The internet of things (IoT) is growing rapidly globally, as the number of connected devices continue to grow and are projected to grow beyond 50 billion in 20251. The massive growth coupled with continuous improvements in the computing power of these devices is giving rise to newer possibilities and enhanced potential for the insurance industry. Technological advancements in IoT have the potential to generate new revenue sources (e.g. usage based insurance, monetization of data, insights based new sales) and reduce costs (e.g. proactive safety, pattern-based fraud prevention).
However, there are two big questions looming large for the insurer:
(1) Will this new technology help drive differentiation in the marketplace and
(2) Will it stand the scrutiny of the rigors involved in a solid and financially profitable business case?
While IoT technology is continuing to evolve, the real test is whether the technology will benefit both the insurance carrier and the insured. Until the industry as a whole cannot get the engagement index going high with the insured, whether personnel or commercial, the chances of the insured opting-out remain high, and thus, could limit the potential of this technology.
Industry pioneers like Progressive Insurance, started in the right direction with usage-based insurance in the automotive sector2. Firstly, their Snapshot program is directly aimed at rewarding the insured with monetary benefits, when they are able to drive safe and avoid high risk driving behaviors, and has resulted in higher stickiness with their insured population. Secondly, the Snapshot program has withstood the financial scrutiny by actuaries and finance professionals, and has reshaped the way insurers are assessing, pricing and limiting risks to their product offerings.
The insurance marketplace has many opportunities that are good candidates to be put against the two-big-question-test. Outlined are a few of those use cases:
What can insurance carriers do to make these use cases pass the two-big-question-test?
Finally, it is incumbent on the insurance carriers to make this technology easy to consume for the insureds, wherein they see greater financial benefits (e.g. better pricing, rebates and discounts) and better convenience (e.g. less downtime, faster repairs, reduced employee absence).
Reference
Vinay Sharma
Digital Sales Director for Insurance Vertical - Americas, Wipro
Vinay leads the US Digital Practice for the Insurance vertical and is focused on the application of digital technologies to help clients create a competitive edge in the marketplace. He has worked with many insurance carriers in property & casualty, and health insurance space helping address issues at the intersection of business and technology.
Top US insurer sees a 338% surge in online premium for its personal line of products in just 2 years by rolling out direct channels for policy sales.
Global IT services firm Wipro Ltd., has partnered with the RSA Group, one of the world’s leading insurance groups, to deliver innovation in a way that will help transform the industry.
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© 2021 Wipro Limited |
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