Insurance is a competitive landscape, more so these days as regulations evolve, customers become demanding and picky with what products they need and how much they are willing to pay.
The entry of insurtech has also opened new avenues for insurers to market products, in some cases, create totally new offerings in new locations, not possible with the conventional model for marketing insurance.
Concirrus CEO Andrew Yeoman acknowledged that the pandemic has challenged the insurance industry business model in Asia. He commented that COVID-19 has given the industry problems and opportunities.
"It's given us a problem because operating a business where you're we've been predominantly used to doing face to face work, and then trying to do that remotely has been challenging. And clearly, there's going to need to be some investment going forwards in some of that backend office and infrastructure. The very manual methods of perhaps processing policies have been challenged," he added.
IoT-led innovations in insurance
According to the IMARC Group report, IoT Insurance Market: Global Industry Trends, Share, Size, Growth, Opportunity and Forecast 2022-2027, the global IoT insurance market reached a value of US$20.2 Billion in 2021. The Internet of Things (IoT) insurance refers to a technological solution that collects, transmits, and shares data of the client to insurance companies.
Yeoman acknowledges that IoT is creeping in everywhere. "Everything that we see in touch with seems to be monitored these days. What we're starting to slowly see is that the insurers are building products around that," he added.
"We're seeing it rising everywhere at the same time, both in personal lines and in commercial lines. And really the most exciting part of it is that it gives you some that hyper-personalised proposition so around how you work, how you're behaving and how you're driving."
The value proposition of IoT in insurance
IoT brings with it data not previously available to insurers. Yeoman commented that the data represents the behaviour, in the form of how, where, and when, of the asset. He cited the example of vehicular insurance. Where traditional insurance would mean that the insurer would only have a record of an incident during an insurance claim, embedded insurance describes a behaviour that is a far better indicator of risk than the static factors that have been used previously.
According to Yeoman, from the insurer's perspective, the data that they get from IoT devices will allow for disaggregation of risk. He posited that using data gathered by IoT devices, insurers can price their products and services to the risk profile of the insured.
"The secondary benefit that it also provides is the concept of nudge behaviour. I think that notion of those additional benefits changes our relationship with an insurer from just being somebody that's there, when things go wrong, to somebody that can help me live a healthier life," he added.
Supporting the operations of insurers
Beyond the embedding of IoT into insurance products, Yeoman says insurance companies make their living off managing the risks of the insured. He cited the example of insured vehicles – that under the traditional business model, the insurer has no awareness of where an insured vehicle is at any given time, whether it is on the road or parked somewhere, the road conditions and the driving habits or pattern of the driver.
He posited that the insurer would not know how many risks the insurance company is taking during the lifetime of the policy. IoT quantifies some of these risks and provides a granularity of risks down to the individual policy owner.
Importance of data
To realise that example of automotive insurance, it is important that data from IoT devices are collected and processed according to a pre-defined workflow.
To succeed in integrating IoT into the insurance business model, Yeoman says it is important to have a very clear understanding of what their business model is going to be, how that's going to scale, and how they can adopt such a business model.
He posited that insurers would need to be willing to experiment and be able to adapt to what works for them. "They need to see what's acceptable to their policyholders. And they need to do that quickly. I think the short, sharp, focused experience. What can we learn? We call it fail-fast," he commented.
Managing the unknown – IoT skills, experience, and expertise
Yeoman noted that insurers are used to dealing with data – much of it recorded on paper. With an IoT-led insurance model,
Clearly, if you go in with an IoT enabled proposition, you might take on a new supply chain, you might have to buy hardware, you might have to have connectivity issues in terms of SIM cards or other sorts of network connectivity. And you need a supply chain to then say, both procure those but then get those shipped out or installed with a customer or whichever. I think that in terms of the insurance expertise, depending on the particular business case, and the line of business that going into, clearly, it changes the need of an insurer, what skills they need in that supply chain. My one-sentence advice is, don't build that in-house, just partner with somebody who's an expert in that.
Click on the PodChat player to hear Yeoman's insights and recommendations around how the insurance industry can meet the evolving challenges using IoT.
- How has the insurance industry in Asia evolved in the last five years?
- It can be argued that IoT is still relatively new as applied in insurance. Can you cite one or two recent innovations around the use of IoT in insurance?
- What is the value proposition of IoT in the provision of insurance products and services?
- There are two aspects of IoT that need to be addressed in insurance: risk management and the other is around data privacy and protection.
- How are insurers using IoT to better manage their risks? (insight into behavioural analysis)
- In your observation, is the understanding of IoT technology, sufficiently mature around data privacy and protection?
- How important is having a clear business model to benefit from IoT data? And how can businesses adopt such a model?
- What skills, expertise, and experience must an insurer have access to benefit from the use of IoT?
- When looking to tap IoT, what questions should leadership ask their CIO/CTO to ensure they are in the right direction and frame of mind?
- What does Concirrus bring to the table?
