Abstract
A German insurance company faces a great challenge regarding differentiation from competition. The homogeneity of products and the simplicity of comparing them in the internet or via comparing websites make it difficult for them to differentiate by other attributes than prices. It therefore seems to be quite logical that pricing is the main criterion for potential customers when choosing among available insurance products. A company with a cost advantage will therefore have a competitive advantage. This paper aims at showing that insurance companies should seriously consider whether joining a club providing an insurance cloud would imply significant cost reductions and therefore competitive advantages. It will be argued that IT services to a major extend have the characteristics of a club good, implying that costs per user would significantly decrease with an increasing number of IT users. The paper thus analyses the decision to enter a cloud-computing club by explicitly solving the corresponding optimisation problem along the lines of the economic theory of clubs. It turns out that many of the conjectures relating to the efficiency gains of cloud computing can be founded more rigorously by this approach. Preliminary empirical evidence is provided by evaluated expert interviews.
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Notes
- 1.
Necessity of the Kuhn‐Tucker conditions is assured since all constraints are linear, cf. e.g. Takayama (1985, pp. 97–98).
- 2.
The Samuelson condition is valid even if the good under consideration is not a pure public good. The crucial criterion is joint consumability which also applies to club goods.
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Christiaans, T., Steden, S. (2018). Cloud-computing in the Insurance Industry. In: Bakırcı, F., Heupel, T., Kocagöz, O., Özen, Ü. (eds) German-Turkish Perspectives on IT and Innovation Management. FOM-Edition(). Springer Gabler, Wiesbaden. https://doi.org/10.1007/978-3-658-16962-6_16
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