The Internet of Things (IoT) keeps growing. Insurers have always relied on data to support underwriting, but new technologies are resulting in an unprecedented wealth of data and an array of new applications. The insurance industry is already seeing big changes, but the true potential has yet to be achieved.
Data is an extremely valuable organizational asset for carriers across the entire insurance value chain. Its acquisition and utilization is crucial to simplifying and improving the customer experience. At the 2021 Connected Claims conference, digital intelligence company ABBYY’s Solution Marketing Leader, Eileen Potter stated, “Data is not static and the ability to extract intelligence and make knowledge-based decisions from customer data is a key competitive edge.” 1 Insurers simply cannot deliver speed, simplicity and ease across channels without accurate and actionable data.
If you’re like a lot of people, you may have more connected devices than you realize. You probably have a laptop and a phone. You might also have a smart refrigerator, a smart security system and smart thermostat. You may also have a connected car. The list goes on and on.
According to PYMNTS2, 15% of vehicles on the road are connected. ValuePenguin3 says that 65% of Americans have at least one smart home device, and according to Pew Research Center4, 85% of U.S. adults owns a smartphone.
The world’s appetite for connected devices seems insatiable. According to IoT Analytics5, the microchip shortage appears to have stunted IoT growth in 2021. That year, that number of connections only increased 8%, reaching a total of 12.2 billion endpoints. In 2022, growth has accelerated again, and the number of IoT connections is expected to grow by 18%, reaching 14.4 billion endpoints. Per McKinsey, it is estimated there will up to one trillion connected devices by 2025.6
The Internet of Things (IoT) is creating a connected environment within the insurance ecosystem for everything from policyholder communications to risk mitigation to insurance payments. According to ReportLinker research, the IoT insurance market is expected to grow at a CAGR of 40% over the period of 2021-2026.7 The widespread use of telematics, IoT and wearables means that a tremendously significant amount of personal data is regularly collected on digitally connected devices, data that insurers are just starting to leverage. According to Forbes, IoT enabled devices can benefit insurance companies by reducing the cost of the claims process by 30% and can decrease premiums by 25%.7
The potential applications are vast, including:
As data has proliferated, so too have data privacy laws that restrict how companies can obtain and use data. According to the National Conference of State Legislators9, California, Colorado, Connecticut, Utah and Virginia have enacted comprehensive consumer data privacy laws. These laws typically include the right to access and delete personal information and to choose not to have their personal information sold.
People have many reasons to want to keep their data private. Some may be worried about data breaches. They may also simply feel uncomfortable being monitored by companies, especially when it comes to devices that monitor their homes or driving.
However, many people appear to be warming up to the idea of sharing their data with insurers. Accenture10 found that 69% of consumers say they would share significant data on their health, exercise and driving habits if it means they could pay less for insurance. This is an increase of 19% compared to two years ago.
Money is a powerful incentive for many people. The TransUnion11 2022 Q1 Personal Lines Insurance Shopping Report says that 59% of Americans reported being concerned about inflation, and this may have driven interest in telematics as a way of saving money. Only 32% of the people surveyed were offered telematics options, but 49% of these people opted to enroll. According to the 2022 Q2 Insurance Shopping Report, the percentage of consumers being offered telematics rose from 32% to 40%, and the percentage who accepted rose from 49% to 65%.
Accenture10 says that consumers between the ages of 18 and 34 are interested in digital offerings that help them stay safe and healthy and that support sustainability. Insurers can leverage device data to help customers maintain their home and mitigate risk. Telematics can detect collisions and push a notification to the policyholder to initiate a claim. Smart sensors could eventually replace traditional FNOL and allow for the repair process to automatically be triggered.
The insurance industry’s role is changing. Consumers don’t just want insurers to react to losses. They also want insurers to play a proactive role in risk management. As more connected devices produce a greater amount of data, insurers need to be ready to seize the opportunity to create better insurance experiences.
Insurance payments are also changing. With One Inc’s sophisticated digital platform, you can access a frictionless payment experience for both premiums and claims. Learn more.