Apple is reportedly investigating how to better protect data stored in iCloud through improved encryption methods. If it is successful, the company will no longer be able to decode user information stored in the cloud service. The primary issue with implementing such a system is how to implement data recovery for customers if Apple can't decode the data itself.
From The Wall Street Journal:
Apple is working to bolster its encryption so that it won't be able to decode user information stored in iCloud, according to people familiar with the matter. But Apple executives are wrestling with how to strengthen iCloud encryption without inconveniencing users. Apple prides itself on creating intuitive, easy-to-use software, and some in the company worry about adding complexity.
Currently, if a customer forgets their password and can get into iCloud themselves, there are a series of steps they can take with Apple in order to recover their account. However, if Apple boosts iCloud's encryption and is unable to access the data, recovery of items like photos and documents, which for most customers is a more likely problem than a data breach, becomes much more difficult.