The concept of the Internet of Things (IoT) is mentioned and discussed almost constantly these days across pretty much every industry. And there’s a lot more to it than Internet-connected refrigerators that text you when you’re running out of milk or when you’ve accidentally left your keys in the freezer…again (don’t judge).
The concept of network-enabling everything – and then having these things generate information that can be sent, aggregated and analyzed – opens up doors to an entire world of new capabilities and possibilities. But for some, the idea of placing Internet-enabled sensors all around them that are constantly monitoring things and reporting back activity may create enough paranoia to inspire the creation of tinfoil headwear.
Regardless of the paranoid delusions of 24/7 surveillance and “Big Brother” that the IoT may inspire amongst people, there can be significant benefits. One of the industries that could benefit is the insurance industry, which is playing with IoT and sensor technology to help better insure people and save money. And the power of these devices and the data they generate only increases when you add in unstructured data from social media and other sources, and utilize data analytics technologies to gain valuable insights.
Let’s take a look at some of the recent news about the insurance industry and its use of IoT and data analytics.
Also…that’s a really nice shirt on you. I mean it…very flattering. (Just kidding. Or am I?)
From grudge to nudge: tech firms help insurers shift gear
Insurance is a tough business. If you think dentists get a bad rap, insurance agents would like to have a word with you.
One of the problems for folks and companies in the insurance business is that people only buy it because they should or are required to. Then, they only use it – and interact with a company and its people – when something potentially terrible has happened.
Don’t believe me…think about all of the times you’ve interacted with your health insurer, or car insurance company. When you did…things probably weren’t all sunshine and lollipops.
But, according to this article by Reuters, the industry is looking at Big Data, data analytics and IoT to help change that. Utilizing these technologies in concert, they’re trying to shift insurance providers from, “the companies you talk to when it hits the fan,” to, “the companies that give you friendly warnings when you’re at risk of bad things happening.”
The technology that will help accomplish this is being lumped under the term “insurtech” and it can include any of the technologies – from IoT, to Big Data, to data analytics – that can help insurers get beyond reactive compensation for bad news and become more about proactively managing a customer’s risk and helping them avoid catastrophe.
A great example provided in the article involved cargo ships and pirates (I’m the captain now!). By analyzing where ships have been hijacked, insurers can give preemptive warnings to captains that may be navigating into waters where aggressive pirate activity has occurred in the past.
Capabilities like these could be in the cards for insurers sooner rather than later – the insurtech sector is seeing a massive amount of investment. As the article claims, “The lure of products promising to save on claims in a highly competitive market has led to a leap in investment in “insurtech” in Europe to more than $400 million (294 million pounds) in the first half of 2017, from just $50 million a year ago.”
Telematics in commercial fleets: a path to profitability
There are a lot of commercial fleet vehicles out there on the roads, and it’s not just those big semis that scare you when you’re right next to them on the interstate. Construction companies, electricians, plumbers – if there’s a name and logo on the side of it, it’s probably one of multiple vehicles in a company’s fleet.
All of those vehicles need insurance. And that insurance has not traditionally been a huge moneymaker for insurance providers. In fact, according to this article on PropertyCasualty360.com, it’s been cutting into insurance provider profitability.
But what if there was a way to change that using technology? Well…it just so happens that they may be onto something…
Utilizing telematics in fleet vehicles isn’t necessarily new. Fleet managers have been utilizing telematics to keep an eye on their drivers for years – ensuring that they’re taking the most direct route, that they’re not taking unnecessary stops, and that they’re not wasting gas – which can add up to be a pretty big expense for a company with a decent number of fleet vehicles.
But these same telematics systems that were being used to ensure efficiency can also be used to track other things – such as driver safety. And by getting a better view into just how good or bad of a driver one fleet operator is, insurance companies can more accurately price their insurance policies. They can also proactively reach out to customers to propose safe driving courses or other remediating steps that can help reduce risk and – subsequently improve profitability.
Qualitative Underwriting
Those last two articles are great examples of how Big Data, IoT and data analytics can come together to make insurance more proactive and profitable. But that doesn’t mean that they’re without their detractors.
Warren Berey is SVP of Multinational Insurance at Generali Global Corporate & Commercial U.S.A., where he oversees the development of international casualty and package insurance solutions for U.S. companies and U.S. subsidiaries of foreign companies. The man know insurance, and he recently penned an article for Risk & Insurance that could serve as a warning to those that think that technology can solve all insurance provider woes.
According to Warren, underwriting isn’t just having access to the best and most accurate data. There’s an art to it. And, although there is a place for these technologies and some serious benefits that they can deliver – they’re not an alternative to good, talented underwriters with a deep understanding and strong relationships with customers and clients.
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