Powering Innovation from the Cloud
As insurers are looking for ways to accelerate digital transformation, one of the most essential and inevitable developments that they will have to take on is adopting the cloud. Cloud computing means having the ability to leverage new business models and turn capital infrastructure expenses into variable costs. To discuss which factors that power (future) innovation from the cloud, we spoke with Tony Jacob, Head of Worldwide Business and Market Development, Insurance at Amazon Web Services (AWS). Tony leads a team of insurance technology experts who guide AWS’ strategies for helping insurers transform their data centers and to speed up innovation by developing and delivering new, cloud-native applications that change their customer experiences.
When it comes to the insurance industry, AWS does two things: it helps insurers transform their data centers, and it helps them innovate more quickly. AWS provides insurance customers secure, resilient global cloud infrastructure and services they need to differentiate themselves today and adapt to the needs of tomorrow. Building on AWS empowers insurance organizations to innovate and drive business growth in an evolving and increasingly competitive environment.
Adopting the cloud is no longer a matter of if but more a matter of how and when for insurance companies. For an insurance company that’s new to the cloud, how do you recommend that they think about a strategy for cloud adoption?
“Because of our depth and breadth of cloud services, insurers have many entry points for where they can begin to work with the cloud. We see projects across distribution, underwriting, and claims servicing, to core systems of record, to data science, where customers are uncovering new customer signals or supporting new and innovative insurance products.
Early on, the majority of the projects focused on the heavy workloads. We helped many insurers take advantage of high performance computing grids in the cloud to support their actuarial and catastrophe modeling solutions, and cloud infrastructure for core systems. This helps them retire technical debt, move away from some of the more expensive server and database licensing agreements, and free more of their IT budgets from the “run” spending category to “transform” and “grow.”
Lately, it’s gotten more interesting. Insurers are quickly stringing together AWS services like building blocks to deliver new and innovative solutions to the business, the end policyholders and producers, especially in the areas of artificial intelligence and machine learning, and in digital customer experiences. The insurtech startups have certainly embraced this approach, and their pace of innovation is game-changing. But, even the larger, more traditional insurers are also finding ways to embed cloud-based agility and speed in their IT organizations.”
How is AWS helping insurance companies change the way they do business and explore new business models?
“In short: new signals. AWS provides a broad collection of services that help insurers liberate their legacy data, enrich that legacy data by incorporating external and unstructured data sources, and expose that data to AI/ML services. The result is the ability to identify new signals that can manifest in many different ways — improved risk identification and pricing, greater customer intimacy, better service levels and reduced churn, increased claims fraud detection, decreased lapse rates — the sky really is the limit. Of course, it’s easier said than done. But, it is being done, in the cloud, and by insurers today.
We’ve all heard over the years that insurers struggle to access their data on rigid, inflexible legacy systems. By embracing the concept of the data lake, insurers are replicating their historical data into the lake, and making that data more accessible to many functions within the business. They’re also using the lakes to ingest external data sources to add to their legacy data, and to add to their understanding of their customers.
We’ve also heard that’s only half the equation. What do you do with the data once you can access it? And, by whom? Data scientists are a scarce commodity. To make that role more productive, and lower the technical requirements to be successful as a data scientist, we’re helping to provide pre-built, managed AI/ML services that architects and developers can quickly incorporate into their solutions. From there, those algorithms — those AI/ML services — can run faster against the data, self-learn, and improve.
And here’s the virtuous circle. These new AI/ML services — e.g., natural language skills behind the chatbot, or recommendation engines behind the portal or the call center representative — improve the digital customer experiences for the policyholders. The improved experiences prompt more frequent and more numerous digital interactions. The increased digital interactions create more data, leading to more opportunities to identify new signals. New signals lead to increased customer intimacy. And so on.
Now, support those interactions with cloud-based serverless/API technologies, and the heart of insurance technology really moves to a new era. Processes are re-engineered as both the business and IT envisions those processes. The teams sit side by side, and they’re not confined to what legacy IT systems can support in terms of new, efficient workflows. The IT architecture moves to an event-driven model, where the loads on IT are only present when an event dictates the workflow or the process. And the APIs are used by insurers to more easily expose those processes, their products, and their digital customer experiences to all channels, to include non-traditional distribution channels.
We can see this vision coming together with insurers today, with the likes of AXA, Liberty Mutual, Sun Life and others.”
Can you talk more about the customer experience? How is AWS helping insurance companies create Amazon-like experiences?
“Insurance customers are looking for the real-time, personalized experiences they receive in other areas of their lives, through digital native businesses like Netflix, Airbnb and Amazon. Insurtechs have presented a model for how these types of experiences can work in insurance, but many legacy carriers and brokers struggle with adoption, mostly because their legacy systems can’t support these types of experiences. AWS has a suite of tools and services that can transform capabilities across the front, middle, and back office, which together can support omni-channel delivery, efficient processes, and AI/ML-driven insights and experiences.
More specifically, we see customers like John Hancock embracing cloud-based call centers, where the technology scales up and down to match demand, and the AI/ML services are pre-integrated and running in the background to suggest the right actions and product recommendations in real-time, while the customer is engaged. We also see serverless technologies and AI/ML being combined to create technology wrappers used to surround legacy systems, such as around life insurance books of business, to support more customer interactions through conversational self-help channels. Customers may ask about AWS services to refresh their customer or broker portals, but when the project is delivered, you often see the end result is more focused on a chatbot supported by natural language skills and personalization engines than the portal itself. Very quickly, call center traffic drops, self-help channel usage increases, but so does customer or producer satisfaction.”
You have a very large ecosystem of partners. Can you talk about how you work with your partners to accelerate digital transformation for insurers?
“We work with partners in a number of ways. We have a global program, the AWS Partner Network, for both consulting and technology businesses that leverage AWS to build services and solutions for our customers. Our consulting partners help customers design, architect, build, migrate, and manage their workloads and applications on AWS, and our technology partners provide hardware, software, and connectivity services that are either hosted on, or integrated with, the AWS Cloud.
We’re fortunate in that a broad spectrum of technology providers to the insurance industry are using AWS services. We see independent solutions vendors use AWS for the infrastructure behind their core systems. Quite a few are also moving to Software as a Service delivery models, and using cloud-native services to expand their suites into the areas of data, workflow, and channels. That’s great news for insurance customers, where they can get two or more — core systems modernization, and the cloud data warehouse and analytics — in one, rather than have to plan and budget for those two strategic projects separately. Accenture Life Insurance Platform, Britecore, EIS Group, FINEOS, Guidewire, Insurity, FAST Technology, Novum-RGI, Sapiens, Vitech — those are just a few who are investing in the cloud.
The front-end systems, and the data environments, are also seeing dramatic changes. Partners focused on these areas include Hyland, iPipeline, Pegasystems, Quantiphi, Salesforce, Snowflake, and VoiceFoundry, to name a few. Our system integrator partners such as Accenture, Capgemini, Cognizant, Deloitte, Slalom, and TCS also are investing in AWS-based service offerings that help fill the digital gaps between the ISV systems, or between the legacy and cloud in the hybrid environments. And, the consultancies — Bain, BCG, McKinsey — are supporting more and more board-level discussions to advise their clients on how best to move to or take advantage of the cloud.”
Many people probably don’t realize that many of the newer insurtechs, among many that we have seen during our DIA events, run on AWS. How does AWS support insurtechs?
“Yes, many of the new insurtechs around the world that you hear about today run on AWS – ranging from the digital carriers and brokers like Lemonade and wefox to the technology providers to insurers like Slice and Chisel AI. Accessing secure, resilient infrastructure in a pay-as-you-go model works well for both early-stage innovators who want to build quickly, as well as for the larger “unicorns” who are looking to scale and expand globally. Additionally, as these insurtechs innovate across underwriting, claims, and servicing, they are increasingly taking advantage of our broad set of tools, including analytics and AI and ML services. Root Insurance, for example, is a new mobile-only carrier in the U.S. that uses AWS machine learning tools to price auto insurance based on mobile telemetry data.
We have several programs to support start-ups in this space, including AWS Activate, which provides new businesses with AWS credits, technical support, and training as well as access to our partner ecosystem. We also work with incumbent insurers to set up environments to help them asses how an insurtech can support their business.”
One final question: from your perspective, what does the insurer of the future look like?
“At a high level, more digital channels and more digital products. We’ve seen the experience from covid-19 accelerate the focus on digitization and based on our discussions with customers, many of these changes will lead to fundamental shifts – certainly in distribution. For example, we’re seeing more and more insurers developing products that can be underwritten and sold digitally, such as levels of term life insurance that do not require blood chemistry analysis and can leverage alternative data sources to help with underwriting, or commercial property insurance that uses sensor data and drone footage to help with risk identification.
Digital products and the ability to service customers in a simple, automated way requires the mastery of data, and machine learning services running behind the scenes to support the interactions, so the role of data and the data scientist within an insurance organization will become increasingly important. And as I mentioned earlier, the IT architecture needed to support digital engagement and rapid innovation will continue to evolve to more cloud-based serverless and API technologies.
Cloud technologies can help deliver both IT value and business value across the entire insurance value chain. I believe many of the insurers we work with are experiencing the benefits of cloud economics as compared to traditional on-premise and hosting environments. But the cloud’s potential to deliver business value through combining data with data science and digital customer experiences — that’s the future. It’s an exciting time to be in insurance, and we’re glad to be a partner to so many insurance organizations on their journeys.”
Tony Jacob, Head of Worldwide Business and Market Development, Insurance at Amazon Web Services (AWS)
To learn more about AWS for insurance, visit aws.amazon.com/financial-services. In the coming weeks, we’ll feature interviews with two of AWS core system partners, FINEOS and Novum-RGI, to learn how they are helping insurance companies migrate their core systems to the cloud on AWS.