Five ways technology will disrupt the Insurance Industry
The Internet of things (IoT) has changed the world propelling ideas that were once science-fiction into normal life. Changing the way we live, shop and exercise. The IoT’s impact on the industry has been massive in some sectors, especially logistics and retail, where IoT allows companies to match products perfectly to customer demand.
Typically old-fashioned and resistant to change, the insurance industry was moving at a snail’s pace, until recently, only monitoring devices, such as the black box had a significant impact.
However, things are changing, and the insurance industry is waking up, and with over 75 billion devices expected by 2025 utilizing the IoT is no longer an option, it’s a necessity. Allowing insurance companies not only to provide solutions for customers but to ensure that they don’t end up losing out to tech companies. Thomas Buberl, chief executive of the French insurer Axa, said that future competitors in insurance would be the likes of Facebook, Google, and Apple.
The insurance industry is braced for disruption, especially regarding IoT, let’s look at what we can expect in the coming years’.
The black box has been around for years and has helped countless drivers’ access lower insurance premiums by agreeing to fit the monitoring device to their car, insurance companies can personalize a premium based on whether you keep to the speed limit or drive recklessly.
In Europe, this may no longer be an optional thing. The European Commission has proposed new safety regulations for new cars, which if passed would ensure that new cars come fitted with a black box as standard. Which will not only provide a record of driving but also include a speed limiter, which, when combined with smart motorways could make speeding a thing of the past.
This proposal should benefit insurance companies, as the data captured provides clarity in the event of a crash, helping establish the at-fault party. The EC expects it to save 25,000 lives over a 16 year period. Which will also mean a reduction in claims. However, should this come into play, it will be hard for insurance companies to justify price increases, if speeding is no longer a factor.
The IoT approach is not perfect either, in the UK a woman was marked down by her insurance for speeding. Despite the fact, she was on a train at the time!
2. Connected cars
The IoT is making our roads safer, thanks to a wealth of interconnected devices in new cars. Many of which reduce the chances of an accident, resulting in lower claims. Assisted braking, self-parking cars, and proximity sensors all play a part in reducing risks, while inbuilt monitoring devices ensure that drivers know if they need to top up their tire pressure or take their car for a service. Which again reduces the risk of accidents. Connected car drivers are set to become a low-risk market segment, and smart insurers will recognize this market and offer appropriate discounts.
3. Increased Personalization
Personalization has changed retail, with customers now expecting retailers to offer products that meet their needs. The IoT allows this with striking accuracy. It’s time for insurance companies to follow suit, by utilizing smart technology and big data to analyze driving habits, insurance companies can tailor their products to individuals driving style, therefore offering incentives for good behavior.
4. Customer retention and engagement
Most customers rarely need to interact with their insurance company, you buy your insurance at the start of the year, and don’t think of it again until you need to claim or need to renew. With little differentiation between brands, insurance customers are price-sensitive and will quickly change between companies if they can make a small price saving. Disruptive technology, whether it be through IoT devices, digital services, or insurtech collaboration, allows insurance companies to offer new products, engage positively with customers and differentiate themselves from the crowd.
This is the important one! For insurance companies to stay ahead of their rivals, the collaboration will be key according to KMPG, insurance companies don’t need to create new technology, as the tech is already here! With investment in insurtech reaching a record high in 2019, there are products available that integrate perfectly with insurance company portfolios allowing insurers to offer new solutions to customers, that aren’t available elsewhere. Solutions aren’t limited to IoT either. As we wrote last week peer-to-peer insurance has majorly disrupted the Chinese industry and is making inroads in the US and European markets.
But there are risks
IoT is set to disrupt the insurance industry, and those that acquire new technology or build good partnerships are the ones that will stay ahead, companies need to move quickly, not recklessly. Customers are more aware of data security and concerned with the amount of data that IoT gathers, a strong alternative to IoT is the equally disruptive peer-to-peer insurance. By linking customers’ policies to the people that know them best, VouchForMe allows insurance companies to recognize low-risk customers while reducing the frequency of claims.
Curious about the future of insurtech? We’re presenting at Insurance innovators on the 10th of March and Insurtech insights on the 17th and 18th March in London. Come along and learn why peer-to-peer is the superior disruptor.