tohandle increased load as the business volumes grow is

very important to business critical insurance services.

Disaster recovery and business continuity Abilityto recover the services and continue the businessprocesses from alternative locations is extremely criticalto insurance business services and operations.

Auditing and logging In some services, due to thenature of their business criticality, the auditing andlogging of such service usage is very critical from bothauditing and compliance point of view.

Service integration and interdependency Theprocessing and integration dependency of a service withother services, can be a critical factor in determining the

hosting model of such a service. Such dependencies maymandate deployment of such services closer to theirdependent services.



Figure 7

Cloud ImplementationAs of now, the cloud computing technologyimplementation in insurance organization is limited to few

areas and is not extended widely accorss the enterprise.The most immediate candidates that are being exploredfor cloud implementation are low risk testing anddevelopment environments, leveraging to external cloudswherever feasible. The actual production deployments ofexternal clouds is slowly increasing, but not at a speedas it was anticipated. There are several reasons for thisslow adoption rate, few of which were discussed in theearlier sections. Among the key insurance applicationportfolios, non critical and non core applications andservices are being considered for cloud deployment,mainly due to the low operational risks and low servicelevel agreements associated with such applicationportfolios.

The core insurance applications pertaining to policy lifecycle administration, claims management, HR, Admin,analytical reporting, etc. are slow in getting promoted tocloud environments, especially to public clouds. Thereasons are many and include lack of control on ITgovernance, data security concerns, integrationrequirements, etc. The table 2 included in the appendix ofthis document briefly highlights the cloud computingadoption patterns currently being visible in the insurancecarrier organizations.

Small and medium sized insurance businesses:In such organizations, the implementation of cloudservices that are based on IaaS, PaaS or SaaS models, isrelatively faster compared to large insurance businesses.Small and medium sized businesses can quickly move tocloud computing models, as the need to protect thecurrent IT infrastructure investments is relatively low andhence such organizations have greater freedom andflexibility to move quickly to adopt new computing butcost effective models. Also, the size of the IT budgets(relatively lower) in SMBs, make them to consider cloudbased computing model from where more IT services canbe provisioned with comparatively lower CAPEX andOPEX requirements. In SMBs, building enterprise scalein-house cloud computing platform would be very useful,however the initial investment (CAFEX) requirements maypresent few financial constraints in adopting enterprisein-house cloud platforms. Currently, few cloud vendorshave rolled out SMB focused IaaS, PaaS computingplatforms, which can be quickly rolled out to SMBs, tocreate medium sized in-house private clouds.

The SaaS based clouds are more appealing to SMBs, asthey allow those businesses to quickly deploy new ITbased business solutions, with low initial investments andlow operational costs. The data integration needs in suchorganizations is relatively lower compared to largeInsurance businesses with larger IT application andinfrastructure footprint.


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Table: Key Service Level Factors Cloud Computing

Performance Response Time, Concurrent users,Peak Load Support

Service Security - Authentication, Authorization,Transport level security, Storage security

Service Data Centre Security

Service Availability Support

Service Support Window provisioning

Service Scalability

Service Auditing and Logging facility

Service Integration Dependency Impact

Service DR and Business Continuity Provision

Performance of the cloud services as per requiredSLAs

Cloud Service Security features required for securitycompliance

Security in Cloud Data Centers for securitycompliance such as SOX, DPA, PCI DSS

Availability of cloud services, in terms of cloudresilience

Cloud Service Support

Scalability of cloud services in terms of horizontaland vertical scaling

Auditing, Logging and Metering facilities

Need for integrating the data in cloud back toorganizations IT systems

DR and Business Continuity Provision measuresemployed in the cloud

ConclusionsIn the recent years, cloud computing has maturedenough to become part of the mainstream IT computingand is widely being accepted by many organizations inthe insurance industry. Certainly, the lower initialinvestment requirements for public cloud usage (CAPEX)and the lower operational costs (OPEX) have been seenas the key financial advantages of a cloud computingmodel. At the same time, the faster implementation andondemand service provisioning aspects of cloudcomputing models are considered to be essential to buildand promote agile business operations within aninsurance organization. As of now, many insurance

businesses have been using proven and traditional ITservices to cater their business operations and have beensuccessfully leveraging to SOA technologies as a part oftheir business technology model. As a next leg in thetechnology journey, insurance organizations have nowstarted seeing a value in cloud computing models andhave seriously started evaluating usage of cloudcomputing technologies. Although at this stage, the cloudadoption in insurance organization is at a lower side, butover the next few years, cloud computing implementationis expected to increase significantly in insurance

organizations. The key cloud computing models such asIaaS, Infrastructure as a Service, PaaS, Platform as aService and SaaS, Software as a Service, are all findingtheir applications in an insurance organization. The recentadvancements in network technology, processorarchitecture have further fuelled the growth cloudcomputing models, which can be practically adopted byan organization. Insurance organizations can find cloudcomputing models as a promising option to adoptefficient IT provisioning models that can consolidate theinfrastructure and provision computing resource in anagile and on demand fashion. Such an on demand cloudscan help insurance organizations to optimize their ITfootprint and also enable those organizations to efficientlymanage the operational costs involved. The SaaS cloudmodels are fast becoming viable low cost alternatives forinsurance organizations to adopt a variety of on demandbusiness solutions that are economical both in terms ofinitial investments and also in terms of lower ongoingoperational costs. The data and application security hasbeen always seen as a constraining factor in adoption ofcloud services within an insurance organization. Thestringent data privacy acts regulations and guidelineshave further put additional security demands on cloudcomputing models. In the recent past, the cloud serviceproviders have been able to address the security

Insurance Application Service Level Factors Description - Cloud Relevance



concerns associated with cloud services, and as a result,the acceptance of cloud computing models is significantlyincreasing. The service availability and service qualitylevels of cloud services also play a critical part indetermining the acceptance of cloud services for aparticular business in an insurance organization. Cloudservice providers have been offering highly availablecloud services at desired quality of service levels, which

make those services business grade and easily utilized asa part of real time business operations. The cloudtechnology is being applied to almost every aspect of ITcomputing at this stage and as a result, a variety of thecloud services are currently available in the market, which

can be easily accommodated either fully or partially, intoan existing IT operations of an insurance organization.Going forward, insurance organizations are going to bebenefited by optimal implementation of cloud servicesand associated computing models as a part of theiroverall IT and business services operations. Newtechnology advancements are further likely to improvethe cloud service offerings, which in turn result in

increased cloud adoption levels in the insurance industry.It may not be wrong to say that cloud journey ininsurance industry has just begun and there is a longway to go, as far as cloud computing and its successfulrollout in insurance industry is concerned.

Business

Service Or

Application

Table: Insurance Services Cloud Suitability

Application

Category

Internal Cloud

and SaaS

Public Cloud

(PaaS, IaaS)

External

SaaS

Virtualization

Technology

Pricing Model

Development

Environments

Testing Environments

Front Office

Marketing Agency

and Distribution

Front Office Sales,

Marketing,

Service Support

Front Office Policy

Admin, Underwriting,

Quotes, Binding,

Renewals, Rating

Front Office Claims

Handling

Middle Office

Reinsurance,

Risk Management,

Billing, Payments

Back Office Reporting,

Financial Accounting,

HR Admin, BI Analytics,

Re-porting, Compliance

Shared Services Doc

Mgmt, Email, Fax,

SMS, Printing,

Messaging, etc

All

All

Prod

Prod

Prod

Prod

Prod

Prod

Prod

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes Integrations

Limited

Limited

Limited

Server, OS, Platform,Application

Business Application

Business Application,Application Platform

Processor, Storage,Node Based. (Basedon environmentspecs. User accountbased). Also basedon nature ofcomputing instances.

User License Based,Business Volume,Transaction Based.

User License Based,Business Volume,Transaction Based.

Yes

Yes

Appendix


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About the Author

Ashok Goudar

Senior Enterpr ise Architect Europe, MphasiS an HP company

Ashok Goudar is an experienced professional operat ing in the consultancyservices industry for the last 17+ years. He has an in depth experience in

business technology/architecture consultancy and programme/

engagement management services. Prior to joining MphasiS in 2008,

Ashok Goudar had worked in EMEA, NA and India regions with two other

(TCS, Infosys) consulting service organizations in the capacity of business

techno logy architectural consultancy and IT management roles. His

experience includes enterprise solutions (BPM, SOA, Cloud, CRM, SCM,

BI/KW and Web) covering Applications, Infrastructure and IT service

delivery space applied to Insurance, Finance, Retail and Telco domains.


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