Time and tide waits for no man – IoT in Insurance
However, tapping into this new world of billions of devices connected via the internet could be a real challenge for insurance companies given the legacy systems and privacy concerns that most are currently facing.
The challenge faced by insurance companies is not only one of competition, but also one of changing customer expectations. Much of what customers do in their everyday life has become the standard by which they measure companies - digital, instant response, great customer experience and services that are tailored to their needs
There is also a number of macro trends that underpin those expectations: a shift from asset ownership to asset sharing, a changing set of demographics (ageing and growing population) and increased willingness to 'switch' service providers resulting in less customer loyalty, a move to freelance employment and an increased trend in travel and mobility, moving addresses and even countries of residence on a regular basis.
On top of all of these trends, we will start to see new entrants come into the insurance market from other sectors: vehicle manufacturers offering data driven insurance, white goods/appliance manufacturers offering 'as a service', removing the need for extended warranty and insurance, security companies using sensors in homes to offer insurance based upon occupancy or how secure the building is.
So the insurance market is faced with a market and operating model shift that is moving from an annual cycle based upon risk assessments using historic data to a real-time interaction and risk assessment based upon a combination of historical data and current status. If you think this is unrealistic, look what has already happen to: music, books, photography, hotels, transport/car sharing etc.
However, there are some big opportunities for insurance companies who embrace IoT and transform their business accordingly.
- New products and services
- Usage based - using a combination of sensors and smart phone technology, different levels of insurance can be offered to customers. For example, car insurance could be varied between theft and fully comprehensive when the Car is not being used.
- Context aware - as above, but the context could be whether a building is secure and being occupied.
- Behavioural based health and wellness - For life insurance, the level of exercise completed could influence the premiums offered
- Group policies - using the aggregation of multiple data feeds could mean family policies can be offered, but also enable group buying for insurance based upon group usage and risk, being an extension to the collaborative economy
- Time and location based insurance - think car insurance varying depending on when and where you drive your car.
- Cost reduction
- Automatically providing costs and data for claim processing, significantly reducing fraud and risk
- Manage lower risks through pricing premiums based upon real time data.
- Increase customer engagement
- For many of the new services, it gives insurance companies the ability to communicate with customers on an ongoing basis throughout the year, providing a better service but also with a channel to sell other services
- The use of an individual's data could enable highly personalised services to be offered.
The other large opportunity for insurance is to help the customer move from protection to prevention of risks. For example, a base level home insurance policy could be offered or when the occupants are at home. The premium could then change depending on if the occupants are at home (driven location of phones and cars) and whether the windows and doors are locks. If the windows are open, but no one is at home, an alert could also be sent giving the customer time to rectify the situation before the premium is increased. Similar sensors and monitoring could also be used to prevent burst pipes etc.
So, are you ready to ride the IoT in insurance wave or be swept away by competition and new market entrants?
Open Group Certified Distinguished IT Architect | IBM Cloud Cross Portfolio Product Manager @ IBM
8 年An interesting post and I'm sure the disruptors in the insurance market are looking at these types of use-cases. There will need to be a clear benefit to both consumers and the insurance companies of implementing such systems, particularly if consumers feel that insurer's are 'watching them' and thought will need to be given as to how customers will be billed if premiums can vary and the systems that underpin them. However, cloud technologies are at the point where IoT in insurance could be implemented. Together with cognitive technologies and improved analytics, the insurance market could be at a point where its risk decisions are more accurate, which may lead to lower premiums and market advantage to early adopters.
Business Storyteller | Fractional CMO and Growth Consultant for HRTech, Startups, SaaS | LinkedIn Creator Program Top 200 Creator | Interested in Career Pivots, Books, Personal Branding for Founders/Sales and Parenting |
8 年The metrics based insurance is still at a very nascent stage, however with the technology support - wearables for humans, sensors in vehicles & house etc there is possible paradigm shift in the way insurance premiums are calculated...but before that there needs to be a reliable information that could be studied upon for various demographies to arrive at the business model - the recent news that fitbit's data is not reliable is something which would push the timelines for the newer insurance business model ! Its early days ...
Nuts, Bolts and Technology.
8 年If it's a wave, it's a wave of awareness and optimism, but in real terms it's going to take a very long time to effect the landscape in a big way. There are so many moving parts so many parties and markets involved as pointed out in the article. For anyone outside of the insurance game, I'd just exercise a lot of caution for startups banking on the outcome, though the upsides are inevitable they are still largely distant and timing is critical in business. The economic benefits of IoT in terms of lowering OpEx and creating new revenues from other than insurance will need to be established to survive and thrive before the buy-in from insurance can be largely capitalized, in many cases it will be the last thing to occur after all else is said and done.
Senior Director | Intelligent Service Management & Transformation
8 年Time waits for no man - so true! Also true for IoT is "It takes a village" If you look at any of the analyst IoT landscape maps, everyone and his brother has a claim on a piece of the IoT pie - chip makers, OS companies (is Win 10 really IoT?), to device and component OEMs, to telecoms and connectivity companies to big data and analytics vendors. Oh yea - and insurance. When it comes to insurance, I'm an outsider, but I have been saying for some time that insurers have the fundamental core competency that enables transformational changes in any business looking to win in IoT = operational to financial risk management. We all know the story of Rolls-Royce servitizing the gas turbine engine creating a bundle of product and services sold on a usage and subscription basis (Power by the Hour = $ / lbs-thrust hour) and changing forever how the aviation industry works (least for engines). What most people do not know is the person who spearheaded PBH, it wasn't an engineer or a technologist it was a banker - Miles Cowdry - who recognized that in order to transform how Rolls-Royce engaged their end consumer he needed to manage engineering, operations, maintenance, supply chain risk vs financial risk - and that required a new set of capabilities and technologies - so he founded DS&S (now Osys / Operations & Control. The Internet of Things isn't about the Internet or Things - its about Outcomes. The "product" mindset is probably the biggest barrier to transformation for most companies as it inhibits understanding of servitization (usage or consumption based business models = XaaS = anything or everything as a service). So now my critique on the insurance industry in IoT - again, an outsiders view: 1) Their customers currently don't see the connection or the value proposition insurers bring - a marketing and communications issue. 2) Insurers are not collaborating / teaming / partnering to build the village ecosystem solutions in various industries to help their customers. But this is something I'm working on, in my own little outsider way.
Living at the edge of Insurance & Technology | Head of Global Insurance at ServiceNow | #makeinsurancelovable
8 年Danny - nice summary. Technology disruption is firmly here for insurance - insurtech being a very hot bed of activity here in London. Worldwide there are over 500 + startups changing the traditional face of insurance. Combine IoT with blockchain and AI and you have a very smart new world and exciting time ahead for consumers