by Charles Marshall and Karsten Rimestad
By now you’ve probably heard of smart homes or more broadly the Internet of Things (IoT). This has been a hot topic in the insurance industry and insurance companies have started to interact with smart homes in varying capacities. Some companies have established partnerships with smart device companies, some are offering premium discounts for customers installing devices, while others just have this whole IoT thing on their radar.
The Internet of Things is touted as the fourth industrial revolution and the insurance industry is looking into ways to implement these technologies. That led us to the Internet of Insurance (IoI) conference in New York City, where we heard from over 20 experts in the realm of IoT. We attended some thought provoking sessions that led us to two important underlying themes: the customer of the past is not the same as the customer of the future and the technology frontier in insurance is incredibly vast and constantly changing.
At the forefront of this technological frontier is the consumer. People today want more digital interactions at their fingertips. Think about when you use a public restroom, how inconvenienced you are when you actually have to pull that silver handle to flush the toilet!
To demonstrate how far we’ve already come, John Hancock gave a presentation about its Vitality program, a rewards program that incentivizes insureds to lead a healthier lifestyle. For example, an insured may receive rewards points for badging in at a fitness center. Consumers redeem points for premium discounts and things like discounts at sporting goods stores.
So what does the P&C version of this look like? How can we incentivize homeowners to reduce their loss propensity? How can insurers use information from these devices to reduce claims and create a competitive advantage over other insurers? How do we convince our customers to share their data so we can determine the impacts from these devices?
People are not always willing to share every detail about their life to strangers or companies, so gamification is a great way to overcome an unwillingness to share. For example, an auto insurer could give a prize to the "Driver of the Month" as a part of its telematics program. The ability to gather data comes down to one basic proposition: a person is more willing to share their data if they get something in return.
Another example is a homeowners insurer providing a report that shows energy inefficiencies in certain areas of the house, or other data the insured may find informative - and even motivating. There is vigorous discussion these days about how smart devices will reduce insurance claims (the extent of reduction varies by line of business), which leads to an interesting concept: insurance companies becoming less of an insurance provider and more of a service provider.
If you’re wondering how we can get started, you’re not alone. In this rapidly growing and changing environment most of us are not experts, but we can draw on the expertise of others to help us press forward. Consider partnering with, investing in, or acquiring an IoT company. They’re innovating, and we can join them at an early stage to change our industry for the better.
The insurance environment is poised for tremendous disruption, as technological change is imminent. The industry has faced technology disruption before; just look at how computers changed the business decades ago. We believe companies must implement change culture and increase mobility in this dynamic technological environment. The more nimble companies will have better opportunities for cost savings, increased mobility, influx of data, and a competitive advantage. This change isn’t something to fear, as change often brings opportunity, and the opportunities our industry face are fantastic.