As cloud computing continues to grow in the business community, small to medium-sized insurance companies that are holding on to the old systems of in-house hardware, software, and IT departments are facing a real risk of falling behind their competitors. In fact, the risks are multi-dimensional and merit a closer look.
Smaller insurance companies have a smaller capital base than their larger counterparts. Therefore, it is important to keep capital expenditures as low as possible in order to preserve more capital to grow the business and adequately reserve capital for potential losses.
Before the advent of cloud computing, these smaller companies had to expend large amounts of capital for hardware, software (including insurance policy software) and IT personnel to manage and run the business.
Cloud computing has helped to significantly reduce the need for small insurance companies to invest in expensive technology equipment. The “cloud” is actually space on a server provided by an insurance software management company that partners with the insurance company to provide the service. The service is provided on a subscription basis by the software management company, and the small insurance company reaps the benefits of full-power technology for a fraction of the cost of purchasing the equipment itself.
Along with less equipment to purchase, cloud computing brings data storage capacity that is almost unlimited in its scope. This is a major advantage because it eliminates the need for the company to purchase larger servers as it grows. There is less downtime for system upgrades, and the insurance policy software never has to be reloaded into new systems.
In addition to the insurance policy software mentioned above, cloud computing can be utilized by small insurance companies to perform a host of additional functions including billing, accounts payable, estimates of damages, claims processing and policy updates.
Using the cloud also brings about the stability of partnering with a software management company that undertakes the burden of making sure that all systems are maintained to assure compliance with state and federal regulations. Forms and disclosures are kept up-to-date and professional in appearance.
Data integrity is also better maintained in most cases with cloud computing because systems are in place for regular, automatic backups, with easy retrieval of data as necessary. Companies providing cloud computing to insurance companies normally provide encryption and security services that provide greater protection of information for their clients as well as the clients’ customers.