Gartner predicts that there will be about 500 smart, connected devices in the average home by 2022. This prediction opens opportunities for a host of digital businesses to capitalise on the Internet of Things (IoT) trend.
However, few stand to benefit more than insurtechs (insurers who leverage technology innovations to maximise savings and efficiency from current insurance models) and their customers (the insured), writes Jaqueline van Eeden, insurance head for Africa at Wipro.
IoT for insurtechs
IoT enabled devices to generate copious amounts of data that can be analysed to give insurers insight into the daily practices of their customers, which allows insurers to not only better understand their customer — and design products around them specifically — but also to predict and potentially prevent or divert claims before they have the chance to occur.
Virtually everything is becoming smarter and insurers can tap into connected devices in order to access and use the data they generate, while this data is directly accessible to insurers via sensors or mobile devices, third-party organisations may also play a role in owning, aggregating, and distributing to insurers.
The types of devices that insurers can tap into, and the ways in which they can be used, include but are not limited to the following:
* Wearable or personal technology – The gaining impetus of the popularity of wearable technology reduces risk for both and can help to save money and lives. This rapidly evolving technology, also known as “fittech”, is well suited to health and life insurers. Devices such as heart rate monitors, step counters and sleep trackers deliver critical data on the state of a customer’s health, which insurers can leverage to make recommendations for lifestyle adjustments. Backed by the likes of Artificial Intelligence (AI) and data analytics, specific patterns present possible anomalies which alert insurers of potential health risks, allowing them to act proactively. Prototypes patches are also being developed for automated blood work, ECGs and the administering of chronic drugs.
* Sensors – Sensor enabled security systems and utility monitors are able to deliver information which allows insurers to proactively act on, or even prevent, issues such as home invasions, fires, leaks or floods, geyser misuse and explosions, electrical damage and more. Vehicle insurers can tap into sensors installed in personal and commercial vehicles to identify driving patterns and behaviours, measure travel distances, and monitor speed and braking levels. Insurers are already leveraging this data to offer tailored packages to drivers, backed by rewards for “good driving”. From a more holistic perspective, this data — collected and collated from multiple sensors — can aid insurers in guiding their customers to avoid common driving problems such as high accident or hi-jacking areas, overheating due to being stuck in traffic, and theft. Location based sensors, such as tracking devices and cameras, are able to assist with the prevention of theft and fraud, enabling insurers to tap into the whereabouts of various moving and unmoving assets.
* Geographical information systems (GIS) – GIS provides geophysical, topographical, climatological and hydrological data. This delivers insights that insurers can use to warn customers of impending natural disasters such as storms, floods and other dangerous weather patterns. The data assists with minimising damage caused by these events, thereby reducing the number of potential claims.
Leveraging IoT data
The data generated by IoT can be used in a number of areas of insurance.
The convergence of different data types leads directly to increased precision in assessing risk, pricing policies and estimating necessary reserves. There are clear advantages over current approaches, which rely on backward-looking claims data and historical risk studies. Through constant monitoring of IoT delivered data, underwriters can recommend real-time pricing and policy terms, as well as health and well-being services to manage mortality and morbidity risks over time.
IoT is likely to drive further evolution in claims, as it orients more toward active loss prevention. For example, in-vehicle sensors can be useful in providing warnings in case of dangerous driving patterns. Within group health insurance, the discounts offered to employees who monitor their activity levels and heart rates could also be considered a claims prevention program.
Commercial insurers are able to leverage GIS data to mature their modelling capabilities, especially relative to natural disasters. Security systems, access control systems and tracking devices all play a role in helping insurers with both investigations as well as monitoring of an organisation’s practices and adherence to health and safety protocols.
Life insurers can now automate and streamline the traditionally intrusive and lengthy underwriting process, because sensor data provides the means to answer a lot of the questions from yesterday’s paper based application forms.
Insurers are able to better profile their customers, by looking into ways in which they can improve and tailor their products according to customer behaviour. As they can better monitor what is happening to their customers, it makes it possible to reduce their risk and at the same time reduce their customer’s premiums, giving them a competitive edge.
Insurers may also improve on their customer experience, from speeding up claims, to offering behaviour-based rewards programs and providing proactive tips and alerts.
Where to start?
While investigating the host of exciting new and emerging architectures available for the provisioning and analysis of IoT data, insurers should be engaging their customers to identify their data and confirm the accuracy thereof. In line with data protection protocols and legislation, insurers may need to give their customers peace of mind about the security and privacy of their data.
Creating an analytics culture is critical, and helps to create focus on layering insights back into business as usual while engendering an environment that is agile and adaptive to change. Old architectures, legacy systems and traditional processes will need to be revisited and adjusted to make room for new developments. Advanced analytics and data science also assists with identifying and attracting talent.
Insurers don’t need to completely change, however. By focussing on product enhancements rather than creating additional channels, and developing “featurization” and bundling capabilities, they can add onto their revenue stream and their customers retain familiarity with their improved products.
Ultimately, using IoT data should be adding to the whole customer experience, ensuring that insurers are able to deliver better, more customised products, while maximising their service and bringing costs down — for themselves and their customers.