Connecting commercial insurance with IoT
Rapid technological development and the Internet of Things (IoT) is shaking up traditional industries, with greater connectivity between people’s physical and virtual lives.
So, in the world of commercial insurance, how is the IoT changing the landscape?
Just a few years ago, the IoT was at the vanguard of consumer-focused product development. It brought science to the fore, and gave authority to the brands using it. Since then, data has crept into our day-to-day lives.
Now, in the home Nest gets to know your family routine and adjusts the temperature of your home accordingly. It even allows you to check security systems, lock doors and gives alarm alerts – all accessible remotely from a smartphone.
And when you’re enjoying some leisure time, Fitbit is monitoring everything from your heart rate to the amount of steps your take in a day. This vast collection of personal data is informing our behaviours and changing our habits.
But all of this short and medium-term adoption doesn’t necessarily mean it is a bandwagon worth jumping on, does it? Well, in the insurance industry it has to deliver real benefits to both the business and its consumers. That means using data to solve a key commercial challenge, and also digitalising our businesses to provide the kind of service our customers expect.
It’s already proved to be a valuable strategy for fleet and haulage companies, as they use telematics to accurately assess the performance of their vehicles and drivers, and inform business decisions. This technology has even been used by personal lines insurance providers to add a level of authenticity to premiums. Drivers have an influence on what they pay, based on how they drive. It’s clever. In a world where people increasingly feel connected with the brands they advocate, handing over some control makes the results irrefutable.
The traditional insurance business model has been in place for centuries, with its high levels of protection through regulation, carefully considered policies, sometimes outdated billing and claim management systems. Putting stability and consistency of customer relationships at the core of a business is crucial, but some insurers have lacked the drive to innovate, and this must happen to keep customers happy and the offering current.
The transformative power of the IoT
In a recent survey, lack of innovation was the biggest complaint that risk managers had about the insurance industry.
Risk is about balancing what we know, with what we know can happen. Intelligent data usage can help increase our knowledge in both areas, and make assessing risk more accurate than ever.
In commercial lines, the stakes are incredibly high. If something goes wrong, a significant amount of money can go to waste. That is far more threatening from a financial perspective, than the cost of investing in data management systems, sensors or telematics.
In short, having the right systems in place can allow businesses to intervene before there is a real problem. The power to stop a molehill becoming a mountain.
But there are challenges in the IoT’s integration. Both insurers and clients are facing real-life challenges that could prevent customer-focused solutions being transferred to the business environment.
Specialists add that understanding of data at a deeper level, across the commercial sector is lacking, so expertise is in short supply. Paired with a need to upgrade the sector’s core system – it could take years before some insurers are able to get up to speed. Once up to speed, they will then need to keep up.
So, what next?
The big plus of the IoT, in the case of commercial insurance, is transparency of data and automation, because – when it comes to speeding up processes that create customer satisfaction and cost savings – clear data flows can turn security into an insurance product.
Connected insurance is a big opportunity, but adopting it in the commercial insurance space is still in the experimental phase. Switching to the IoT will not happen overnight. But – when it does – one thing is certain, it will change three key areas in the commercial insurance landscape: risk selection, risk prevention and reinsurance.