Leveraging smart home and IoT for new insurance business models
Article Synopsis :
Insurers need to get to grips with the way the internet of things (IoT) is developing. As with most emergent tech, it is snowballing and that in turns delivers carriers a tsunami of data from connected devices.
IoT offers access to data that will offer a competitive advantage and this will be valuable. However, whichever company provides the solutions – whether it plays music, orders groceries or turns the heat and lights on in the evening – will control the relationship and the data.
A growing market
In the US, households have, on average, more than 10 connected devices, including smart home, entertainment, and health products. A quarter of US broadband households are planning to buy a smart video doorbell this year.
In the UK, only 16% of the UK of broadband households own a smart home device. Yet, there is greater awareness of and engagement with smart devices in the UK in the energy sector.
Increasingly, product sales will not depend on the characteristics of the item itself, but the ability for it to connect with wider ecosystems.
Reduced claims but increased engagement
Smart home solutions will increase safety and reduce claims risk for insurers, similar to telemetry systems in cars. They also provide the opportunity to enable insurers to help customers protect what matters most.
This may reduce claims, but the greater benefit would come from improved customer engagement, a new understanding of customer behaviour and opportunities to build new, relevant products for those customers.
Smart home data can also Influence how insurers assess risk, doing away with the need for credit rating, as real-time consumer data shows exactly how and what customers are spending their money on.
Access all areas
This, of course, requires access to the data, and nobody is going to be giving it away for free. Insurers must, therefore, move outside their comfort zone in order to remain relevant to consumers.
This is another call for the focus on engagement and customer experience. Though improving business efficiency and reducing claims is important, IoT offers new areas for growing revenue and they can’t afford to miss the boat.
This requires developing affinity programmes with carriers, but only if they have access to the data. Alongside this, they might consider deploying branded smart home systems and services to build brand recognition and loyalty.
This provides carriers with the data they need to protect their position in the market while transforming their business by being able to offer more highly tailored products and pricing that are relevant to their customers.
Focus on the prize
Focusing on the smart home and IoT may help insurers improve customer engagement, reduce customer churn and create new revenue streams.
It will be more expensive, but a useful by-product will be reduced claims. The shift in consumer engagement will move carriers from their role of insuring against losses to partnering with consumers to help prevent them.
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Digital Insurer's CommentsInsurers want to transform their businesses, but will probably follow the tried and tested softly-softly approach.
Those who do will miss the opportunity that IoT offers to be gathering data that will in itself transfer the way they do business and interact with their market.
However, it will take a leap of faith and a move out of their comfort zone. And they need to do it now.
There are already companies finding this channel to be extremely rewarding and is already delivering all they anticipated – and a little but more.
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