The Insurance Market Is Moving Towards an IoT Future
The Internet of Things (IoT) is turning out to be one of the most disruptive technologies in the modern marketplace. This article talks about how the insurance market, in particular, is moving towards an IoT future.
The internet of things (IoT) is being adopted by businesses across all verticals, including the insurance industry, where it promises to bring considerable value to both insurers and their customers alike. The Internet of Things refers to devices that are connected through the internet and share data. The insurance industry has a broad range of applications to be used for this technology.
According to an IBM study, "connected car telematics can save insurers up to 30% on claims processing costs". The IoT also enables the collection of more accurate real-time risk profiling information from drivers by providing access to real-time driving behavioral patterns over time. This enables better pricing models and allows carriers to offer usage-based insurance tailored to individual needs rather than being made using generic assumptions about a customer's profile or current cover.
This article will discuss how IoT is currently disrupting the insurance market and what the future holds.
The current state of IoT in the insurance market
A report from ABI research forecasts that total connected devices will reach 50 billion within the next 5 years. Insurance-technology companies are already deploying "standalone" products utilizing various remote capabilities and connectivity options to provide new connected services.
While some companies have taken it upon themselves to harness the latest technologies such as wearables and apps for their customers, others have been busy diving into home automation with platforms such as Nest, through which they can offer new features, including loss control functionality. This way, insurers can capitalize on opportunities presented by early adopters who would be willing to pay a premium for access to sophisticated cost-saving technology.
IoT is also helping insurers streamline the claims process to reduce processing time, making it more efficient for customers. British insurance company Aviva launched an app that allows customers to take photos of damaged property and submit the claim straight from their phones, cutting out paperwork altogether.
Meanwhile, another British insurer Norwich Union partnered with telematics provider Wunelli to offer usage-based insurance by tracking driver behavior via a mobile device or telematics box installed in cars. This real-time data can provide insights on driving habits, including speeding, hard braking, and rapid acceleration, allowing insurers to adjust premiums accordingly based on this changing risk profile.
These are just some examples of how IoT is already impacting the insurance industry; however, there's much more to be done. According to a report from ABI Research, the growth in connected devices has presented new opportunities for insurers and reinsurers alike to provide creative offers.
Despite all this potential, many challenges exist, such as those involving connectivity; after all, how beneficial is a connected device if it loses its connection? This issue will need to be solved sooner rather than later as IoT takes off and the benefits continue to present themselves.
Recently there has been a surge of companies utilizing the internet to offer new products and services. For example, Turtlemint, an insurance-based in Spain, aims to use technology to help customers automate their yearly renewal process by providing them with a platform to compare quotes from different insurers.
Similarly, Mota Health is one of many products becoming increasingly popular as wearables become more common among consumers; the product uses consumer optometry data and wearable technology to provide preventative healthcare solutions for users.
Another insurance-tech company called Click2Protect provides online systems enabling insurance brokers and carriers alike access to better metrics than ever before to better understand how specific changes affect various aspects of the insurance business, including customer acquisition costs, lead volume, lead quality, and revenue. In this way, it allows carriers to better understand their business, which can help them maintain a competitive advantage.
How the insurance industry will change over the next five years
According to research, technology in insurance companies is expected to become more prevalent by 2022. Insurance companies are also becoming increasingly common. Since many areas can be automated, and because there is a lack of transparency within the insurance market, customer service levels increase, and costs for carriers decrease.
For example, currently, it takes an average of 63 days before claims are paid out; using IoT, this process could take just seconds thanks to smart contracts, which automatically pay out when certain conditions such as location or speed have been transmitted to them. This would mean that customers' premiums could differ depending on where they live and what type of car they drive.
More and more insurance companies are shifting from the traditional model to a client-focused one, which is far more profitable. Many insurance companies were "forced to become brokers themselves" since they recognized that intermediaries earned between 30-35% of their premiums. They then realized that by shifting from a model where there is a single provider for all services to an intermediary model, costs can be reduced dramatically due to competition between providers who now need to compete for a customer's business.
This competition necessitated a need for the consumer to be at the center of everything an insurance company does. While it is necessary to have multiple providers to show competitive prices, these companies must also provide customers with the tools they need to make an informed choice about what type of policy would best suit them.
How IoT can further contribute to the Insurance market
With this shift in focus towards consumer-facing models, insurers are now "exposing their internal data" to create "applications for better customer service."
However, when customer service levels increase, costs decrease since less human involvement simultaneously reduces advertising spending. This, therefore, increases profits over time by reducing operational expenditure even further.
Insurance companies cannot afford to ignore the new ways that connected devices can impact their business models. Many insurance providers have already begun to use IoT to improve their products and services and reduce costs. Some examples of how the IoT is impacting the insurance industry include:
- Monitoring driving habits
- Using telematics data from cars for usage-based Insurance (UBI)
- Allowing homeowners to monitor sensors from outside their house
- Remote diagnostics on machinery
In addition, these changes are putting even more emphasis on a move towards autonomous cars that will drastically reduce accidents and allow insurers to create a UBI model where premiums decrease depending on your driving behavior.
This would be done by implementing remote monitoring on cars or even self-driving car insurance, which would sense how well a person is driving and use that information to adjust premiums accordingly.
The insurance industry has undergone many changes in recent years, but the IoT will allow it to continue developing in ways almost unimaginable before now. We already see some of these changes happening, either through more advanced telematics devices or new types of policies such as a UBI.
However, we will see further fragmentation and greater levels of automation within this sector over time, which will inevitably lead to higher customer satisfaction and lower premiums while costs decrease for carriers.
With the insurance industry relying more and more on third-party data, such as driving habits and telematics devices, it is vitally important to maintain compliance with GDPR. This is especially true in countries where IoT adoption is higher than in others, such as Estonia, which already implemented a full-scale nationwide system.
This will be the future wave for all industries, so they must prepare themselves accordingly and implement new ways of collecting and organizing their data to remain competitive in the future.
The future of IoT in the Insurance market
There will be an increasing focus on how people use their products and services rather than merely providing them. This is because consumers now expect to own a product for as little time as possible before it goes out of date, becomes obsolete, or needs replacing due to its capabilities not being sufficient any longer. While this initially sounds like a disadvantage, it can benefit the companies if they will utilize analytics to see where they can improve.
The IoT enables companies to gather a huge amount of data about their customers, which can transform almost every part of your business model. With that being said, there are still some challenges facing organizations that have not implemented the IoT into day-to-day operations yet such as:
- Scalability requires a business to be prepared, both financially and operationally, for the expansion of their IoT deployment so that they can provide consistent performance if more devices are required.
- Security as more and more personal data is generated and transferred.
- Batch analytics where companies must ensure that their systems do not become overwhelmed or unable to support further growth due to an inability to handle big data. This would only harm customer satisfaction and your overall image.
Regulation such as GDPR is still another hurdle facing companies that have not yet utilized the IoT. There is a substantial increase in accountability as organizations often lack the necessary infrastructure before now. However, with time spent on planning this step wisely, it should not cause operational difficulties or damage your business.
IoT has provided a wealth of opportunities for companies operating in almost every industry. With its continued expansion, we will see a massive shift in how different market sectors use it. The insurance industry is just one example showing how this technology is being implemented into their day-to-day operations and consumer interactions.
It is important to mention the challenges that remain, such as scaling your IoT infrastructure due to rapid growth, security of customers' data, and batch analytics where your systems need to handle a large influx of information without becoming overwhelmed.
Regulation such as GDPR adds another layer of compliance that needs to be considered if no proper planning has been carried out before now. The future holds a lot of promise for the insurance market, with further developments made possible through the Internet Of Things, which will open up a wealth of possibilities for insurers worldwide.
IoT in the Insurance market refers to the possibilities for insurers to use remote monitoring devices or telematics data through connected products, which allow them to monitor usage and improve risk assessment. Improvements are made possible through automated claims processing while customer satisfaction increases due to more efficient services overall.
Areas, where products can be enhanced, include usage-based insurance where premiums decrease depending on driving habits, anti-theft technology, and fleet management which can all improve customer satisfaction and profits for insurance companies.
Utilizing the IoT to make automated, real-time decisions will allow insurance companies to provide customers with even more personalized service. This is because it allows them to use previously unavailable data, resulting in targeted offers based on an individual's actual driving habits rather than generalized statistics.
The IoT can also be used to monitor various devices and appliances within our homes; for example, wearables could potentially improve health care costs by analyzing how active we are at home compared to when we are away. Combined, all of these factors will result in less time spent handling claims, higher customer satisfaction levels, and reduced costs for carriers who utilize this technology effectively.
IoT devices like wearables can help insurers target specific customers with offers and services more efficiently.
IoT devices have the potential to improve efficiency within insurance companies by collecting data from consumers, which can be used to offer targeted products and services. In addition, the shift towards autonomous cars will reduce costs for insurers as accident rates decrease significantly due to preventative care tech.
Finally, telematics devices provide insurers with a wealth of driving habit data they have previously been unable to access or use effectively. This has resulted in lower customer satisfaction levels for carriers and a need for increased marketing budgets to attract existing customers. Using IoT tech will allow these companies to provide more personalized services while reducing operational expenditure even further at the same time.