For the businesses and governments that are ready to take advantage of it, the Internet of Things (IoT) presents huge opportunities. Conservative estimates place worldwide spending on the IoT at $20 billion in 2012, and it’s expected to reach $500 billion by 2020.
In a new study, “Driving Unconventional Growth through the Internet of Things,” Accenture examines what leading companies are doing to meet the challenges and opportunities presented by the IoT.
Successful organizations – including insurers – are already using the IoT to capture new growth through three approaches:
- Boosting revenues by creating new hybrid business models;
- Exploiting intelligent technologies to fuel innovation; and
- Transforming their workforce.
For most of these companies, the quickest and easiest way to start using the IoT is by focusing on operational efficiency. But some trailblazers are forging ahead with unconventional ways to use the IoT to provide value to customers. These IoT innovators are using the technology to develop product-service hybrids: connected, intelligent physical goods capable of producing data for use in digital services.
Success as a purveyor of hybrid product-services isn’t guaranteed. Companies must compete and collaborate with players from different industries, all attempting to find a competitive edge with digital technology.
To create new value and foster growth, Accenture recommends that insurers do the following:
- Think unconventionally about customer value. Why not sell auto insurance on a per-hour or per-trip basis? Isn’t it likely that many customers would prefer a usage-based auto insurance product instead of the traditional product? If this is true, how long can the industry resist offering these products before a non-industry player steps in to fill this customer need in a profitable way?
- Be the most valuable information provider. The Climate Corporation combines big data, climatology and agronomy to offer US farmers its Total Weather Insurance, which automatically pays the farmer when specified weather events occur. In 2013, Monsanto bought the company because that would allow it to sell more data and services to the farmers who bought its seed and chemicals.
- Share more data with partners. Insurers can strengthen their position within an ecosystem by providing the data their partners need to enhance their offerings or get closer to customers. How can the “home office” leverage its scale and access to data to provide information to their agents to make them more productive, make their jobs easier, and help them be more engaged with their customers?
- Treat services as R&D for products. The South African health insurer Discovery offered customers heavily discounted gym membership to improve their (monitored) fitness and minimize claims. When it later entered the life insurance market, it had a wealth of customer data that gave it a distinct pricing and cross-selling advantage when competing for new contracts.