There’s no doubt that the environment we are living in is getting smarter as more and more things are fitted with sensors and connected to networks. Telematics is one part of this revolution in the making. Another is the smart building, with the emphasis currently on the home.
This is another area in which a farsighted insurer might seize the opportunity offered by something that will disrupt the home insurance market. In so doing, it will position itself to play a bigger role in the life of its customers.
Basically what we’re talking about here is smart devices that can be monitored or controlled by a remote mobile device. The applications are numerous: smart locks, security, smoke and water leakage alarms, heating or cooling systems. It seems likely that the companies that provide the infrastructure for this, the telcos, could be in pole position to dominate these ecosystems. But given that so much of the services around the connected home are initially aimed at managing risk, bold insurers could position themselves at least near to the center of the system. In the short term, connected home insurance will probably depend on specific new devices, like the @habitat home insurance recently launched by BNPP Cardif in Italy.
Again, for insurers the benefit of participating is the increased frequency of customer contact combined with access to invaluable data, creating a new platform for customer intimacy. And just as in telematics, first-mover advantage in this area will be significant.
The idea of the connected or smart home has tickled popular fancy, but I have begun to wonder whether the connected office or factory isn’t perhaps a better play for insurers in the longer term. The same could be true of telematics for commercial vehicle fleets rather than private cars. My reasoning is that the B2B space might be one in which the insurer’s brand name and expertise in risk mitigation might have more potency—and in which its sheer size would count for more. I suspect that this world is one in which customer fickleness and the vagaries of the blogosphere have less of a role to play; in other words, that the fit with the traditional culture of an insurer is better.
Manufacturing facilities, for example, are well on their way to becoming connected in the ways described above. Traditional SCADA (supervisory control and data acquisition) systems are already being linked up to larger systems within the factory or group, typically via the manufacturing execution systems and ultimately to the enterprise resource planning system.
This evolving landscape represents a substantial opportunity to create a range of services of value to factory owners, initially focused on managing risk by scheduling maintenance based on actual machine performance and so on. Given that this type of data would impact the company’s business continuity management and ultimately its insurance portfolio, insurers would have plenty of value to add.
Again, the prize would be a flow of data that could be used to bring insurers closer to customers.
Next week, I’ll conclude this short series with a look at another set of smart devices and their potential to disrupt the health industry.