How the Internet of Things (IoT) can change the insurance industry
In this technology driven era we cannot imagine our life without smartphones. Smartphones have connected us as never before. Most of us depend on it to be in touch with family and friends, and it has also become a necessary device for our professional life too.
With the advanced smart devices, sensors and communication technologies, insurance providers can collect relevant data that was not available previously. They can use this data to improve the current business procedures and develop new offerings for their customers. The possibilities of IoT can have a huge impact over the survival of old-style business models.
Let’s have a quick look at what insurance companies can do with IoT
Actually, IoT is not completely new for the insurance industry; it was initially applied by the insurers in the property and auto segment using a popular concept recognized as usage-based insurance for automobiles. Insurers remotely monitored the vehicles, how the drivers drove and they collected the data allowing actuaries to analyze performance in near real-time. By applying those IoT methodologies insurance companies know how their customers were related with the danger behind the wheel with the collected raw data.
Also, with this information they have rewarded their less risky customers with no-claim bonus or discounts to increase their value proposal to the consumer. This automation of tracking allows insurers to perform the claim procedure more quickly and improve the fraud claim ratio. This procedure resulted in more positive customer experiences and helped companies increase their profit margins. This was just the beginning of using IoT. Insurers can do a lot more with IoT technologies.
Insurance companies now know that they can improve the features of their business model by using the latest IoT Solutions. IoT helps to collect rating parameters as well as the historical data taken from the devices and sensors of insured people and objects, in real time. This massive data can be analyzed for underwriting and to take decisions of pricing at each level. This process can move insurance industry to the next level. The latest IoT platform is already developed enough to enable the first mover to obtain this new model for insurance industry.
Impact on health and life insurance
Health and life insurance industry can see the biggest impacts from IoT for several reasons. Generally, risk quality gets changed along with the life’s memorable events such as marriage. Also sometimes demographics like age or occupation influences the underwriting of the policy. When IoT is implemented to the insurance, the continuous monitoring of risk quality converts into the reality. Nowadays, IoT wearable devices can measure health records such as heartbeat, temperature, blood sugar, duration of exercise and send those data to insurers. This collected data helps insurers to decide premiums transparently for the customers and encourage their customers to have a healthy lifestyle.
Impact on Auto insurance
As we discussed before, auto insurance industry is already using the popular method of usage-based insurance over traditional pricing in major countries like USA, Canada, UK, and Germany among several others. With usage-based insurance, vehicles are fitted with sensors that are able to monitor driver behavior, keep track of vehicle motion, etc. So, insurers can decide the premium on basis of driving behavior, rather than alternative variables such as vehicle make, model, and year. Even, claim procedure for auto insurance will also be the concern area of improvement with automated push notifications based on data gathered from the sensors, especially in case of events like accidents or theft. In case of an accident, the data gathered by sensors will be transmitted to the insurance company resulting in an appropriate claims settlement for the driver.
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Impact on Property insurance
In this decade people will see increased adoption of IoT that will give real time data from the fitted sensors and devices of the smart homes, offices, or commercial buildings for measuring hazards from overheating systems or malfunctioning systems to building material strength. Any kind of accidents or breakdowns can be recognized with IoT solutions; also ongoing corrosion can be monitored to avoid extensive damages.
For example, home, office or industrial equipment can all be remotely monitored for constant situational assessment. Smart carpets can deduct falling events that can notify medical assistance, liability claims and reducing staged accidents. Any kind of measured factor leading to damage can trigger notifications to repair the location for prioritized services.
- More precise risk management
- Lower claim difficulty and frequency
- Improved claim services
- Higher customer satisfaction ratio
Following the benefits of IoT, insurers can use collected information to prevent fraud claim, for example, a person has already claimed amount for his appendix operation. He put claims again for the same reason, which clearly proves that it is fraudulent claim. With the help of data science it is possible to identify when any person intends to make fraud claims for any kind of insurance. On the other side insurance companies can encourage clients to have a healthy life style following the claim statistics.
Insurance companies realize that they can improve all the features of their business processes by using modern data analytics captured using connected IoT solutions. For example, interactions with existing products — when combined with demographic information and retail spending habits — help insurance companies understand who to better target with their products and improve market timing.
The entire insurance industry including underwriting, claims, policy services, re insurance, actuarial services and customer services- all are impacted by IoT solution in a better way, as insurers are more focused on business improvement.
The cutting-edge IoT technologies will help both insurers and clients to use their insurance services in more advanced way and take most advantages from those services.