For the past few weeks, we’ve been discussing the findings of two recent Accenture studies on how the Internet of Things (IoT) will drive global economic growth and corporate revenue and innovation. Now it’s time to tie these findings into how the IoT, and specifically what’s known as the connected home, is presenting new opportunities for property & casualty insurers.
The IoT has already “come home” in many households, where wireless control panels enable a range of functions, including HVAC, lighting and security, and can be managed from inside or outside the home.
The global connected home market is expected to reach $235 billion by 2016, with the largest revenue-generating segments being home security ($110 billion), smart utilities ($33 billion), and home entertainment ($68 billion).
The inevitable growth of this market means big opportunities for the P&C insurance segment. Auto insurers have already discovered the benefits of using wireless devices in vehicles to track driver behavior, which enables the insurers to better assess and price risk.
But this only scratches the surface of what’s to come. We believe that IoT technology provides opportunities for P&C insurers to improve both revenue and profit margins through:
- Better risk management and mitigation;
- Better underwriting based on increased data flows and a keener understanding of risk factors and behavioral elements;
- New product offerings, including value-added services delivered in partnership with other providers;
- Closer customer relationships as a result of more frequent and personalized interactions.
The connected home is interconnected with areas of larger influence, including insurance, car manufacturers, and retailers. The takeaway is that the insurance industry can no longer afford to stand alone in the world of the IoT, but must follow the lead of businesses that are partnering with utility companies, home security providers, and makers of smart home technology to deliver the hybrid products and services that consumers demand. Said another way, Insurers need to determine what differentiated position they will play in this new home ecosystem.
Here’s an example. New wireless and machine-to-machine (M2M) capabilities allow remote monitoring of the home and remote activation of home alarm systems, locks, lighting, even doorbells. Property & casualty insurers can partner with the security provider by offering policy discounts to customers who install and maintain these systems. Going a step further, insurers can offer a data recorder to be installed in the home (similar to those now available in vehicles) to track temperature, humidity, wind speed and mechanical vibrations as they affect the house. This information can be wirelessly sent to homeowners mobile devices so they can act quickly to major changes in status. This benefits the customer through lowered premiums, and the insurer through more accurate underwriting and risk mitigation—a true win-win. This is a simple example that some insurers are already doing. What are your ideas? What is next?
Next week we will examine how P&C insurers can move beyond these simpler applications of the IoT to delve into real innovation.
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