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Imagine a scenario where you roll out of bed in the morning, and the kitchen light and coffeemaker have turned themselves on already. You are about to sip the last drop of milk available in the house, and the refrigerator updates your grocery list. As you start to drive away, the security system arms itself…That’s how the Internet of Things (IoT) will radically change the world in the coming years.
As the world becomes more and more connected with the adoption of smartphones, wearables, and connected cars, it won’t be surprising to see that IoT will become a way of life. For insurance providers, the adoption of IoT presents an opportunity to gain a competitive edge. For example, if an insurer takes advantage of an IoT program, it would enable them to offer customers discounts based on that customer’s actual habits and real-time data, rather than determining the premium based on the customer’s past history.
Examples of how IoT is being leveraged by various insurance providers
- Auto insurers have been the leading adopters of Usage-Based Insurance (UBI) model wherein they use smart devices/solutions to gather metrics (such as such as data about speed, distance, turning and braking patterns, time of day etc.) from the vehicles of policy holders and this data helps them correctly price their products which benefits both the customer as well as the insurer.
- Health insurance agents have started providing customers with free fitness trackers which help them to monitor their activities. The wearables and other fitness trackers provide carriers with valuable data that can be used to adjust rates more fairly and profitably, and help customers prevent injuries and diseases.
- Home and property insurance providers are inducing customers to install connected devices that warn of potential danger (fire, flood, robbery). They also use drones to assess damages after an incident has occurred.
Benefits of IoT in Insurance
The traditional insurance claims process has stayed the same for decades, and it doesn’t sit well with customers. Today’s customers want fast results. Insurance claims that take several days or weeks to process can be really discouraging. The modern customers use technology in their everyday lives and expect insurance providers to do the same.
IoT can allow insurers to move more quickly and make powerful data-driven decisions. Insurance providers will no longer have to wade through paperwork, and can instead move through the claims process more efficiently. Instead of filling out countless forms, customers can now submit claims via mobile apps by taking a few pictures. Connected devices like biometric and environmental sensors make it easy to calculate risk and adjust policies as situations change. Here are some of the ways in which IoT can benefit insurance providers…
- Assess risks more precisely by using IoT sensors
- Mitigate and/or prevent loss based on the data gathered by the devices
- Generate additional revenue by cross-selling by means of improved customer interaction
- Reduce costs by increasing efficiency and optimizing resources
- Provide usage-based insurance leading to enhanced customer satisfaction
- Improve customer experience by improving engagement
The Data Challenge
The growth of IOT in insurance isn’t without challenges. One of the key challenges is the security of customers’ data. Thus, insurers looking to leverage IoT should invest in establishing an enterprise data management strategy which encompasses necessary tools, technologies, and frameworks for securing and managing the data as a core asset. Conducting periodic training programs for all the concerned stakeholders on how to avoid breaches can help bring the cultural shift necessary for ensuring the security of the data.
IoT represents an exciting emerging market for insurers, with a huge opportunity for innovative players. However, its implementation isn’t a cakewalk. Having the right tools in place is critical to capitalizing on the opportunity that IoT presents to the insurers. The insurance providers also need to make sure that they have the right infrastructure in place to support the influx of data that comes with IoT. Whether you employ an on-premise or cloud solution, the critical records need to be digitized and legacy systems need to be modernized in order to reap the rewards that IoT has to offer.