Digital meets Physical: Insights as to what insurers need to consider to leverage IoT
The potential of IoT
IoT has all the right characteristics to transform insurance thoroughly. It offers data, real-time, with little room for fraud in claims and limited hassle: all things that are treasured by insurers. Many segments and many uses are impacted:
- Chronic diseases management, prescription management, ambulatory medicine, health prevention will be simplified and ubiquitous.
- The connected home will offer unprecedented security and the ability to manage remotely energy consumption,delivery of services, pets … and family members...
- Cars will be autonomous and those already connected (100% of new cars are, one way or the other) will offer new compelling services – additional security, preventive maintenance, car sharing capabilities and usage-based insurance.
The connected fleet space
There is especially one area where the story should be compelling: Connected Fleet. Employees, employers, fleet managers, leasers and insurers should be able to drive value of the vast amount of real-time vehicle data to optimize fleet management efficiency and better protect employees and goods. The rationale and economics are strong for all stakeholders.
A burning platform
- Employer safety obligations.
- Multiple inefficiencies in fleet management.
- Very significant savings potential in reduced mileage and fuel consumption, improved security of persons and goods, optimized vehicle management… (see Figures 1 &2).
- A clear need for insurers to shift from payer to partner, improve client loyalty and overall commercial car insurance profitability.
- Shifting roles and value creation between car manufacturers, fleet leasers and insurers.
A promised land
- A fast-growing fleet car market, structurally due to a shift from car property to usage.
- Cheaper, better technology and data access, including in cars.
- Increased companies’ interest in their employee safety.
- An ever-developing need for last mile logistics, with direct impact on the vehicle fleet growth and efficiency.
Still it has not happened. Offerings are slowly coming of age, but business cases seem still unclear. Volumes are still marginal, though growing.
Multiple reasons are given:
- Most of the focus from start-ups, tech providers and insurers has been more on the individual and usage-based insurance which translates into less offers, less sexy (gamification) and a limited development of the connected fleet segment.
- The use of simple dongles or phones is not enough to provide the sufficient data to get the full benefits of Connected Fleets. There is a need for further evolved TCUs (telematic control unit) which can lead to higher costs (more expensive TCUs will be more complex to install).
- Push back from fleet managers is expected (although, from our own experience, they are in fact very willing since they know it will be a change for the better for them).
- Concerns about privacy –such as drivers’ data and labelling as bad drivers and insurers’ compliance.
Dealing with the digital dilemmas and tensions
Let’s step back using the framework provided by our thought leadership publication Journey 2022 which explores the most important technology trends and offers insights into the digital dilemmas arising around their adoption.
Three of them are particularly acute in IoT – adaptive business models,customer engagement (& intimacy), and data privacy.
Delivering and adapting the business model requires the ability to look at the big picture and consider the benefits – securing goods and persons, optimizing assets & emerging technologies while delivering tangible short-term benefits. The ability for an insurer or leaser to partner with a committed ecosystem and technology enabler - who has fully aligned economic interests - is no doubt important to ensure efficient operations and technology choices over time – eg. replacement of boxes by OEM data.
Customer engagement and data privacy are all about ease of use and clear benefits. Clarity as to who is accessing the data, and doing what with it, is paramount. The discussion with employees and the work councils is simplified when the proper framework and technology are in place. Gamification and access to a simple, user-controlled experience help.
Indeed, out of the main forces described in our Journey 2022 research, “Insight” is here the most important one. In simple terms: how can we deal with the contradiction between personalization requirements (and therefore access to a mass of data) and privacy?
So, what will it take for employers, fleet managers, employees, services providers – insurers, car manufacturers, other - to reap the benefits of connected fleet?
- Open eco-systems
- User centricity – for fleet managers, employers, employees and insurers and/or leasers
- Execution – scalability, value chain integration, ecosystem management.
Most of this thinking applies even more to other segments of the IoT space where the business rationale is weaker, with unknowns and with barriers to adoption which are even greater. But as one of my most remarkable former bosses always told me “Do not try to swallow the full apple, do it piece by piece”.