Arguably the greatest and most disruptive of current trends causing insurers to transform their distribution models is the Internet of Things (IoT)—which not only enables insurers to better understand their customers and improve their interactions with them, but also is driving the expansion of insurance beyond indemnification to real-time protection.
While much early attention was directed at vehicle telematics, in the past 12 months there has been a two- to three-fold increase in the number of IoT-related products, services and pilots focused on homes and buildings, health and fitness, and other wearables. Of the insurance executives we surveyed in Europe, North America, Asia Pacific and Latin American, 39 percent have already launched or are piloting connected home or connected building initiatives that use the Internet of Things, and 44 percent consider connected devices to be a driver of future insurance revenue growth.
The IoT presents unprecedented opportunities for growth. It gives insurers the potential to move up the value chain, from providing only indemnification for a loss that has occurred, to a more proactive, positive role that includes continuously helping customers prevent the loss.
Alex Koslowski, Head of Consumer Proposition at Royal London Group says, “We’re definitely excited about the potential of the IoT. Already, any smartphone user has got a motion sensor, GPS and a step counter with them at most times. At some point you will be able to create behavior profiles that are incredibly valuable when it comes to risk-pricing that particular person.”
The advent of the IoT and the proliferation of ecosystems that transcend industry boundaries and facilitate end-to-end buying experiences for customers offer insurers many new opportunities for value-added engagement. These include a steady stream of novel benefits, bundled into “living services” that appeal to customers more than insurance on its own ever could.
Although numerous organizations with strong brands have started to invest in the IoT, insurers face capability gaps that they will need to overcome to remain competitive. These gaps include:
- Effective ecosystem orchestration and the seamless connection of all partners.
- The ability to gain the necessary, actionable insight from a constant flow of IoT data.
- The establishment and management of a connected insurance operating model.
Insurers must have a connected insurance platform, digitized back-end and transactional systems, and advanced data/analytics and partnering capabilities if they are to see success. And as they move up the protection maturity curve, the more sophisticated, integrated and digitized their capabilities will need to be.
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