The Impact of Internet of Things on the Insurance Industry
Until very recently, the concept of Internet of Things (IoT) existed only in people’s imagination of a technologically advanced future. However, the future has arrived. Consumers today are already using multiple devices that are connected to the internet, creating a wide network through IoT. Those that have made forays into investing in and leveraging IoT have already seen huge successes. But capitalising on IoT isn’t just for software and electronics companies. Insurance has historically been a conservative industry; however, the emergence of IoT in insurance could prove to be a game changer. This advancement provides the most crucial factor that the insurance segment depends upon: large volumes of data. But are insurance companies in India ready to take advantage of this development?
Here are the biggest changes IoT will have on the insurance sector.
Personalisation of a customer’s experience
The biggest reason customer’s switch insurance providers aren’t due to the quality of services offered, but their experience with the provider. This gap in customer satisfaction can be a very costly one for insurance companies, with one report by Accenture on Capturing the Insurance Customer of Tomorrow, valuing it at almost $470 billion. One of the essential rules that set good customer service apart is to adapt to the changing customer. The valuable data insurance companies can access through IoT will help them provide an enhanced, personalised experience for their customers. Customers today are using technology in almost every second of their waking hours. This translates to the availability of a huge resource of informative data that can help companies understand their customers better and offer tailor-made solutions. For example, based on data gained through wearables, such as activity trackers, companies can offer their customers customised health insurance recommendations.
Improved convenience for customers
In the age of technology, there is no reason why companies or their customers should deal with mountains of paperwork. Unfortunately, the paperless revolution has been slow to affect the insurance segment. With the advent of IoT, insurance companies and customers alike could see processes becoming faster and simpler than ever before. Through their phones, customers can send scanned forms or pictures to their insurance agents. Sent electronically and possibly coupled with ICR technology for faster recognition, these forms are also easier for companies to verify and process. With all devices connected to the internet, insurance providers will be able to upload forms and other valuable data onto a secure online platform immediately. By tapping into the power of the IoT network, providers can slash process costs by a large margin. One study on insurance and the digital reality by McKinsey estimated that there would be a reduction of almost 30 per cent in the processing of claims once automation enters the industry.
Improved accuracy in risk estimates
The basis for arriving at a pricing for insurance is a forecast of risk. To determine this, insurance providers have had to solely depend upon information provided by an applicant. This information might or might not be accurate, which can affect the final pricing. With the IoT network at their disposal, however, insurance agents will be able to formulate a very accurate estimate. Devices connected to the internet can track user data, providing a valuable resource of data for insurance providers. Some of the ways that insurance providers can use this data are:
For insurance on shipping of goods: GPS devices and sensors on trucks, ships and other forms of transport can provide insurance companies with data about speed, frequency of brakes and quality of the transit. This can help them arrive at an accurate cost for insurance of goods.
For insurance related to environmental factors: Thermostats and environmental sensors connected to the internet can relay information about the occurrence and frequency of storms, hurricanes and other weather conditions. This can come in useful when determining risk for agriculture and properties.
For health insurance: Apart from offering customised insurance options for customers, activity trackers can also help insurance companies themselves. With the data they receive about a person’s activity and fitness levels, companies can arrive at an accurate estimate of a health insurance plan pricing.
Potentially lower future payouts
As data from the IoT network can help insurance providers and users map the probability of certain events occurring, prevention will become more important than simply addressing the aftermath. Smart cars are now equipped to detect the chances of collision and prevent accidents. This can reduce the number of claims made by automobile owners for insurance to cover the cost of the damage caused by accidents. Improvements in predictive analytics through data gained from IoT networks can also help insurance providers branch out into providing preventive solutions rather than just processing claims. In this way, the advent of IoT in insurance could signal an evolution in the role of insurance companies, increase insurance premiums and lower payout amounts.
Prevent insurance fraud
Fraudulent claims are an ever-present risk in the insurance industry, with one report estimating that India loses $6.2 billion to insurance fraud. With the greater visibility that IoT in iinsurance offers, insurance companies could take stringent measures against fraud and reduce its occurrence. Data records of each individual can track every claim they have made in the past, how many of them were denied and whether any investigation was conducted. If an individual has been investigated multiple times, their claims can be flagged for review before being processed. IoT in insurance can also help companies determine an individual’s spending pattern, which can provide valuable information regarding the authenticity of a claim. Social media is also proving to be a valuable check on fraudulent claims. Most individuals today are using their digitally-connected devices to post regular updates on social media. Insurance companies can investigate their social media accounts to validate if a certain event did actually occur.
At Sundaram Business Services, we have developed an online workflow manager that provides our insurance clients with complete visibility of all processes. This dashboard is an excellent example of how the digitally-connected world we live in today can streamline operations for insurance companies.
As the world becomes more interconnected through the internet, old business models might no longer be viable for insurance companies. Tapping into the unlimited potential of the IoT network can help insurance companies modernise their processes, widen their customer base and improve profitability. To learn more about the growing impact of technology, read our blog on How Artificial Intelligence is changing the Way Leaders Perform.
To learn more about Sundaram Business Services and how we can support your organisation, visit sundarambizserv.com