It’s been nearly a decade since the Internet of Things has been around, and though it has much to offer the most traditional of industries – Insurance, the sector has not made the most of using IoT data. More so because of the lack the knowhow of working with IoT data and the potential it can offer Insurance carriers with its real-time inputs from IoT sensors, a recent LexisNexis Risk Solutions survey reveals.
Data gathered from the Internet of Things (IoT) devices can support the insurance sector by facilitating the creation of personalized services and products. Smart objects capturing relevant user data is no longer a futuristic concept, and if insurers become early adopters of this technology, IoT can help them create compelling value products by gaining insights using this data.
Developments in telematics, for instance, have helped carriers decide car insurance rates based on driver data. Information from smart home sensors has helped make homeowner insurance more comprehensive. Wearable IoT devices can help health insurers gather critical medical data and provide relevant protection plans for their customers. With real-time data, IoT drives new business opportunities, enhances customer satisfaction thereby reducing attrition, and improves risk assessment.
Thus, understanding what is the Internet of Things, and how it impacts the insurance industry is critical for insurers today.
Simplifying the Wiki description, The Internet of Things (IoT) is a network of physical devices including vehicles, home appliances, and other items embedded with sensors, which enable these things to connect and exchange data in real time.
Using this data helps insurers gain a better understanding of their customers and their needs to create customized product offerings.
IoT has the potential to reduce acquisition and policy administration costs substantially, by data-driven underwriting. To get the optimal benefits of IoT, insurers must transition from traditional models of business to proactive business strategy that includes data from this technology – to design products with risk coverage that are proportionate to the insured person’s liabilities. New business models driven by data from smart devices can boost operational efficiency, enable precise products pricing, and improve fraud prevention. Eventually, it will help insurers to evolve into strategic partners, who can act as preventive risk advisors for their customers.
The new data streams that IoT devices provide, when coupled with advanced analytics, have set the foundation of usage-based insurance (UBI) in vehicle insurance, also known as pay-as-you-live and pay-as-you-drive insurance. This allows insurers to tailor insurance based on specific driver behavior and usage patterns. According to estimates, UBI policies will reach almost 15% of market penetration by 2020 in most major global regions. Vehicle insurers have the scope of using drone assistance for vehicle damage inspection, telematics-based driver assessments, and use of beacon technology to support customers take better driving decisions. This helps the carrier to contain claims and helps the customer with reduced premiums.
Similarly, the fast adoption of wearable technology allows better risk profiling, simpler and more affordable products in healthcare insurance. Health insurers can track data from wearables to know the risks of their customers, before customizing products. Interestingly, dental insurance company Beam Dental uses smart toothbrushes to get data inputs and then decide on premiums.
Home insurers and businesses too, can look at data from smart smoke and water level alarms or home security systems to help customers contain their risks and be rewarded with lesser premiums.
Despite IoT data providing crucial inputs for insurance companies, it seems carriers don’t feel compelled enough to incorporate it into its offerings.
