Is Insurance Industry in the cusp of Technology Disruption?

When astronaut Barry Wilmore asked for a spanner, NASA emailed him one. Barry printed what he wanted in International space station in less than an hour using a 3D printer. This explains the power of disruptive technology, in a nutshell. In this highly competitive world where standing still means falling back, disruptive technologies gives industries and companies an edge over the others.  Adoption of disruptive technologies is one among the many other business challenges that insurance industry is facing, as I have outlined in my previous blog.

Technology in insurance
Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Transamerica’s Chief Innovation Officer Aaron Proietti rightly quoted in LifeHealthPRO, “I think this (insurance) industry is on the cusp of a big disruption, and has been on that edge for the past decade or so. The longer it lies dormant, the more disruptive it’s going to be when it happens”. Insurance industry started embracing innovative technologies such as telematics, IoT, mobile, digital, cloud etc., Let me delve into few of those in this post.

Telematics – Computer with tires?

car-telematics

If we look at the amount of data being collected by telematics devices, we may think that we are all driving a computer with four wheels. Originally started in the auto industry, telematics and the adjacent technologies has ventured into other lines of insurance as well. Oscar’s misfit could be a perfect example for this. Oscar, as it claims that it is a new kind of health insurance company, provides its customers with misfit devices and rewards with cash benefits if they stay fit. The increase in adoption of these technologies has also made the manufacturers to incorporate these technologies during manufacturing. GM’s Onstar and BMW’s ConnectedDrive services show how manufacturers have taken telematics seriously. However, there is a fly in the ointment – Privacy. According to a recent McKinsey connected car consumer survey, 37% are reluctant to use connected cars because of privacy concerns.

Internet of Things (IoT) – No science fiction, anymore

Internet of Things
Source – forbes.com

After telematics, innovative insurers wanted to be at the center of Internet of Things (IoT). As home and other places get more and more connected from carpet to water pumps, P&C insurers see this as an opportunity to lower risk and reduce loss. Though connected home technology is still in the early phase, insurers started partnering with smart home equipment suppliers and offer discounts to their customers who use smart home technologies.  For example, State Farm teamed up with ADT a home security and monitoring technology supplier and Allstate partnered with Rogers, a smart home monitoring equipment supplier. Some bold insurers, are also a step ahead by providing, innovative insurance package such as BNP Paribas Cardif’s Habitat. According to ‘A Ninety Consulting’ white paper on ‘The Connected Home’, 86% ranked property loss protection as a top reason for a smart home system. Also, the whitepaper reported that the market growth is very strong for IoT. Between 2012 and 2017 the installed base is forecasted to grow at a CAGR of 55% to reach 31.4 M smart home systems.

Mobile, Digital and Cloud – Technologies in action

Cloud technology in Insurance
Image courtesy of marcolm at FreeDigitalPhotos.net

 

Mobile, Digital and Cloud technologies are matured as compared to telematics or IoT and works in intersection with multiple technologies for insurers. Think about a digital insurance market place which enables customers to compare and buy insurance through a website which is hosted in a public cloud and could also be navigated via mobile devices. Also, mobile phones started taking over the standalone telematics devices like progressive’s snapshot and acts as the hub for connected homes like Google’s nest. The adoption of mobile technology is further accelerating, according to a recent Celent survey, almost 70% of the IT leaders see mobility as mission-critical or important to their organization today. In line with this trend, a survey on insurance CIOs by Novarica suggests that more than 60% of insurers will add new mobile capabilities for policyholders and agents.

How analytics can address the challenges?

Insurers are embracing innovative technologies and the amount of data being collected is growing exponentially. Insurers have started seeing the vast data generated through these technologies as gold mine when a layer of analytics is applied on it. The outcome of analytics could increase customer experience, cross-sell targeted products, prevent and reduce fraud/loss and much more. As insurers see ROI in adopting these technologies because of analytics, the adoption also gets deeper and wider. For example, Progressive applies analytics on data collected through its telematics device snapshot, for pricing car insurance and BNP Paribas Cardif in partnership with Follow Analytics to offer a solution that boost personal safety based on IoT data analytics. The rise in telematics & IoT solutions by major IT/analytics vendors and a surge in niche analytics players for telematics & IoT would also vouch for the increase in adoption by insurers.

Please share your thoughts on how you have seen analytics is transforming the insurance industry. In the next few blogs, I will try and explore analytics’ role in the insurance industry in further detail.

This blog is written by Karthick Paulraj, Analytics Consultant at BRIDGEi2i

About BRIDGEi2i: BRIDGEi2i provides Business Analytics Solutions to enterprises globally, enabling them to achieve accelerated business impact harnessing the power of data. BRIDGEi2i’s Insurance Industry solutions brings in a unique combination of advanced analytics techniques and domain experience to help businesses develop a clear understanding of the market landscape, prioritize marketing channels and transform digital data into actionable insights to deliver incremental marketing return on investment. To know more visit www.bridgei2i.com

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The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position or viewpoint of BRIDGEi2i.

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