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Why hybrid cloud architecture for insurance

Bojan Brumen / 22. June 2021

We often hear that change is good. Especially now, in the time of digital, change is becoming something that is expected to happen regularly. Even though there is no arguing that this statement is true, one must admit that change is also challenging. That goes especially for the insurance industry. There is a huge responsibility when your business revolves around providing financial security and wellbeing in critical and vulnerable moments of your customers’ life. Therefore it is understandable that one cannot just jump on the digitalisation wagon and mindlessly adopt the entire business to every trend to prove to be digitally ready. Sometimes it is wise to change gradually. This is proving to be a smart decision regarding the exchange of outdated portfolio administration software for modern cloud-ready IT platforms, which prove to be more suitable for mastering the digital era and enabling flexibility for the user. But how can an insurer digitally upgrade without taking a full dive into the unknown? The answer is hybrid cloud architecture.

Why hybrid and not pure cloud all the way?

It has become clear that insurance companies must shift their business into the cloud. Only in this way can they satisfy tech-savvy customers and keep pace with all other industries that have harnessed the power of digitalisation. Agility, speed, and cost-cutting are the three key advantages of the cloud that spur insurers’ digitalisation strategies. But the transition to the cloud brings its fair share of challenges. Things like security, cost management, compliance with regulations, data gravity, and changes in organisational structures need to be overcome. There is also a middle path, which is represented by the hybrid cloud.
The hybrid cloud model represents a mix of on-premise, private and public cloud services, including their orchestration. Therefore a hybrid cloud computing environment offers great agility when talking about adaptability to market changes. Furthermore, suppose insurers implement this model and partner with a specialised IT service provider. In that case, they will reap the benefits from a modern, technologically mature out of the box IT solution. In other words, they get a last state of the art architecture with all services needed to run their insurance business considering all regulatory requirements within a specific country.
Using a hybrid cloud, you can align your data and processes with the appropriate resources in the public cloud, on-premise, or even in the private cloud.
A hybrid cloud approach is also a smart option for insurers who need time to analyse further and understand their business- and operational needs before fully transferring to the cloud.

Benefits of hybrid cloud structures

There are several benefits of choosing a hybrid cloud IT structure. The greatest of them all is the possibility of a transition onto new portfolio administration platforms or, in other words, core systems, which promise a high degree of parametrisation and process automatisation. Let’s look at some further gains that come with the hybrid cloud approach.

1. (Step by step) migration & combining the old with the new

Migration is a critical procedure, especially for insurers who need to move large amounts of data. So the on-premise-to-cloud migration method needs to be carefully planned. The hybrid model allows for a step by step migration. In this way, the insurer is not required to move the entire operational workload at once. That is why the insurance companies can keep many of their applications within their private structure and ensure their security.
So, the hybrid approach enables users to continue running their processes within their on-premise environment. At the same time, they are given the ability to securely access their new core system/platform deployed in the cloud within a fault-tolerant resilient architecture. A precondition for this is that the on-premise- and cloud-deployed system are fitted out with message queues (MQs) on both sides. The use of MQs ensures seamless and uninterrupted process flows, even in cases of failures or disruptions, like, for example, internet outages.
When insurers decide to transition to a new cloud-ready core IT solution, like the Unified Administration Platform provided by msg life, they get to use a high-performance solution. The vendor also provides 24/7 support in the form of Dev Ops. This means that a team of experts will support the insurer all the way, providing continuous delivery and integration.

2. Modern technologies

Cutting edge IT solutions require the use of various modern technologies and tools, like Kubernetes, to operate appropriately. Using the hybrid approach model, the insurance companies do not have to ensure them on-premise, which is also financially attractive. And in cases when companies do not want to part with some of their services that they run within their on-premise environment, the hybrid cloud approach makes this possible. The only important thing is to carefully study the new core IT solution and make sure that it is configured/designed to allow a comprehensive and smooth integration.

3. Elasticity

As an insurance company navigates through the dynamic market, adaptation to workload changes is crucial. So, it is more than welcome to be able to make full use of cloud infrastructure. Cloud services/providers enable the provision of resources on-demand following the current needs of the insurer. So, this means that the scaling of database(es) and provisioning of additional resources like CPU and RAM for running Docker containers can be added (or removed) at any time.

4. Maintenance & monitoring

There are also some perks for the maintenance and monitoring of cloud infrastructure and its vulnerability, which are usually part of a service provided by the experts of the vendor who disposes of real-time tools and sets up real-time alerts.

5. Pay as you go

Costs are often one of the customers’ pain points when transitioning to new systems and infrastructures. That’s why we at msg life offer a pay as you go modus for the infrastructure within the scope of hybrid cloud projects. The benefit for the customer is clear: paying for resources that are needed and no additional investments in expensive servers, air conditions, server rooms, etc.

In general, there are 3 C’s every insurance should live by to thrive and stay competitive in the digital world: Choices, Chances and Change. Make the Choices that will provide your business with Chances for Change. So, when in doubt, choose change! But choose wisely and make sure you have competent partners by your side.

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