For the past several weeks we’ve been looking at opportunities for insurers to leverage the IoT and become “Insurers of Things” to meet evolving customer needs.
In this final blog of this series, I will look at practical steps insurers can take to evolve into Insurers of Things by balancing the various dimensions we previously discussed.
Insurers contemplating a move into the connected home market – or an expansion of current initiatives – have to think on multiple planes at once. They need to define, for instance, how customers currently engage with their products and services; to track how innovators in the connected home market are enhancing the customer experience; and to analyse the regulatory implications of collecting and using vast quantities of data from new sources.
The road map to success involves four major steps:
- Envision and define. Insurers should start with a vision of where they wants to be in the connected home value chain. Does the insurer want to focus on providing discounts in return for information? Or is there more value in providing actual devices and services to the customer?
The key to this step is determining what problem you wants to solve, whether it’s market differentiation, building the brand or reducing operating expenses. By starting with the end in mind, the insurer can identify the appropriate path forward. For example, you could conduct an in-depth assessment of loss performance to see which types of losses could be avoided with new technology.
- Whether in partnership with others or through home-grown innovation labs, insurers should experiment with concepts and technologies – including analytics and modelling as well as the actual in-home devices – to test the value proposition of the chosen approach.
Using the information gained during the “envision and define” phase, insurers can identify the technologies and/or devices that are most relevant to their stated objective. This may require extensive research into the data produced by each device. Insurers can use brainstorming and case creation to map out practical applications for connected home technology within the insurance sphere.
- Insurers will need an initial ecosystem of partners to deliver the chosen approach. The technical reliability of devices is a major concern, but so is the network of incentives that makes the partnership work.
In particular, insurers should assess the connected home ecosystem and determine where they are best positioned in light of their selected strategy. Should they partner with a connected home device maker to sell a white-label product branded by the insurer? Or are they better suited to acquire a connected home start-up company and help it grow and succeed? Or should they focus on market access, service support and value sharing with partners and clients? A traditional partnership with a mature home security or automation company may be sufficient to provide insights into the market opportunity, but the insurer should retain a high degree of flexibility and be ready to act quickly as other options present themselves.
- The insurer needs to test the mechanisms for adding value, whether through triggering discounts, reducing losses through active monitoring and alerts, or the expanding existing customer relationships. Rapidly executed pilot programs can help assess the impact of the new program on marketing and distribution, product manufacturing, underwriting, policy and contract management, and claims management.
- Refine and extend. As insurers develop new pilots and projects, they can extend pilot lessons into new projects while incorporating new technologies as they emerge.
With its impressive adoption growth rates and expanding device and service offerings, the connected home represents an enormous opportunity for insurers. However, to convert this opportunity into profitable growth, property & casualty insurers must invest now in concepts and partnerships that provide real value for customers and tangible gains for themselves and their partner organizations. Establishing the right approach requires both rigorous research, thorough testing and an entrepreneurial mind set.
Other papers on the topic that you might find useful: