A web of connected “things”
The Internet of Things (loT) is a network of internet enabled objects, together with web services that interact with these objects.
These objects include cars, buildings, wearable devices and other items that are embedded with electronics, software, sensors, actuators and network connectivity that enable these objects to collect and exchange data.
The acceleration of change
As the insurance industry has been relatively slow to change, the acceleration of emerging technological trends and developments; such as mobile connectivity, big data and IoT, will have a substantial impact and subsequently force the industry to adapt to customer expectations.
Advances in digital technology have made customers change how they interact; both among themselves and with insurers, these always-connected customers demand to transact seamlessly across all channels. Another noticeable shift in customer expectations will transpire from reimbursement to prevention.
As insurers begin to provide prevention solutions, the fundamental economics of the industry will shift, and they will experience greater up-front costs to lower loss pay-outs in the future.
The impact of IoT
IoT will further impact and challenge the way insurers traditionally conduct business while opening innovative opportunities for growth by an ever-changing risk landscape, new competition from within and outside the traditional insurance industry.
Advances in safety technologies will impact accident frequency, reducing losses and the continuous rise of autonomous cars and car sharing will change the nature of insured assets.
IoT data will add value for market segmentation, these always-connected lifestyles of customers will generate new types of risks, such as for information security. The opportunity of IoT includes:
1. The connected car
• Smartphone applications, dongles or black boxes to be installed/plugged in the cars; and
• Analysis of driving behaviours, accidents and breakdown detections and analysis, stolen car tracking, etc.
The connected car is critical to the insurance industry; insurers must prepare for multiple potential futures, and develop strategic partnerships with these emerging gatekeepers while reinforcing their value proposition to the customer to sustain customer pull.
2. The connected home
•Sensors and cameras installed at home with connectivity and smartphone platforms; and
•Analysis of presence, intrusion detection analysis of carbon monoxide, smoke, water leak/flood/fire detection levels etc.
Just as customers demanded universal remote controls to replace their collection of remotes, it is likely that they will want a single hub for their connected homes.
3. The connected self
• Wearables/devices with connectivity and smartphone platforms; and
• Analysis of health behaviours and conditions for wellness management (chronic disease).
This emerging market may be the catalyst for merging across connected cars and homes.
The above opportunities will impact the insurance value proposition:
• Customisation of offers -improved risk selection (customised pricing and guarantees);
• Prevention and early detection - claims reduction (rewards for low risk behaviours, claims early detection); and
• Customer relation management improvement - increased frequency of interactions with customers, high-added value services and differentiation of offers.
Capitalising on uncertainty
This connected ecosystem creates new opportunities for insurers, and more frequent, more relevant engagement for customers with their cars, homes and selves.
Insurers have an opportunity to adapt while the market is still evolving. Leading insurers will utilise IoT to differentiate themselves and in that way position their brand as innovative and responsive to customer expectations.
The better insurers understand these opportunities and risks, the more innovative and successful they will be in an increasingly commoditised market.
The potential and hype of IoT is truly likely to materialise over the upcoming years however, the need to innovate more rapidly and effectively is undeniable. Clients want instant connectivity across all channels. The more insurers can meet clients’ needs, the more they can capitalise on opportunities.
It is crucial that insurers develop strategic plans to address technological disruptors such as IoT and their related risks and growth opportunities.
