In today's advanced digital society, technology has evolved into our lifestyle. As technology continues to evolve at pace, we see new connected technologies that were once a distant notion become reality with the emergence of the Internet of Things (IoT).
In my previous blog, “Will traditional insurers realise the Gen Y opportunity?”, I explored the customer experience in today's insurance industry and what the future could hold for traditional insurance companies vs. tech companies if they do not innovate to meet the next generation's expectations.
This article explores a key enabler for this opportunity, connected technologies, ‘IoT’ (Internet of Things) focusing on the potential impacts this could have on the traditional insurance industry. Examples of ‘IoT’ influences already appearing in our daily lives are fitness gadgets, wearables like the Apple Watch, connected home security, and ecosystem devices.
An affluent generation buying tomorrow's technologyWe already know that Generation Y customers rely heavily on digital channels and that traditional insurers are failing to develop a multi-channel experience that meets their expectations.
Does this mean that Generation Y are also more likely to embrace new connected technologies? Not necessarily. In the Capgemini World Insurance Report 2016, our findings suggest that it is affluent customers - especially those who fall into Gen Y and Gen X categories - who are most likely to adopt new technologies.
Capgemini reports that 54% of Gen Y and 47% of Gen X confirmed they are likely to adopt new tech such as wearable devices. Many readers will be Gen Y customers who regularly go to the gym, drive a car and own house and might see the need for these technologies and the benefits of investing in them.
Customers' Likelihood to Adopt Technologies by Age Group and Affluence:
Three key technologies most likely to disrupt the current insurance business modelsConsumers are already subconsciously adapting to multiple IoT related influences, giving us greater control to better our lifestyle. Three key pieces of technology will potentially changeinsurance business models in the coming future. Connected ecosystems, Embedded Technologies and Autonomous Machine Intelligence.
Connected Ecosystems: These are physical products, for example, the current home ecosystem could have products like a garage door, thermostat or a smoke alarm. In a connected ecosystem, these everyday products gain a digital capability, enabling them to operate without human control, but capitalise on mirroring our human activity to manage user needs. For example, if your home were to be broken into, you can remotely access your home security system from anywhere via an app and an alarm system will be able to alert you, the authorities and your insurance company. Surely having this tech in lace should impact premiums?
Wearable Devices: These are technology products that can be worn and they provide some features like tracking health and fitness or GPS capability, together with a number of other technologies like Google Glasses, Samsung Gear VR or Quell Pain Relief. The next generation of wearable devices is anticipated to be embedded into the human body which could help manage our eating habits, major heath issues, and dental hygiene– I believe this to be some time away, however, an exciting prospect for insurance premiums.
Autonomous Devices: This is essentially machine intelligence which will enable a broad range of objects like cars, drones and robots to make decisions and perform tasks on behalf of humans. One good example of this is driverless cars, which have the capability to park, avoid traffic and navigate to places such as a petrol station independently. However, recent incidents involving Google’s driverless car suggests that there is still quite some work to do!
According to the Capgemini 2016 World Insurance Report, IoT provides an opportunity for traditional insurers to ‘create meaningful, technology-based connections with consumers,' given they embrace the change required to deliver this.
Risk fundamentals are set to go through a significant changeInsurers are highly dependent on being able to analyse risk, and so far this has worked, however as technology grows customers seek out tailor-made policies to suit their behaviours and needs. To elaborate, if we always drive within the speed limit, we are less of a risk to vehicle insurers than someone who has a need for speed. If we are the picture of good health, we are less of a risk to health insurers than someone who is not.
With the increase in IoT connected technologies, data records (such as a customer heart rate or speedometer recordings) will provide an increase in consumer transparency. Accurate and regular reporting should allow insurers to create more dynamic pricing models.
Watch this spaceUltimately, whether insurers will meet the inevitable trade-off: stay with the historical business model that has been in practice for for decades, or adopt connected technologies - which address the needs of tomorrow's generation, the verdict from above is they are likely to evolve for the new age.
As a digital native in the Gen Y camp, I am extremely excited about the prospect of connected technologies being adopted by the insurance industry and its application to generate more tailored premiums. It is changing the way customers are living and shaping how insurance companies operate and manage risk. My prediction is that we’ll see a profound and dramatic shift where insurers assess risks on segment of one basis as they become much more transparent in their pricing.