Carriers Warm To The Cloud

By Cyril Tuohy

InsuranceNewsNet

Over the past 12 to 18 months, two major life and annuity carriers have adopted cloud-based e-mail systems, a sign that the Internet cloud finally has begun its slow penetration of mammoth legacy systems.

One carrier has moved to Google’s Gmail system for its sales and distribution organization, and another is in the process of implementing Microsoft Office 365 cloud-based office suite, according to a recent report.

Both insurance carriers previously relied on IBM’s Notes application, which was regarded as the standard office and mailing software for major life insurers over the past several years.

“From the work we did, the perspective of cloud-based e-mail has shifted dramatically,” Bob McIsaac, principal in the insurance practice at the financial services consulting firm Novarica, said in an interview with InsuranceNewsNet. McIsaac formerly served as an executive at Nationwide and divisional chief information officer at Guardian Life.

“Until 2012, all carriers in our study group were hosting their own e-mail capabilities,” McIsaac wrote in a research report to clients. “With two of the seven (28 percent) now moving to cloud-based solutions, there’s demonstration of growing traction for this option.”

McIsaac, who wrote the report with Novarica principal Tom Benton, said he would be surprised if more carriers didn’t adopt cloud-based models for e-mail in the future. “Insurance carriers tend to be risk-averse, but the fact that we have two large companies heading in that direction suggests we’re likely to have more adopting this in the future.”

He declined to name the carriers.

No insurance information technology and business strategy expert expects the dozens of life and annuity giants in the U.S. market to stampede into the e-mail cloud, of course. Several carriers interviewed in the Novarica report reiterated their preference for a wait-and-see approach.

Time, though, is moving against them. Many life carriers are finding themselves at a crossroads when it comes to their e-mail environments.

“Notes was implemented frequently when e-mail was first deployed and moving off the mainframe,” McIsaac said. “Now it’s at the point of either making big investments to upgrade Notes, or spending even more money to convert to Notes or Microsoft Exchange, or they need to consider alternatives.”

Of the seven big life and health carriers in the study sample, three were on Microsoft Outlook platforms and four on Lotus Notes platforms. The larger the carrier, the more it skewed toward IBM’s Notes e-mail system, the report also said.

Other trends, too, are forcing companies to consider the cloud for e-mail, the report said. They include: the cost of maintaining effective archival and compliance support, systems coming to the end of their life cycles, evolving regulatory requirements, unforeseen complexities because of vendor and systems consolidation, changing definitions of what constitutes electronic communications in the age of social media, and distribution partners bringing their own hardware devices.

Life and annuity carriers talked about the importance of having systems work with their distribution channels and partners, McIsaac said. “The reality today is that the devices are less controlled by the carriers than they ever were.”

Under the bring-your-own-device model, producers are selling policies using laptops, netbooks and tablets, so e-mail systems have to work with all these platforms, McIsaac said.

For companies with independent distribution channels and agents with their own personal data assistants, the cloud offers more user choice and more flexibility for independent agents, many of whom make up the backbone of a life and annuity carrier’s distribution infrastructure.

Because massive amounts of e-mail storage are possible on the cloud, archiving vendors also are moving their storage abilities there, Benton said. He added that these vendors believe the cloud is more secure than a system hosted within the confines of an insurance carrier.

Benton also noted the importance of archival systems meeting the requirements of U.S. Securities and Exchange Commission, Federal Deposit Insurance Corp. and Financial Industry Regulatory Authority oversight.

“The pace of technical change in this area has been significant. Cloud-based solutions now appear to offer viable alternatives for carriers and chief information officers that are looking to make significant changes to their e-mail archival and compliance environments,” the authors of the report wrote.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].