Insurance industry under pressure to plug into the cloud

Summary:Changes to technology is forcing insurance companies to rethink the way they store data in order to maintain control and ensure they remain compliant.

The concept of transferring an existing platform to the cloud appears to have many businesses stumped, including those in the insurance industry.

Equinix global head of insurance, James Maudslay, explained there are very few insurance companies in Australia moving to the cloud, mainly because there are hardly any in their industry paving the way, despite knowing how beneficial it could be.

"The problem is nobody in the insurance world understands the processes and procedures because there are no outlines on how to deal with it or handle the implications, so it's almost like a blanket concept," he said.

"In the saying that, cloud service providers like Microsoft, Oracle and VMWare are not going to wait for the insurance company to make up their mind about it. So by the time they do, they could be restricted to having their data still on old hardware systems."

But what separates the insurance industry from others, aside from banking, is that it's a highly regulated space, and according to Maudslay, the regulators are starting to drive the behaviour of how insurance companies are upgrading their technology, including cloud adoption.

"Insurers have talked about how important cloud is, but the reality is it's easier to be adopted in a non-regulated industry," he said. "Although regulators generally are making businesses up their operational game; if they don't, they are usually often charging those companies more money to operate.

"What that's doing is forcing companies to spend money to do things they perhaps wouldn't maybe do, such as upgrading and placing their systems into third party centres."

Maudslay also noted the recent changes to the Privacy Act bring added pressure for insurance companies to reconsider the way their data is stored.

"Privacy laws are more stringent as it's becoming more evasive in terms of regulations globally.

"It is going to be more demanding and that's core reason to expanding our footprint to ensure we can support companies in their privacy rules," he said.

But if the insurance industry do not move soon in enough into the cloud — whether that's adopting a private, public or hybrid model — Maudslay said there could be repercussions in the future as everybody could be worse off and face higher costs and risks of running old systems, and being uncompetitive.

He notes its particularly crucial insurance companies understand the importance of upgrading their IT systems as there are predictions that by 2020, the insurance companies in the Asia-Pacific region will constitute 40 percent of the global insurance market — it currently makes up 2.5 percent of the market.

Topics: Cloud, Australia

About

Since completing a degree in journalism, Aimee has had her fair share of covering various topics, including business, retail, manufacturing, and travel. She continues to expand her repertoire as a tech journalist with ZDNet.

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