THE INTERNET OF THINGS
Despite still being in its infancy, the Internet of Things is bringing sweeping changes to the customer experience and greater efficiencies. Matthew Thomas takes a look at this latest technological leap forward, from A to Z.
The Internet of Things (IoT) is more than a buzzword for ‘generation selfie’, it is the latest technological revolution in the digital society. The IoT refers to the new generation of connected objects and smart devices, creating more data and more opportunities for insurers to develop and deliver solutions to meet consumers’ needs.
Despite still being in its infancy, the IoT is already bringing sweeping changes to the customer experience and greater efficiencies through self-service and support options via mobile devices. From remote thermostatic temperature control and light sensors to webcams monitoring our homes or connected cars on our roads, the digital age is here – with one in five cars predicted to be connected by 2020.
The IoT is already changing the insurance market in two key ways – the first is the ability to price based on a customer’s individual risk, the second is the potential to reduce and even prevent risks. For instance, a smart device that can detect early on that a water leak is occurring in the kitchen means the problem could be nipped in the bud before it becomes a flood that damages flooring, cabinets, electrics and more. If you consider that escape of water claims outstrip any other type of household claim in cost, this becomes a serious opportunity for insurers to control claims costs and deliver tangible service benefits. A range of webcams are also now offering home insurers a way to help consumers provide data to support their claims.
Telematics devices used for motor insurance are delivering quality driving behaviour data to insurers. This has benefits on a number of levels, first in the level of engagement it offers insurers with their customers; second in the way telematics policies support underwriting decisions and incentivise good driving behaviour; and third in reducing claims loss ratios. In 2014, the number of usage-based Insurance policies nearly doubled in the US, and is only set to grow as consumers adapt to connectivity and demand a more personalised insurance service.
When it comes to health, activity trackers are becoming more common, making it easier to estimate risk more accurately. In the future, your moves may be recorded by your smartphone and wearable technology will send your location information to your home or vehicle as well as monitor your health. And how about smart clothing that adapts to your body temperature, activities or location when travelling?
And the more devices that come onto the market, the greater demand there will be for innovative insurance solutions tailored to the needs of individual customers. Imagine a scenario where a car linked to the health tracker of the driver detects they are about to suffer a heart attack and simultaneously stops the car and contacts emergency services.
With more and more automation of cars, home appliances and medical devices, which all transmit data – estimates suggest there will be 80 billion connected objects by 2020, in a market worth some $1,900bn – the real challenge facing insurers is deriving value from the zillions of bits of data being transmitted across the IoT.
Insurers will have the huge task of juggling the data – cleansing, analysing and regulating that information, as well as protecting personal data from hacking and cyber attacks. In addition, in the move towards more granular pricing based on behavioural data, some customers may be excluded from insurance services, as insurers select the best risks. This of course has a huge social implication, which could invite government intervention.
The Ageas Horizon Scanning team is constantly looking into emerging future concepts to ensure we understand what customers may want down the line and explore opportunities to apply the latest trends to better understand how their needs might change in the future. Connected, smart devices will become even smarter and more useful as more people adapt to the technology, with even young startup technologies having the potential to disrupt the industry.
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