IoT and the role it plays in insurance
By the end of this year, forecasts anticipated that there will be more than 14 billion Internet of Things (IoT) devices in use with that number expected to reach 25 billion by 2021. Furthermore, the global market for IoT is projected to grow significantly between 2018 and 2026 with the banking and financial services industry holding the bulk of the market share. Nelson Camara, go to market executive at SilverBridge Holdings, discusses how this growth can benefit insurers.
Thanks to its effectiveness in collecting data at scale to deliver greater insights, some insurers are already embracing IoT to better predict and evaluate risk, expedite claims processing, improve sales, and gain a more comprehensive view of their customers. Of course, the temptation to rush in and push IoT as quickly as possible is there but insurers should carefully examine what their strategic goals are and how data can be used to help achieve this.
“As is the case with any new technology concept, a business case must be developed first, tested, and piloted before embarking on a new digital strategy. Even though the pressure to transform is significant when looking at the growth of insurtechs, incumbents must maintain their focus and investigate an area where they can extract the maximum benefit from IoT.”
Insurers have been tasked with embracing disruption in recent years especially when it comes to customer and partner relationships. IoT can be considered a vital ally in this regard as everything from wearables to sensors in homes and telemetry devices in vehicles can gather vital data especially as it relates to risk assessment.
“This is essential to delivering customer value. Already, some insurers are using telemetry data to identify driving behaviour and gamify the experience (drivers can rate themselves against others nationwide). In turn, it transforms the relationship with the customer. By optimising premiums on an individual level, the insurer not only delivers a better experience for users but strengthens a relationship that may become very fickle when it comes to loyalty.”
These IoT-connected devices have helped some insurance companies significantly lower their premiums. According to an international report, most insurers believe that connected devices and more data will prevent greater losses, which could decrease the number of claims and lower insurance prices for customers who have reduced risks.
Of course, in a world driven by data, care must be taken to remain cognisant of the governance requirements especially as it relates to personal information. Therefore, an effective data management strategy is important that keeps historical data available while tapping into the influx of new data points through IoT-enabled devices.
“IoT is providing insurers with a significant amount of data that can be used to asses risk and tailor pricing in more innovative ways. And by developing new personalised risk protection services, they will improve the customer experience as well as the value to be delivered.”