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As insurers strive to differentiate themselves, many have come to the realization that adding front-end innovation, while patching the core, is not a sustainable development model. To meet policyholders’ expectations for a connected and personalized experience, organizations are flocking to cloud-native development, with the desire to take advantage of DevOps principles to accelerate and expand delivered features and services with greater flexibility.

The Critical Value of Cloud-Native Development for Insurance Firms, a Forrester Consulting industry snapshot commissioned by Red Hat, verifies an overwhelming majority of surveyed developers at insurance companies in North America, Europe and Asia Pacific reported benefits from cloud-native development initiatives, and recognized more work needs to be done.  

Desired benefits and challenges of cloud-native innovation

There is no lack of interest or recognition by insurance firms for cloud-native development in achieving business efficiencies and enhancement of the customer experience. The Forrester Consulting survey respondents cited the following desired benefits associated with initiatives in this area:

  • Cost reduction (40%).

  • Improve speed-to-market (38%).

  • Integration with partner systems (35%).

  • Better customer experience (31%).

  • Improved collaboration (25%).

While cost reduction will always be a primary driver in this strategic undertaking, there are other benefits as well. A consistent DevOps approach, utilizing a hybrid cloud infrastructure, can automate processes, improve continuous integration/continuous delivery (CI/CD) pipelines, and provide access to new tools and applications—further speeding the development process. The ability to share configured services allows for improved internal collaboration among development teams. It can also help accelerate the integration of external partners, for example, by incorporating new third party risk models for expanded underwriting capabilities or accessing artificial intelligence (AI) and machine learning (ML) for greater personalization for lifestyle monitoring.

Challenges in achieving these goals, technical and otherwise, may be compounded by a risk-averse mindset—especially in perceived efforts to modify or replace siloed, brittle legacy platforms. Half of the respondents are not confident that their firms are properly equipped to handle cloud-native development strategies, with 46% stating that cloud native development teams are not incorporated into broader development initiatives. 

Current approaches – benefits limited by complexity?

Insurers need to manage the pressure of increased migration to the cloud with risk mitigation. This balancing act results in pockets of cloud-native innovation, which can provide gains, but would benefit from a more strategic enterprise vision. 

Insurers use a variety of methods to modernize, including lift-and-shift (55%), Software-as-a-Service (SaaS) offers (44%), refactoring (39%), and/or replatforming (23%), in the instances where they employ multiple methods. These strategies can be beneficial—65% indicate meeting delivery of business needs when it comes to applications. However, this mix often leaves insurers with incomplete IT environments that do not fully take advantage of the efficiencies gained from cloud-native architecture. 

Removing barriers to build a true cloud-native environment

Insurers may recognize a competitive edge with cloud-native development, but they must follow through on their efforts to realize true transformational benefits. 

Firms that have commenced the journey towards cloud-native development reported promising preliminary results as cited in the Forrester Consulting study:

  • Improved partner experiences (45%).

  • More productive use of technology resources (42%).

  • Improved application quality (40%).

While encouraging, limitations and stumbling blocks for insurers include legacy and proprietary systems, missteps in aligning their strategy across the organization, and the ongoing challenge to acquire or retain key developer talent. In addition to the technical challenges described, cultural inertia often hampers the ability to affect beneficial change, necessitating that business technology leaders also assume an internal evangelist role.

To achieve maximum success related to cloud-native development, insurers should consider:

  • Cloud-native development becoming part of broader strategy in order to mitigate issues between current business, technical challenges, and legacy systems. 

  • Executive buy-in, backed by a structured communication plan is essential to illustrate business value internally and through the overall developer community.

  • Flexible tools that give developers the choice they need to be successful avoiding the struggle with tool selection, integration, and structural alignment. 

  • The use of a non proprietary, open platform that will allow you to maintain control of your environment, offer greater portability and provide additional security. As an extension, working with similarly open, full stack vendors enables internal apps and previously developed functionality to be preserved. 

How Red Hat plays a role

Red Hat OpenShift Container Platform and Red Hat Middleware create a foundation of open source tools and technologies that empower developers to design, develop, deploy, and integrate cloud-native applications across any cloud infrastructure. Red Hat’s container platform helps enable insurers to continue their cloud journey, introducing a modern DevOps methodology while providing the flexibility to build and run scalable applications–including Kubernetes to orchestrate and manage application containers at scale regardless of the environment.

Red Hat OpenShift Container Platform offers the flexibility to adopt modern architectures like microservices, includes the tools your developers need, and supports a wide choice of languages.

A sound cloud-native development strategy, with careful technology and team considerations, can help insurance firms improve customer experience, cut costs and remain competitive. Contact the Red Hat Financial Services team to plan your path forward. For more information, we invite you to read the full Forrester Consulting Opportunity Snapshot.


About the author

Jeff Picozzi is a Principal Product Marketing Manager specializing in the financial services industry for Red Hat. He has more than 20 years of experience in the industry. After working for a global insurer and wealth management institutions and surviving Dodd-Frank, Solvency II, and the Basel Accords he began working for technology partners supporting the industry.