Connected insurance also means creating a new ecosystem to deliver customer experiences that breed loyalty—and sustained profits.
The inevitable growth in the Internet of Things feeds into the current explosion of data (the “big data” buzzword) that’s now available. Not coincidentally, cloud computing is making the necessary computing power easily and cost-effectively available, and powerful analytics is offering ways to turn that data into actionable insights.
In the short to medium term, this creates the opportunity to drive operational efficiency—call it “digitization”; but the exciting part is likely to be the long-term “digitalization” that will see new business models, products and services develop.
In the end, connected insurance will impact every part of the insurance value chain (see the diagram below) simply because it will give insurers the ability to observe and act on the behavior, status and health of their customers and their customers’ possessions (houses, cars, factories and more). One spinoff will be risk assessment that is progressively more accurate; another will be the ability to integrate into a customer’s life in a way that traditional insurance cannot.
Imagine partnering with an auto manufacturer to sell a usage-based insurance product packaged with a whole set of complementary services that can be delivered to a “connected car.” The services could be ones that lower risk (for example, We see that icy conditions along your route are making driving hazardous: here is an alternative route) or that offer convenience (for example, Why not make a dinner reservation at Bistro X up ahead? We can take your order to reduce the time it takes out of your journey—and we have negotiated a 10 percent discount for you as well).
This is already starting to happen. Toyota is soon to launch an expanded telematics service that will allow users to download apps from third-party developers to their cars’ navigation systems. Called T-Connect, the service will offer apps in four categories: communication, driving assistance, information and lifestyle.
Here’s the important lesson: to become a truly customer-centric service provider, insurers will have to team with a growing number of partners to become an indispensable part of their customers’ lifestyles. Auto manufacturers and mobile operators are likely to be key members of such an ecosystem that allows insurers to deliver value-added services at scale. It’s a collaborative approach that will, in turn, require much more of insurers’ processes, systems and people.
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