Library: ValueMomentum – Insurance IoT use cases: Industry progress and future direction
Executive summary:
Insurers today recognise the sharp competitive edge that the internet of things (IoT) provides through real-time and continuous data, enabling optimised risk assessment, customised products and services, enhanced customer experiences, and more. Yet, the number of insurance IoT use cases and the maturity of IoT in the industry vary depending on the line of business.
At the recent North American IoT Insurance Observatory plenary symposium in Piscataway, NJ, insurance business and IT leaders met to share the progress their organisations have made with IoT. Hosted by ValueMomentum, these leaders discussed current use cases, explored varying trends, and offered up strategies for better business outcomes via IoT.
Expanding insurance IoT use cases
Speakers from diverse enterprises—including AXA XL, Swiss Re, Cambridge Mobile Telematics, and Kinetic—emphasised how insurers are no longer relying solely on historical legacy data or self-reported data from policyholders. Insurers are actively investing in IoT, leveraging real-time data to develop innovative solutions, from medical malpractice insurance to improved claims processing.
To demonstrate how the industry investment is leading to some maturity for insurance IoT use cases, executives from these enterprises shared their experience driving IoT initiatives in their organisations. Drawing from the insights shared by members and the size and varying degrees of success of their use cases, we’ve observed the following IoT trajectories across three lines of business:
1) Auto telematics is mature
Personal auto has the highest level of IoT maturity, with a strong interest in the U.S. market to usage based insurance, or UBI. The usage of telematics data is now a necessary capability, and many insurers offer a UBI program in some shape or form. Thanks to the longer history of telematics application in personal lines, personal auto insurers have a wider consensus on the use and benefits of IoT data. The challenge now for insurers is the next step—to expand the use cases beyond risk assessment and driver safety to something that will add higher personalisation to policyholders, as discussed by Earnix.
2) Smart home is in the midst of development
The rise of smart home technology such as artificial intelligence and cloud-based solutions has increased the potential data points for insurers to assess home risk. Despite this rise, insurance IoT use cases for the home remain low in maturity, according to a roundtable featuring speakers from Notion, Allstate, Travelers, Nationwide, and Catalyit. The speed of development has been much slower and looks similar to the state of auto-telematics five to six years ago. Insurers are still figuring out how to apply the smart home data and leverage them for decreased risk and improved safety. Large carriers are actively exploring this field for a more scalable and concrete model.
3) First pioneers are exploring commercial applications
IoT use cases in commercial lines are only beginning to pop up. It is still uncommon to hear insurers commit to IoT investment for their commercial products. New growth and innovation in this line is currently driven by larger carriers. Although the IoT use cases are for smaller portfolios, the innovation shared by these pioneers is worth noting. For example, in one session, European insurer, Relyens, spoke about how IoT could be used to innovate medical malpractice insurance. Even though the players in this line of business are still working to figure out a model, or models, that would work well for commercial products, more and more insurers are investing in this line and committing resources to explore IoT for commercial lines.
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