70% of insurance companies agree that gathering IoT data is integral to their strategy. This trend is due to the myriad possibilities for IoT intervention on the insurance value chain, from underwriting to claims assessment and distribution. Amazon is already using IoT for employee health insurance – yet only 21% have an IoT strategy in place. We delve deeper into this landscape.
The Internet of Things (IoT) is now a buzzword for companies across the globe. Since 2008, there are more connected devices in the world than human beings – by 2025, the number of such devices will cross 50 billion. This shift is creating an incredible opportunity for insurance providers, allowing them to collect vast amounts of customer data before making critical decisions. For this reason, insurance is a prime candidate for IoT-led digital transformation.
A 2018 report suggested that 70% of companies view “gathering IoT data” as a critical priority for their insurance strategy. Another survey found that nearly three out of four respondents believe IoT will reduce the occupational risk for insurance executives. Another 50% expect IoT to mitigate risk to the public (resulting in a lower number of claims) revealed the same survey.
So, what are the potential use cases for IoT implementation on the insurance value chain? How can insurance carriers leverage IoT, overcoming any roadblocks on the way?
Let’s delve deeper.
The Myriad Possibilities for IoT Intervention on the Insurance Value Chain
For example, a car rental company buying insurance for a large fleet will have to go through multiple checks before receiving a quote. Inevitably, this leads to poor customer experience (CX) for the buyer and a protracted processing period for the underwriter.
Once the policy is active, the customer may submit a claim to be validated and fulfilled by the insurer. Insurance executives will conduct a thorough analysis of the damage/claim request before deciding to fulfill or reject it. However, an overlong fulfillment timeline could negatively impact CX (for instance, in cases of high-value health insurance claims) and encourage the customer to switch carriers. For Property & Casualty, claims assessment could cause occupational risks, as executives must venture into natural disaster-hit regions.
All of this transformed by the intervention of IoT.
IoT sensors embedded in cars and other vehicles can relay valuable data on usage, driver-behavior, and maintenance needs. These insights will help to arrive at an accurate quote, optimizing underwriting activities, and improving revenues. Similarly, networked health wearables distributed to prospective buyers can obtain a comprehensive picture of customer health and potential risks.
At the time of claims verification, IoT-enabled drones can conduct analysis and surveys, containing occupational risks for insurance executives. But the most prominent application area for IoT is probably the rise of usage-based insurance models. Sensors embedded on specific assets can track usage patterns, dynamically adjusting the policy to benefit both customers as well as insurance providers.
Leading companies are already making significant strides in IoT adoption for insurance. Recently, Amazon introduced IoT for its Amazon Care health insurance plan for employees. The brand new benefit includes a smartphone app that uses IoT to connect employees with an available medical professional, either online or in person. The medical professional delivers prescription medicine to the employee’s home or office in as little as two hours. A patient’s health history and payment details are available within the app, streamlining the insurance claims process.
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Despite its massive potential, IoT in insurance is still mostly experimental. The 2018 report we cited found that only 21% of companies have an IoT strategy, and just 7% have the resources needed to leverage IoT for insurance decision-making. One of the roadblocks holding back the trend is enterprise incompatibility with the unstructured data flowing in from IoT sources.
Further, insurance carriers require sophisticated analytics and dashboards that can convert raw IoT data into meaningful and actionable insights.
The ability to leverage these insights is why IoT is an exciting area for investment and innovation among insurance technology providers. Carriers can partner with technology specialists to iron out any roadblocks to IoT implementation. Some of these roadblocks could be related to master data management, customer risk profile analysis by IoT, and consolidated customer views across multiple data sources (including IoT, social media, third-party research, etc.). It’s no surprise, therefore, that IoT in insurance is expected to grow at a whopping 65.89% CAGR between 2019 and 2025!