The Internet of Things (IoT) is fast multiplying the digital connections between consumers and the world in which they live. It is dramatically changing way people buy goods and services and the relationships between businesses and their customers.
The impact on the insurance industry will be enormous. Around 80 percent of insurers canvassed by Accenture expect the IoT to change how they sell their products and transform the nature of the risks they will cover. In my previous blog I highlighted how the IoT will disrupt the insurance industry and force companies to change if they want to become successful Insurers of Things. I want to share some research that indicates where insurers need to make these changes.
Accenture has identified three big trends triggered by the IoT:
- Changing consumer expectations – Customer needs are increasing and becoming more fluid. Consumers want continuous personalized relationships with their insurers. They are looking for greater flexibility so they can tailor services to meet their own needs rather than adhere to the specific product categories delivered to them in the past. Accenture’s Consumer-Driven Innovation Survey found that 80 percent of consumers would switch insurers for more personalized services, and 41 percent are willing to pay more for those services. Furthermore, 78 percent of customers say they would allow their suppliers access to their behavioral information in return for a more personalized service.
- New products and risks – The IoT is forcing insurers to move away from selling traditional “out-of-the-box” products and instead deliver outcomes and experiences. Already 83 percent of insurers have identified this trend. They will also need more innovative approaches to risk. Emerging technologies, such as drones, will present new risks that require insurance. Insurers will also have to reconsider existing risks. Car insurance, for example, will need to accommodate accidents involving self-driving vehicles!
- New competitors and markets – The boundaries of the insurance industry are fast blurring. New digital ecosystems created by the IoT will enable more companies to add insurance offerings to their online services. Insurance companies will compete with rivals from beyond their traditional markets. Digital innovators, such as Google, Apple, Facebook, will be a major threat. They are also likely to pioneer new insurance markets. To remain competitive insurers will need to build partnerships. Other insurers are obvious candidates but successful partnerships will include innovators new to the industry. Around 61 percent of insurers say they are already looking to partner digital specialists. Unshackled by the thinking of the past, these companies will provide vital technology resources and expertise as well as broader consumer skills and brand awareness.
The arrival of the IoT is already disrupting the insurance industry. To prosper in the increasingly interconnected digital economy insurers will need to move quickly and decisively.
In my next blog I’ll discuss how insurance companies can succeed in this fast-changing environment and establish themselves as Insurers of Things.