Smart home and consumer IoT solutions promise significant opportunities for the insurance industry in terms of reducing costs, alleviating risks, deepening customer engagement, and creating new services and revenue streams. There are many barriers ahead to overcome, but given the tremendous upside, insurance companies have begun attacking these challenges with a multi-tiered strategy.
The technology and specific analytics available today to help companies take advantage of their opportunity. IoT for insurers can significantly impact the way it’s done with access to not only the full 360-degree context of their policyholders, but capabilities to aggregate that data into the intelligence needed to protect their policy holders and grow their business.
Insurance companies will have to transform their IT infrastructure completely to manage the volume, velocity and variety of big data from the IoT solutions installed in their customers’ homes and cars. Querying that data at scale will require technology capable of handling hundreds of terabytes.
Finally, integrating that data into the daily workflows of underwriting, claims, customer service, and product development will require the transformation of all related back-end systems.
In light of these challenges, insurance companies have begun developing both short-term and long-term IoT strategies:
- Short-term plans tend to focus on raising consumer awareness, generating measurable results for marketing and sales, and deepening customer engagement to pave the way for future products and services.
- Long-term strategies provide a road map for implementing the technology and forming the partnerships required to bring a complete insurance IoT solution to market at scale, and to operationalize the data in every aspect of a firm’s core business.
Insurers have taken a variety of progressive actions to leverage IoT for marketing and sales. For example, State Farm has a dedicated Web page that includes educational content and special offers for specific security products and monitoring solutions. Travelers has offered several special offers from August Home, Canary, Roost, Vivint, Piper and Nest Protect.
The IoT creates the potential for new products like usage-based auto insurance and insurance against the cyber-attacks that are becoming more common in an increasingly connected world. It will enable a host of innovative risk mitigation services related to the connected home, the connected car, connected health, connected worker, and the industrial IoT. These can help improve customer satisfaction by enabling insurers to reposition themselves as partners in preventing losses. Of course, the IoT can also reduce insurers’ loss and loss adjustment expenses. And finally, it has the potential to create additional opportunities for innovative new products such as context-relevant small-ticket insurance, for new customer interaction channels, and for more frequent and meaningful customer interactions.
As the data from providing these services gives them greater insight into their customers’ risks, insurers can use it to improve their underwriting and pricing models and further tailor the products and coverages they provide. Also, in collaboration with their ecosystem partners, they can develop and launch entirely new products and services that use IoT data for context-relevant offerings.
Consumer Awareness Efforts
One key aspect of short-term plans is consumer education. While insurance consumers generally are aware of their own costs and coverage, they are less familiar with the factors that influence insurance costs. Similarly, they recognize the benefits of smart home products, but in general are not yet persuaded that the value exceeds their cost.
Insurers and smart home manufacturers have an opportunity to create mutually beneficial partnerships that can increase adoption of smart home solutions and build engagement with consumers.
Partnerships in the insurance areas leverage data from smart devices to enhance customer benefits and awareness, including providing more transparency around premiums, personalizing policies, and reducing risk for customers.
For smart home players, partnering with the insurance industry can help extend the value propositions of their solutions, in addition to driving adoption
Article by: Busayo Tomoh