Internet of Things – Opportunity for Insurers – ATKearney
Article Synopsis :
IoT will accelerate existing pressures and disrupt traditional insurance models – while opening new frontiers for growth. Can an old industry learn new tricks? This report, “The Internet of Things – Opportunity for Insurers“, from ATKearney, takes a stab.
Gartner predicts the number of IoT enabled devices will grow from 4.9 billion in 2015 to 25 billion by 2020. This presents an opportunity for insurers, as well as a threat.
IoT will be pervasive, so much so that a family of four could own more than 100 connected devices, and this ubiquity of IoT devices will fundamentally impact P&C insurance in four ways:
- IoT-led innovations will shift market boundaries
- IoT will lead to new value propositions that unlock new sources of revenue
- IoT can improve the economics of core business models
- IoT will shrink the traditional insurance market and change the nature of the risk landscape
The report also suggests that success with IoT will require a different way of doing business, requiring shifts in structure, capabilities, and culture. The new, fast-changing, less predictable business environment will favour players that can execute strategies with agility and flexibility. The report articulates the following actions for getting in position to capitalize on IoT:
- Emphasize the mindset that innovation requires taking risks (which often result in failure)
- Establish a “living” business planning approach
- Maintain a flexible partnership approach
- Build around a deep understanding of customers and their needs
- Set expectations with customers
- Change customer behaviours
Winning plans will define an overall path for each asset (e.g., auto, home, self), allowing for differentiated approaches, attuned to feedback, nimbly able to incorporate changes in investment, resource planning, and product configuration.
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Digital Insurer's CommentsInsurers face four operational challenges with respect to IoT:
- IoT (e.g., devices, networks) capability building and skill development
- IoT-compatible infrastructure
- An IoT mindset regarding product development and marketing
- Data privacy issues
IoT opens up insurance to a whole new set of potential competitors, technology vendors like Google and Apple, equipment manufacturers like Samsung, data analytics firm like Teradata.
These firms are also potential partners.
Some combination of Internal innovation and external partnerships is the formula for success in a device-driven world.
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