How The Cloud Is Transforming The Insurance Sector

The late American inventor and businessman Charles Kettering once said, “If you have always done it that way, it is probably wrong.”

Innovation is the driving force for economic growth across many different industries. The insurance sector in particular has much to gain from the adoption of new technologies and processes. As technology has advanced over the last decade, the infrastructure of the internet has strengthened. As a result, software as a service (SaaS) companies have been able to offer off-premises applications and business solutions for agencies of all sizes.

These cloud-based systems have a lot to offer the insurance industry, which is under constant pressure to offer excellence in service, manage an ever-growing array of financial information, and meet evolving industry standards. Here are a few ways recent technology innovations are impacting insurance brokers at every level of the business.

Managing Risks

Insurance agencies must comply with constantly changing regulatory standards, from the biggest agencies to individual brokers. This constant vigilance poses a significant challenge to resources. Many brokers and agencies turn to cloud-based risk management solutions to help clients manage their own risk and decrease the potential for claims, which ultimately impacts revenue.

Traditional actuarial models of risk management are evolving to incorporate the nuances of modern business operations. Business processes and technology infrastructures must be analyzed and optimized to ensure they meet exacting requirements for security, transparency, and accuracy of reported information. For brokers, this means employing a variety of solutions in order to continue offering the best service and value to their clients. Modern risk management solutions support the framework for the platforms that agencies use most often to gain operational efficiencies, e.g., a cloud-based ERP system. These tools enable insurance brokers to make data-driven business decisions and more effectively connect clients to insurance providers.

The advent of the cloud is helping shoulder the burden of managing compliance for insurance professionals. According to Sonny Singh, senior vice president for Oracle’s Financial Services Global Business Unit, “Now more than ever, insurers have to meet an array of regulatory and compliance requirements, including new financial standards. To do so, they need a comprehensive technological solution to properly comply with these increasingly complex requirements and reduce any adverse impact on their business.” Technology platforms aimed at addressing financial and legal risks are growing in popularity among differing insurance business models as the landscape evolves.

Expanding Distribution Channels

Insurer agencies have to compete for attention in a crowded market. To hold market share, they must diversify their offerings and branch out swiftly into new sales, customer service, and distribution channels. Cloud solutions can help streamline an omnichannel approach through a responsive, modular infrastructure of applications.

Ernst & Young conducted extensive consumer research among a group of life insurance agencies in 2014, reporting that 80 percent of consumers were willing to use digital and remote channels to complete common transactions, such as changes of address, bill payments, and changes to beneficiary information. At the time, few life insurers offered such capabilities on the web or mobile platforms. Nowadays, agencies are moving toward offering mobile applications and other cloud-based platforms to streamline how they service accounts, from the sales process to their customer service strategy.

Providing Consistent Service

Customer service is key to success in any vertical. For insurance agencies, however, dealing with myriad pressures from regulatory bodies, internal revenue goals, and customer-facing obligations is a challenge. They must juggle providing best-in-class customer service with managing operational costs, two dueling priorities that don’t always align. A possible solution for modern insurance agencies is to optimize their internal processes. Improved internal efficiencies are thereby reflected in the quality of their customer care.

Efficiencies created in the cloud enable brokers to streamline their policy lifecycles, centralize relevant information and processes, and deliver a consistent message to the customer from sales to support.

Insurance agency leaders must leverage adaptive systems in order to remain profitable in a fast-moving, digitally focused economy. Migrating business functions to the cloud requires careful planning, with a clear eye for processes and governance, and investment in the right delivery technology. Proper cloud management and greater focus into data security and proactive transparency will ensure a more holistic approach to the future for insurance agencies of all sizes.

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Commercial P&C Insurance

Commercial Office Space Set for a Strong Comeback

The sustained increase in demand for office space across the nation since late 2022 suggests that the market has moved past its lowest point, according to insights from the real estate technology platform, VTS. Demand for office space began to rise in late 2022 and continued into early 2023. Since then, the office market has experienced a period of stability and growth, supported by favorable economic factors, indicating a market rebound. This conclusion is drawn from the VTS Office Demand Index (VODI), which tracks unique new tenant tour requests for office properties in key U.S. markets. The VODI serves as an early indicator of future office leasing activity. According to the index, demand for office space has grown consistently over the past 12 months, closing the second quarter with a 17% year-over-year increase and a 34% rise from the VODI’s lowest point in December 2022. A significant shift in office-based employment patterns further supports the belief that demand for office space has stabilized. After reaching its peak in August 2022, office-based employment declined by 3.9% in early 2024. However, this trend has since stabilized, and employment growth has remained steady. Additionally, a recent decrease in work-from-home rates has fueled the renewed demand for office space. “They say you can only recognize a market bottom after it has passed, and the office space market is no exception. Following what we now see as the bottom, the national demand has gradually increased, though it remains susceptible to economic challenges,” said Nick Romito, CEO of VTS. “However, the growth observed in VODI over the past 18 months, coupled with positive trends in the office-using workforce, suggests that the market has reset, and the worst is behind us.” It’s important to note that this national trend does not impact all local markets equally. Cities like Los Angeles and New York City have seen healthy growth in office space demand, while markets such as San Francisco and Washington, D.C., have experienced prolonged stagnation. In Los Angeles, office space demand surged in the second quarter, briefly surpassing pre-COVID levels, driven by an increase in the average size of office spaces sought by tenants. New York City followed a similar overall pattern, though with some softness in the second quarter. Conversely, San Francisco’s demand for office space remains unpredictable, largely due to its tech-focused workforce, which continues to favor remote work more than other industries. “Markets heavily dependent on the tech sector, like San Francisco and Seattle, are on a markedly different post-COVID recovery path compared to more diversified markets like Los Angeles and New York City. It may take some time before we see office demand in San Francisco and Seattle return to pre-COVID levels,” added Ryan Masiello, Chief Strategy Officer at VTS.

Cyber Liability

Global IT Outage Puts Business Interruption Insurance in the Spotlight

In July, a global IT outage had a significant impact on business interruption insurance policies, overshadowing the effects on cyber insurance coverages. “This incident wasn’t a result of a malicious attack, which is why typical cyber insurance policies may not have been activated,” explained Peter McMurtrie, a partner in West Monroe’s insurance sector, in an interview with PropertyCasualty360.com. “Where coverage was applicable, factors like deductible amounts, waiting periods, and coverage limits played a critical role in determining the extent of exposure,” McMurtrie noted. “Standard policies for small businesses were less likely to offer coverage, while more complex policies for mid-sized companies and Fortune 500 corporations may have included broader triggers for non-malicious outages caused by third-party software issues.” The outage was triggered by a software update on July 19, 2024, by cybersecurity firm CrowdStrike, which affected organizations worldwide using Microsoft Windows. This interruption had far-reaching consequences, including disrupting hospital systems, media outlets, financial institutions, delaying thousands of flights, and halting daily business operations. McMurtrie emphasized that while the initial impact of the outage was similar for both large and small businesses, the ability to recover operations and whether insurance covered the loss of business income varied. “Larger companies are more likely to have advanced disaster recovery plans that ensure service redundancy following unexpected outages,” he added. “Their insurance programs also tend to cover a wider range of incidents.” According to Microsoft, the CrowdStrike update error affected over 8.5 million Windows devices globally. The incident highlighted the interconnected nature of our global ecosystem, including cloud providers, software platforms, security services, and their clients. “It’s a stark reminder of the importance of prioritizing safe deployment and disaster recovery across the tech industry,” the company said in a blog post. McMurtrie pointed out that the outage’s widespread impact was largely due to its effect on organizations that are critical to societal infrastructure—sectors like agriculture, airlines, banking, energy, government, healthcare, manufacturing, and retail. “Insurance companies base their risk appetite on their ability to understand and price risks appropriately. This becomes increasingly challenging with emerging threats,” he said. “However, I anticipate that insurers will respond by clarifying policy language, refining risk selection criteria, and possibly developing new products specifically designed for this evolving exposure.”

How The Cloud Is Transforming The Insurance Sector