“Unlike their cousins in the banking sector, insurers have been largely untouched by the digital revolution.”
That assessment comes from Sam Stewart, an analyst with Boston Consulting Group, who also maintains that the insurance industry is now poised for digital disruption. The disruption will come from two directions: the Internet of Things and big data.
Are these just the latest buzz terms, or is there a real change on the near horizon for insurers?
For starters, insurance companies are already employing the Internet of Things, as seen with the widespread embrace of telematics that tracks customers’ driving habits. Big data is part of the equation, as it is gathered from devices and applied to customer pricing models.
But the possibilities extend well beyond auto insurance, Stewart says:
“Over the next decade, the number of connected devices will be measured in the tens of billions. This will encompass small, low-cost sensors that can be placed in homes and cars to provide data that will allow much more accurate information about insurance risks. For example, a sensor in the home will be able to detect a water leakage in real time. Sensors in cars will provide data about the location and usage patterns of the vehicle and therefore a more accurate fix on the risks of theft and accidents.”
Wearable technology may also open up new avenues of business for insurers. As Stewart explains, “Wearable technology such as the Apple Watch opens the door to mass-market availability of real-time data on health and fitness and new insights on risk for health and life insurers.” Many consumers would be willing to submit to sharing data from sensors of various types in their homes or on their bodies in exchange for reduced premiums, he adds.
Recently, I was speaking with the vice president of Verizon Telematics, which is working with a number of insurers to track both individuals’ cars and corporate fleets. As insurance companies move into “telematics” in homes and on individuals, expect to see more partnerships being forged.
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