To reduce their insurance premiums, consumers are willing to connect more closely with insurers through digital channels and by using the Internet of Things (IoT). Insurance companies must ensure a safe and secure transformation to digital and Cloud-based services to meet this demand and stay in the game.
The win-win situation
Let’s say you want to check you are getting the best possible deal on your car insurance. During your commute to work, you take the opportunity to open the insurance app on your phone and select a few options to help tailor your policy to better suit your needs.
Gen Y Customers like to engage more regularly, preferring to interact with insurers via new channels, such as social media, at least twice as frequently as other segments. 
You feel satisfied with your selection because you know that thanks to data sent to your insurer by the GPS device fitted in your car, your premium will be adjusted in real time, according to where you go, where you park and how you drive: leave your car at home, locked in the garage while you are away on holiday, and your payments will be reduced accordingly. It’s the same situation when you drive carefully and park in safe areas and use secure car parking. Your premium will stay low because you don’t park in areas where crime is a problem, and even if the worst were to happen and your car was stolen, upon it being moved without authorization, the GPS device would initiate an emergency beacon call.
You have also made improvements to your home security using devices connect to your insurer, which means you pay a lower home and contents insurance premium.
You try to keep your daily, physical activity rate high, as the app on your smart watch sends data that helps to keep your life insurance premium to a minimum (meaning that you can feel even better about taking the stairs!)
The circle of efficiency and cost savings is complete.
Savvy insurers are recognizing that helping customers protect their assets might not be a traditional underwritten insurance policy but rather a profitable ongoing service. 
Accurate risk assessment means that insurance companies can make efficiency savings and connect, and stay connected to customers better. Customers are pleased because they pay a lower premium.
As the IoT matures and becomes more mainstream, the nature of risk transparency, risk ownership, and risk itself will shift, making conventional insurance principles less relevant. 
“Knowledge is power”– in this case providing a sea change in the relationship insurance companies have with their customers and the way policies are designed and managed. This change starts with the transformation to digital and Cloud.
All of this sounds wonderful, but, of course, there’s a catch. There is risk inherent in every change or transformation, and the biggest risk now, lies with the many well-established, traditional insurers that must move to the Cloud in a way that mitigates that risk as much as possible.
The Challengers to Insurers
The risks connected with transitioning to cloud services are wide, and include:
· data security
· interruption to business processes
· compliance issues
· data confidentiality
· business continuity.
These risk often result in clients taking a tactical approach to the Cloud rather than a strategic one, marginalizing the long-term business benefits.
The speed of development in the marketplace is moving faster exponentially, and smaller, digital-oriented companies who are cloud-native are gaining an edge through increased efficiency and agility, giving them the ability to scale-up and deliver innovative new services rapidly.
Naturally, mature, traditional insurance companies store and handle huge volumes of sensitive customer data and are therefore attractive targets for cyber-criminals. So the stakes are high, and other dangers involve breaches of security, which expose customers’ personal data, and lead to loss of reputation and heavy fines. During the period of transition to the Cloud, this data is particularly vulnerable.
Expertise in transition strategy
Without the right expertise, systems and strategy the deal with them, factors such as organizational silos and legacy technology present a hindrance to conducting a fast and secure transition to digital, as well as to achieving the ambition of having shorter time to market for new functionality.
The risks listed above must all be mitigated before, during and after the transition, and the question of security is at the core of any cloud transition strategy. It is essential to employ an application security testing service to flag up any existing vulnerabilities in the applications landscape.
Much of the risk connected with the transition to digital is technology based, i.e. an area not traditionally associated with insurance companies, who in the past, relied on personal contact with clients, and more recently, cheapest quote search engines. Using the services of a technology partner seems to be the preferred method for traditional insurance companies with complicated legacy systems to enter a digital transition. Some of the main considerations that must be taken into account in the transition are that, when using a partner in digital:
· the insurance company is always compliant with internal and external regulations
· the insurance company is always in control of its data and applications
· the security strategy is founded in a solid and operational security framework.
Secure by Design: with Big Data Analytics
Using a transformation partner also means that data analytics will be something that is built into a transformation as an organization-wide strategy. This plays a vital role in every stage of the insurance process, from the core business of risk assessment and policy design, to insurance fraud detection and data security.
Other benefits of the partnership include:
· automated application security testing – enabling shorter time to market for all applications
· secure end-user access to new applications
· protection of end-user data
· a proactive “shift left” response to cyber threats
Now or Never?
There is now a general awareness that a future business model with Digital is the only viable one for the insurance sector. Well-established companies generally need to do much more to get where they need to be – and it really is, “now or never” as newer, leaner companies and service providers enter the insurance market without being slowed down by the drawbacks of legacy systems.
Five years after what Forrester called the advent of the age of the customer, empowered customers are driving disruption all over the business of insurance. That focus on the customer now matters more than any other strategic imperative, based on a Forrester global survey of over 250 insurance business decision-makers. But success in the age of the customer requires insurers to go beyond customer centricity and become customer-obsessed. It’s also impossible to be customer-obsessed without addressing the digital expectations of those customers. 
I agree that today, the question for decision makers in the insurance sector is not when to adopt digital and the Cloud, but how – and particularly for traditional insurers, the thinking time on that question won’t last forever.