How significant is the Internet of Things (IoT), for instance? Let’s look at numbers. Experts from IDC forecast that global spending on IoT will reach $1 trillion by 2022. And the insurance sector will feature the highest five-year CAGR among all industries – 17.1%.
What does this mean? Just IoT ideas are disrupting the insurance markets quickly and inevitably. Today, various companies already gather data from connected devices to simplify claims management and deliver more personalized services. Further, the role of IoT will only grow, forcing underwriters to evolve to remain competitive.
If you represent this industry, you may wonder how to catch the wave. DICEUS will guide you through all the basics, show significant IoT benefits, and reveal top challenges for IoT in insurance. Of course, thanks to our professional background in insurance combined with high technologies, we can help in designing safe and profitable IoT-driven insurance software.
Without further ado, let’s begin.
First things first, we should understand IoT clearly. Put simply, this term refers to a system of interconnected elements: sensors, computing programs, machines, items, and even people. All of them can exchange data directly, forming a new type of network that doesn’t require a human operator to control everything.
It’s possible that you don’t trust in the bright future of IoT. That’s typical for businesses. But that’s also dangerous to refuse to accept modern trends. According to Statista, there will be 75.44 billion connected devices in 2025. Compare this with 26.66 billion in 2019, and you will get almost triple growth. Of course, it will affect the insurance market, as well. People will use these gadgets to equip their homes and cars, generating valuable data for your business.
Since 2008, there have been more IoT things than people in the whole world. And they increase in number way faster than we do. Three essential factors support this growth:
The Internet of Things enables new opportunities for insurers who are ready for changes. Thanks to next-gen data processing principles, this technology allows getting market insights unattainable earlier. Innovations open ways for new business models. Moving further, let’s look at these strategies, as well as the benefits enabled by IoT nowadays.
When it comes to the current situation in the insurance industry, we want to refer to Ben Luckett, Managing Director at Aviva. He says that markets are quickly changing now. Previous generations considered insurance as an inevitable evil, outdated, and blinkered. But technologies change everything, even in traditional ecosystems.
Mr. Luckett insists that the growth of IoT with the idea of ubiquitous connected sensors increased the amount and quality of data – a core resource for any Internet of Things insurance team. As a result, these changes drive significant shifts in business models. While there are different approaches to evolution, Aviva expert focuses on two Internet of Things trends in the insurance industry:
Keeping these points in mind, let’s talk about the advantages that IoT strategies bring to the insurance industry and the challenges to overcome. It’s crucial to know both the positive and negative sides, so you will be able to develop your business correctly. As well, this information can help in getting more tailored programs for your company.
If you want to learn more about modern insurance, check out the guide in our blog. It unveils the hottest trends in insurance software development for the next two years.
In a nutshell, digital-driven operations allow underwriters to cut costs and maximize revenue. Surely, they must implement innovations properly to get these benefits. Here are key advantages of implementing IoT in insurance:
Apart from costs and income, parties that use IoT devices for insurance can manage risks. For example, car insurance companies have direct data from vehicles, e.g. speed and driving behavior. Thus, they can evaluate the risks of accidents better and provide more tailored policies. The same is true for healthcare, where wearables help to monitor patients’ parameters 24/7.
Still, the implementation of IoT in insurance isn’t a cakewalk. It requires a lot of time and resources to prepare, gets the required software, and transform operations. We don’t see the widespread adoption of the Internet of Things in the insurance industry because of several critical challenges. It’s vital to overcome them to start building new-age insurance. Here they are:
These challenges prevent many insurers from diving into innovations. But it’s still possible to transform your business. With the professional help of domain experts and talented software developers, digital/IoT evolution goes much smoother.
Moving further, we also want to share with you some insights unveiled by McKinsey researchers. Based on the emerging Internet of Things trend in the insurance industry, digital disruptions, and the overall popularity of insurance services, it’s possible to name four major ecosystems that hide an enormous potential. They differ by maturity, dynamics, customers, competitors, and regulatory challenges. Let’s see how the Internet of Things insurance companies operate!
A well-known industry that is rising thanks to wearables as the main IoT application for life insurance. Personal IoT gadgets help to monitor patient conditions constantly by delivering priceless insights. Doctors now can check way larger data packages, so they identify diseases faster and prescribe more effective treatments. Thanks to tools like Verisense by Shimmer, people can get a small gadget and predict severe illnesses like cancer before they become incurable.
Thanks to personal and corporative IoT systems, insurers get better vision, too. They can identify health-related risks to offer the demanded products. In combination with smart household solutions, connected health gadgets also open a whole new industry – ambient assisted living. It helps aged people in their everyday lives. Underwriters deliver bundles of tailored services and even can act as healthcare curators who drive hospital-at-home interactions.
Today, cars are boxes full of electronic sensors. These gadgets monitor almost everything, from speed to pressure to wear of various details. If a driver has personal devices like smartphones or wearables, he/she also becomes a part of this local system. A-and, you got it. All these sensors produce telematics data. This information can be gathered by insurers in real-time to optimize claims management, handle risks, and offer better products for each given customer.
It’s highly likely that with the rise of connected cars, insurance companies will face a decline in claims frequency with the simultaneous increase of claims sums. But this will lead to a revenue decrease, as well. That’s why insurance businesses have to think about new sources already. Applications of IoT in car insurance include work with workshops, service add-ons, risk management services, and other intelligent systems like parking and so on.
Apart from personal interactions, insurers can always work with businesses. This B2B approach will flourish thanks to IoT, undoubtedly. The catch is that corporations are interested in all-in-one solutions or policies that protect companies all the way along the supply chain. Here are the most notable parts of this journey:
Probably, this ecosystem is the most famous. In recent years, software/hardware developers such as Google, Samsung, Amazon, and Apple have presented dozens of smart home solutions for the mass market. Today, almost every citizen can purchase a smart camera, a leakbot, and even smart appliances. All these gadgets are integrated thanks to cores – virtual assistants or smart home hubs that control other devices.
Insurers get significant benefits from this growing industry. They can collect data from thousands of thousands of households, process it, and identify risks for each property. Based on this analysis, they create custom policies. Many insurers tend to sell integrated products via smart assistants. They also create new services like improved protection from leaks or higher convenience for owners of smart homes.
To start a successful IoT product insurance project, it’s not enough to get a reliable solution and connect to sensors. There are a few steps required to make the best insurance IoT system:
Carrie Lonze from Accenture says that modern insurers should think about the new approach – the Internet of Thinking. According to insights, unique insurance ecosystems will be based on edge architecture that provides for data processing and analysis via sensors, not central servers. The main reason is the growing amount of data.
Also, Lonze also notes that some companies have made significant progress in automated processing thanks to edge computing. For example, a startup called Aerobotics uses satellite imagery to predict crop health. More traditional groups like Allianz France use constant monitoring of construction sites to predict various risks.
Whether you’re only thinking about the Internet of Things insurance ideas or already have a plan, don’t hesitate to contact us. We have rich experience in this field, with a few notable solutions developed, i.e. Benefitnet and Insubiz. Our experts can help with all stages of software development, from the first consultation to proof of concept projects to launch and support. We care about innovations and like to be involved in game-changing activities. Let’s work together!