The Internet of things is poised to redefine the customer experience, and could offer insurers the opportunity to redefine and reimagine insurance product creation, distribution, services, pricing, data and analytics and business metrics, according to “The Internet of Things: Creating a Connected World Disrupting and Transforming Business and Revenue Models,” a white paper from Strategy Meets Action, an insurance technology consultancy.
Cheap embedded sensors, which can collect data related to status, location and environment and more, are being combined with Internet connectivity and analytics to create real-time information, and alerts that could be used for risk management, risk mitigation and more.
"As the future unfolds and the next-gen insurer emerges, the Internet of things offers vast opportunities to the business of insurance," said Denise Garth, SMA partner. "At the same time, the disruption potential to existing business models is significant for all industries, including insurance. The IoT has the power to create completely new business and revenue models, to generate new business value to counter product commoditization, to enable mass personalization, and to gain deeper customer insights for creating new products and services. Those who do not embrace IoT quickly will be putting their businesses at risk, both competitively and financially."
Highlights from the report:
- The potential for disruption is significant as companies begin to offer "smart" or "connected" products increase customer value.
- Insurance telematics, an early iteration of the IoT illustrates the opportunities and challenges presented to the insurance industry.
- IoT is shifting data ownership to the customer, which creates new business demands and dynamics for insurers.
- IoT could offer opportunities for new entrants in the insurance industry.
- Insurance can become central to the collective connectivity of the IoT through the connected car, connected home, connected life and the connected world.
Insurance telematics, which use embedded sensors to monitor driving behavior over time and derive more accurate rates based on individual behaviors, has been found to influence driving behaviors, making them safer. Some insurers now are leveraging the telematics sensors and data to provide value-added services and spurring further innovations, SMA said.
The insurance telematics model, also called usage-based insurance, now is beginning to be applied to crop insurance and also could be applied for home, medical and other insurance offerings.
The IoT has the potential to unleash as much as $6.2 trillion in new global economic value annually by 2025, according to “Disruptive Technologies: Advances that will transform life, business and the global economy,” a report from the McKinsey Global Institute.
To prepare for the IoT, SMA recommends preparing core systems for a massive influx of data, for customers owning their own data, rethinking business processes and customer data capture, and for the adoption of other industry standards for the resulting data.
Originally published by Insurance Networking News.