INSURANCE

THE APPLICATION OF IOT IN THE INSURANCE SECTOR

The IoT will truly start to get its hooks into the insurance industry in the next several years and change it from the inside out

ISSUES IOT CAN SOLVESOLUTION PROVIDERS

ISSUES WHICH CAN BE SOLVED WITH INTERNET OF THINGS

The IoT offers truly disruptive and transformative potential to the insurance industry. Substantial upside exists for insurers that can shape the right strategy

Improved customer relationship

IoT will enable Insurers to establish direct, unmediated customer relationships based on objective data

Understanding customer needs

IoT will enable Insurers to gain more granular and precise understanding of who their customers are and how their needs change over time

Individualised products offerings

IoT will enable Insurers to Individualize offerings of products, features and access options

Usage-based insurance (UBI)

Usage-based insurance (UBI) — so-called “pay-as-you-live” or “pay-as-you-drive” business models — have quickly moved out of pilot phases and proved their viability and value around the world

Benefits of IoT in the Insurance Sector

Innovation in the Internet of Things (IoT) enables insurers to streamline operations, transform functions, create efficiencies and develop superior capabilities.

Accurate underwriting

The convergence of different data types leads directly to increased precision in assessing risk, pricing policies and estimating necessary reserves. There are clear advantages over current approaches, which rely on backwards-looking claims data and historical risk studies.

Streamlined Claims

The IoT is likely to drive further evolution in claims, as it orients more toward active loss prevention.  In-vehicle sensors can also be useful in providing warnings in case of dangerous driving patterns. Within-group health insurance, the discounts offered to employees who monitor their activity levels and heart rates could be considered a claims prevention program. Enhanced incident management and claims service, such as proactively offering towing or “loaner” vehicles in the event of an accident, rather than just covering these costs.

Improved modelling

Commercial insurers have matured their modelling capabilities, especially relative to natural disasters.  Combining data — layering wearable technology data with GIS data against historical patterns — enables a deeper understanding of risk, both in real time and across historical perspectives.

Automate applications

Life insurers can now automate and streamline the traditionally intrusive and lengthy underwriting process because sensor data provides the means to answer a lot of the questions from yesterday’s paper-based application forms. This opens the door to a greater focus on millennials and younger customers, as well as on policies with lower face amounts and the promotion of healthier lifestyles and potentially pay-as-you-go models. There are even opportunities to automate retirement planning processes and offer simpler and more affordable products.

USE CASES ON THE USE OF IOT IN THE INSURANCE SECTOR

The Internet of Things (IoT). With 6.4 billion devices already connected and 5.5 million new devices added every day, the IoT’s real-time data collection and sharing power creates significant new opportunities in finer product segmentation, more specialized pools of risk and predictive modelling to better assess risk, improve loss control and accelerate premium growth.

Geospatial Applications.

For example, auto insurance carriers now use what they call “telematics” to gather history of speed, distance, turning and braking patterns, time of day and much more from the vehicles of prospective policy owners in order to price and maintain “usage-based” insurance (“UBI”). Premiums are lowest for responsible drivers. For the carrier, this will drive premium growth, reduced loss ratios and improved margins. In the near future, weather data supplements pushed to the car will trigger warnings such as: “Hail storm approaching”. These will benefit both the policyholder and the carrier by avoiding a claim.

Environmental Sensors.

Homes, office buildings, warehouses and factories have sensors installed to detect temperature, smoke, toxic fumes, mold, earthquake motion or other hazardous conditions. With two-way communication, these IoT devices can also provide predictive alerts on potentially dangerous conditions in the near future. Carriers offering homeowner’s, commercial property, worker’s compensation and general liability lines would all be able to “write right risk” and improve loss ratios based on IoT connected environmental sensors.

Connected Biometrics

Our kids may already be bored with their fit bits, but life, disability, medical and worker’s comp insurance executives should remain excited about “wearables”. Numerous large employers have established programs that award points to employees having healthy lifestyles as documented by their daily activity, calorie burn, heart rate and sleep pattern history uploaded daily. With supplemental GPS data, wearables could monitor and report on compliance with the rehabilitation protocol of a disability claimant. Improved compliance would shorten the time until return to work. In both scenarios above, the plan sponsor, employees and carrier all benefit from improved understanding of risk, more accurate pricing and reduced claims cost. In the future, blood chemistry associated with impending heart attack could trigger a proactive alert and preventative or mitigating action. An employer could detect substance abuse by workers on the job and initiate proactive intervention.

Diagnostics.

Some of the very first applications of connected sensors, the precursors to the IoT, were in factories using process control automation. IT executives got excited when IBM announced a “phone home” error log dump capability when their new (!) 3090 mainframe had a hiccup. Today, small, inexpensive, but highly intelligent sensors are embedded in a huge variety of products including appliances, toys, consumer electronics, industrial machines, vehicles and much more. As manufacturers of these devices embed and enable IoT, specialty insurance carriers offering extended warranty protection on these products will also offer predictive and preventative service prior to product breakdown or component failure. Maintaining happy policy owners will improve cross and up-sell likelihood for additional insurance products.

LEADING PROVIDERS OF INTERNET OF THINGS SOLUTIONS FOR THE INSURANCE SECTOR

Which retail businesses and brands have been at the forefront of Blockchain technology implementation in their sector?

R3 CORDA

R3 builds blockchain technology to transform the way the world does business. Our global network of partners works with us to develop innovative apps for finance and commerce on our blockchain platform, Corda.

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Fenergo

Fenergo KYC is an out-of-the-box, rules-driven solution for all Know Your Customer policy requirements to support regulatory needs across multiple jurisdictions and business lines.

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Digital Asset

Digital Asset is the leading provider of Distributed Ledger Technology to regulated financial institutions 

Digital Asset combines unparalleled financial markets leadership with world-class technologists across multiple fields in one of the fastest growing fintech companies in the world. The Digital Asset Platform is the only Distributed Ledger platform to have been developed according to the production requirements of the world’s largest financial institutions.

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Ripple

Ripple helps banks’ customers send money to their loved ones in many emerging markets like Mexico, India and Thailand, to name a few. The opportunity: increase share of this large and growing market.

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