There has been a lot of debate about the potential impact of the IoT on the insurance industry and some strong push back to the term ‘game changing’. As an industry that was built on collecting and analysing data to make decisions on risk, it is hard to deny that the IoT is going to have a huge impact. However, the IoT and smart home will present both and opportunity and a threat and, in my view, it will be a game changer if the industry fails to embrace the opportunity and deal with the threat.
A recent survey of by Insurance Nexus highlighted that most carriers are struggling to develop a strategy for the IoT which makes me fear for the future, particularly in the mass consumer market where the smart home growth is accelerating rapidly. Strategy will be high on the agenda of the Insurance Nexus conference in London on 11/12 June and it’s important that insurers work out how to exploit the opportunity.
The industry should be worried by the threat posed by the IoT because the traditional business models are ready for disruption. In property and contents, consumers don’t really have a meaningful relationship with their insurer. They see insurance as a grudge buy and interact with their carrier once a year, generally haggle over price, and then pray they never actually use the product. Not and experience that inspires confidence as we move into the digital age.
In my view, the big threat to insurers will come from access to data. If competitors have access to better quality data, they can price more competitively and secure stronger margins. In this new, connected world, data will not be as open as many might think. Consumers will only share the data when the see a real value and companies will guard the data they collect because it protects their market position.
In addition, the IoT will open the market to new entrants with innovative business models that bundle smart home/IoT products and services and potentially, layer insurance into their offerings. It’s not a stretch to see Amazon, Google, or Apple exploiting the data they collect to offer targeted insurance products as part of their bundles.
To meet the threat there seems to be 2 strategic options.
Carriers could focus on reinsurance markets and simply sit behind companies like Apple, Google, and Amazon if they did become resellers. Alternatively, they could see the IoT as an opportunity compete and offer smart home as part of their own digital strategy. The option to focus on reinsurance is simple and low risk but very limiting. Growth can only come from offering more and stepping up to bundle new value-added services to existing products by exploiting the smart home and IoT.
However, it seems insurers could adopt plans to grow their business by helping consumers to protect and connect with their homes. This is not as difficult as it might seem. Most major companies deploying smart home start by working with partners that offered B2B solutions as a managed service. These partners create simple, curated, smart home bundles for the consumer and tie this into the insurers brand either directly or indirectly. This reduces commercial risk and enables rapid testing and deployment.
At Insurance Nexus in June 11/12 the agenda will be focused on helping insurers to develop their strategy for the smart home. For my part, I will be addressing what insurers suggest are their top challenges and exploring business models that focus on simple, affordable, and scalable smart home solutions that secure new revenues and drive adoption. I’ll be showcasing some success stories in other channels and demonstrating solutions that have been tailored specifically for insurers.