Tech Trend Radar: Cloud-based core systems

In the field of digitalisation, customers place very specific requirements on companies and service providers: speed, constant availability and straightforward handling. Therefore, also insurers should keep in mind the digitalisation of their IT core processes without neglecting data protection. ERGO China Life relies on cloud-based systems.

Nowadays, cloud solutions play a central role in this digitalised world. It should also be possible for insurance companies to become more efficient and competitive with the help of so-called cloud-based IT core systems. These systems are automated and enable companies to act more quickly thus offering a better service to their customers. The cloud – i.e. an IT infrastructure made available through the Internet – is regarded as an important prerequisite to set up digital insurance platforms. They make it easier for insurers to network with new private customers and companies, and open up new channels and marketplaces.

Convenient and customer oriented

In the digital world however, insuring poses a great challenge on many insurance companies and brings about a great deal of changes: new technologies have to be used, business models must be restructured and products must be digitalized. The main focus is the traditional IT core system. Other companies such as Amazon or Facebook show how user-friendly and customer-oriented business models work in digitalisation. However, in the insurance industry, data protection is rightly a particularly sensitive subject where attention must be paid to strict security standards. An important issue is the question: in which country’s data centres should the data be stored? How secure is it there? The authorities now have a strong interest in ensuring uniform security standards.

Many people appreciate the convenience of using digital platforms and expect the same from their insurance company. This means: take out insurance cover quickly and simply, report any damage easily and enjoy an uncomplicated processing of your claim. However, the core technology of many insurance companies is not yet customer-oriented enough. In some cases, it is not even sophisticated enough for the digitalised processes.

Core system in the cloud

A cloud-based core system can ensure that processes become leaner and more flexible. ERGO China Life has led the way by moving its own core e-commerce system into a financial cloud. “In 2018, we decided to develop a system specifically for online business in order to separate the function of online business from the traditional core systems”, explains Colin Yu from ERGO China Life. The architecture of this cloud system is based on various micro-services, such as an access service for specific partners, underwriting services – which check claims, assess risks and conclude contracts – and issuing services for policies.

The advocates of cloud-based systems say that it is necessary to establish such a system. After all, e-commerce is also becoming increasingly important for insurance companies. At ERGO China Life, this is reflected in the value of gross written premiums (GWP). In 2020, this figure for online sales has up to now exceeded 600 million Chinese yuan (approx. 76 million euros) and is thus already about 69 percent higher than last year.

Fast and around the clock

But how can such a complex cloud-based core system actually be established? “We got support from a cloud services provider to develop and implement the system”, explains Colin Yu. “The provider is able to provide dedicated network access, public network gateways, a virtual private cloud, virtual hardware servers and elastic computing capacity.” In addition, the system also had to be developed on the basis of micro-service architecture.

ERGO China Life’s cloud-based core system can process a large number of transactions simultaneously – around the clock. For the e-commerce business with private customers, ERGO China Life uses the messenger WeChat, which offers even more options, such as mobile payments, compared to those offered by messaging services like WhatsApp. When dealing with other companies, ERGO China Life works with sales platforms such as Meituan or JD.com. New requests can be processed within a very short time, explains Colin Yu: “In addition, the development and maintenance costs are lower. Investments in hardware servers are reduced and the computer’s resources can be adapted very flexibly to the volume of the business.”

And data protection?

What about data protection? “The system runs in the Tencent Financial Cloud, a service offered specifically for financial companies in China”, explains Colin Yu. Compared to ordinary cloud services, compliance standards have been established in accordance with the People’s Bank of China and the Chinese Banking and Insurance Regulatory Commission. “This has improved the security, service availability and data reliability considerably”, says Yu. Transactions are processed in the cloud however the final data is stored in the local data centre.

Business platforms that are very fast and meet customer expectations – cloud-based core systems are obviously able to offer just that and at the same time ensure data protection. Over the next years, insurers will also be able to benefit from advances in artificial intelligence and digitalised analysis systems. Because developments in cloud technologies are taking place at an ever increasing pace.