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.

Specific Technologies Driving Insurtech Investment in 2024

Understanding the Funding Decline The decrease in funding does not necessarily spell trouble for the insurance sector but instead highlights a strategic shift, the report suggests. “The insurance industry, like many sectors, is focusing on the most promising ventures with substantial insurance potential,” the report explains. “Insurers are directing their investments toward key areas and current trends such as embedded insurance, employee benefits, and cyber risk management. This strategic investment approach signals a forward-looking mindset within the industry.” Three Key Insurtech Trends for 2024 The report identifies three major trends shaping insurtech investments in 2024: Public Insurtech Companies: Financial and Growth Strategies The report also notes that public insurtech companies are prioritizing revenue growth as their main goal. These firms are restructuring their financial strategies to boost cash flow and capitalize on rising revenue streams. Their growth prospects are supported by expanding asset portfolios and strong market demand. “Public insurtech companies are focusing on revenue growth and optimizing their financial frameworks to increase cash flow,” the report states. “The growth potential for these companies is driven by increasing revenue opportunities, broadening asset bases, and a robust market for their services.” In summary, while global insurtech funding saw a decline in 2023, the industry’s focus on GenAI, digital process management, and connected insurance technologies is setting the stage for a dynamic and forward-looking 2024.

Business

Insurer Secures Unanimous Supreme Court Victory in New York Choice of Law Dispute

In the world of sports, a clean sweep, a shutout, or a perfect game is the ultimate achievement. In the legal arena, a unanimous decision from the U.S. Supreme Court is equally rare and significant. In a notable legal triumph, Great Lakes Insurance SE achieved a unanimous 9-0 victory in the Supreme Court on February 21, 2024. This victory follows a protracted legal battle that began in the District Court of Pennsylvania, advanced to the U.S. Court of Appeals for the Third Circuit, and culminated in the Supreme Court’s decisive ruling. Background of the Case: Great Lakes Insurance SE v. Raiders Retreat Realty Company The heart of the dispute was the insurance contract’s clause selecting New York law to govern any future legal conflicts. Although the financial implications of this case were relatively minor compared to the broader marine insurance industry, the insurer’s determination to uphold a crucial maritime legal principle has significant long-term implications for marine insurance. Faced with the insured’s counterclaims—including allegations of breach of fiduciary duty, insurance bad faith, and violations of Pennsylvania’s Unfair Trade Practices Law—the insurer was confronted with serious risks. Such claims could lead to the shifting of attorney’s fees, treble damages, and more, which might normally encourage insurers to settle rather than risk pursuing justice. However, Great Lakes Insurance, supported by The Goldman Maritime Law Group, opted to challenge the Third Circuit’s decision and seek clarity from the Supreme Court. Supreme Court Ruling: A Landmark Decision In a landmark ruling, Justice Brett Kavanaugh affirmed that choice of law provisions in maritime contracts should be upheld by default. This ruling is a major victory for establishing a consistent federal standard in maritime law and avoiding a patchwork of state laws that could complicate marine insurance disputes. The Supreme Court’s decision overturned the Third Circuit’s earlier judgment, which had questioned whether Pennsylvania’s public policy concerns might override the insurance contract’s choice of New York law. By upholding the New York choice of law clause, the Supreme Court eliminated the extra-contractual bad faith claims under Pennsylvania law, thereby ensuring that the dispute could be resolved based on the merits of the insurance claim itself. Significance of the Supreme Court’s Decision This ruling represents a significant advancement in maritime law, affirming that choice of law clauses in maritime contracts are generally enforceable. The decision establishes a clear, uniform legal framework for resolving maritime contract disputes, which will streamline the process and ensure fair adjudication of future insurance claims. Justice Clarence Thomas’s concurring opinion was particularly notable for its criticism of the 1955 Wilburn Boat v. Fireman’s Fund Insurance decision, which had previously influenced maritime insurance law. Thomas argued that Wilburn Boat was incorrectly decided and stressed that a uniform and enforceable set of rules is essential for the development of maritime law. Impact on the Marine Insurance Industry The Supreme Court’s decision sets a “bright-line” rule affirming that choice of law clauses are valid unless there is a strong argument against the selected jurisdiction. By endorsing New York’s insurance laws as a reasonable choice, the ruling supports a more consistent and predictable legal environment for marine insurers. This decision represents a major step forward in maritime law, helping insurers better assess risks, determine premiums, and ensure fair and efficient resolution of maritime insurance disputes.

How The Cloud Is Transforming The Insurance Sector