The long goodbye? Insurance in the connected world
Throughout its history, the insurance industry has been quick to adopt new technologies. Yet the advent of the Internet of Things (IoT) and real-time data has led some to question the role of insurers. Manufacturers, utility companies and others are transforming their connected products into services and revolutionising their supply chains. Does IoT mark the beginning of the end for the insurance industry? Far from it.
From processing to prevention
By using data collected from connected devices in homes, at workplaces and on transport networks, insurers will be better equipped to deliver their industry’s essential promise: to make good when bad things happen – and even to stop them happening in the first place. Let’s take water damage as an example. While 30% of all UK domestic insurance claims are water-related, they account for 60% of pay-outs. So with sensors and systems in place to instantly detect a water leak, switch off the water supply and any affected appliances, then notify the home owner, organise a repair, assess the damage and arrange prompt payment of the claim, it’s easy to see the benefits for policy holders and insurers. And when the leak happens in your home, why not choose from your mobile insurance app to have the home engineer fix some other nagging problems at the same time?
This is just one example of how the industry can make the shift away from just efficiently processing pay-outs and towards prevention (returning to its earliest roots as fire look-outs). IoT systems can already detect fire risks and intruders, are present in cars (such as Michelin’s connected tyres, which send advanced alerts when tyres need to be replaced), and in commercial settings. By becoming highly responsive day-to-day service providers, insurers can also cut costs, reduce fraud, lower their premiums – and give their customers the reassurance that any damage will be minimised.
Some of the biggest advances are being made in the motor market. Ahead of driverless vehicles reaching the mainstream, connected cars are transforming relationships between manufacturers, insurers and owners because usage and damage can be tracked (and often pre-empted).
As well as our work on Michelin’s connected tyre, Atos has worked extensively on connected cars with insurance and manufacturing leaders such as Axa, Daimler and Renault. Each has delivered major innovations. More agile, just-in-time interactions give customers greater visibility of the cover they’re buying, with more diverse, better tailored insurance products and services (such as ‘pay how you drive’), plus clearer pricing and value. And as manufacturers transform their business models, car ownership itself is changing as customers start buying ‘driving hours’ from the manufacturer instead of the car itself, or insurance is held by connected car fleet companies or transport operators instead of individual owners. It’s the same for other commercial and domestic markets, with customers buying ‘capability’ (a fully serviced and maintained product) rather than owning the product itself.
Navigating the journey
So, where are the main challenges for insurance businesses along this transformation journey? Many lie in the vast volumes of data that businesses have to harness, both to reinvent products, services and relationships, and to evaluate and process claims using big data and analytics. Tight cyber security is essential, as is finding the right business model in these more complex, highly competitive supply chains.
One of Atos’ differentiators is that we’ve been active in this space for some time, enabling insurers and others to overcome these challenges. Atos company Worldline has a series of large, fully secured and tested IoT platforms that support dynamic ecosystems of leading insurers, manufacturers, utility providers and others – all gathering, using and sharing data about customers and usage. And because Worldline’s heritage is as a global payments company, these IoT platforms make customer payments straightforward and totally secure, enabling companies to monetise their new business models.
For any insurer, being part of a secure ecosystem of trusted companies opens up opportunities to explore and build new relationships to support policy holders who are themselves part of this new ecosystem. With access to secure data, they can generate use cases to deliver business value, enabled by IoT.
As insurers develop more use cases and more customers see the advantages of lower premiums, faster responses and more preventions, there will be closer engagement and more trust between consumers and service providers. Old-style policies will be superseded by more interactive relationships with insurers, with external data, such as weather warnings, integrated to assess and mitigate risk in real time and send personalised advice and advanced warnings to customers. This is certainly a cultural shift from the more arms-length relationships we’ve become used to. With IoT being used to make life better and easier, insurance – far from being obsolete – can meet its fullest potential and give consumers something that can’t be priced: real peace of mind.
Digital Vision for Financial Services
This article is part of the Atos Digital Vision for Financial Services opinion paper. We explore the challenges and opportunities in a newly disrupted space for banks, insurers, FinTechs and technology incubators, who are today experiencing an unprecedented rate of technological and regulatory change.