A new report published by Capgemini has revealed that changes in consumer behaviour and the rise of IoT is set to disrupt the insurance industry.
The World Insurance Report 2016, which consists of data from over 15,500 insurance customers from right around the world, shows that IOT combined with changing preferences predominantly from Gen Y customers is pushing for insurers to undergo transformation or risk falling behind.
According to the report, 40 percent of all insurance customers have positive dealings with their insurers, while only 34 per cent of Gen Y customers do. This suggests that they have more expectations when it comes to insurance.
As well as this, Gen Y customers are 2.5 times more likely to interact with insurers via social media and could easily turn to non-traditional firms for insurance products. Naturally, they’d adopt IoT technology.
The report also shows differing views between customers and insurers when it comes to adopting IoT technologies. For example, just 16 percent of insurers believe that customers will invest in driverless cars, while 23 percent of customers do express some degree of interest in the area.
One of the biggest IoT trends within the insurance industry is the connected ecosystem, with 34 percent of customers saying they’d adopt smart homes and buildings. Wearables follow second, with customer interest at 30 percent.
Due to these technological and customer trends, in order to stay relevant, insurers need to streamline processes and build data capabilities in the short term. In the long, they must prepare for new customer and product portfolios, and compete with new industry players.
Also read: Insurers start cashing in with the Internet of Things
GenY relying on IoT
Nigel Walsh, head of UK insurance at Capgemini, told Internet of Business: “IoT is coming whether we like it or not –we live in a much more connected world and from our research we see GenY relying on it much more. Very little is not connected.
“The key challenge for issuers will be getting ready to leverage this huge volume and speed of data and importantly being able to act, both reactively and proactively to drive a better outcome for their customers, partners and brokers.
“Once they have it it’s then linking it back to their legacy core systems and data platforms that will really make a difference. Some companies are now offering per hour or per day policies, new business models are on the way enabled in many ways by IoT.”
Naresh Govindarajan, director of insurance UK, Virtusa, says the main challenge that insurers face is the ability to verify data as IoT continues to grow in dominance.
He said: “IoT is really all about the data; the challenge for insurers is being able to access and verify this data. Big players are already testing out digital insurance premiums, whereby customers can get reduced premiums for good behaviour by using data from apps.
“Mobile apps, such as those that monitor driving behaviour or Fitbit-type apps in the health insurance sector, are available. However, the user decides when to turn these on.
“Moving forward, insurers are going to need to find ways to get that data direct from the device. For example, it is likely that we will see insurers and car manufacturers teaming up to create IoT dashboards with data transmitted direct to insurers to determine motor insurance premiums.”
Insurance evolution
“The Internet of Things is part of an ongoing evolution of the insurance industry, leaving a mass-market approach behind to become increasingly customer-focussed,” said Mike Davies, VP EMEA North at GMC Software.
“We’re already seeing life insurance premiums being positively impacted by IoT, as connected devices can prove that people are exercising; as a result, some insurers are even offering special deals on gym memberships.
“Car insurance in particular is set to be revolutionised by data from connected devices. The idea of a black box in your car monitoring how you drive could seem a daunting prospect at first, but younger people are set to drive widespread adoption over the next few years. They’re the ones hit by sky-high premiums, and millennial wallets will only stretch so far, so they will jump at the chance to prove they don’t drive too fast or brake dangerously if it provides an opportunity to save money.”