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Insurance has "seen margins shredded by a firestorm of price-driven competition and spiralling claims costs," according to "The Future of Retail Financial Services," a survey of more than 500 financial services executives from vendors Cognizant, Marketforce and Pegasystems. But the Internet of Things offers an opportunity to reinvent the industry. Here's some of the ways insurance executives surveyed see that happening:
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1. Pricing overhaul
Constant data from IoT devices mean that insurers can update prices accordingly -- both up and down -- as risk is better quantified. Seventy-seven percent of auto insurers surveyed expect policies to be priced dynamically in five years.
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2. Valuable feedback
Preliminary data on usage-based insurance policyholders indicates they appreciate the feedback they get from insurers based on their driving, which retains them as customers for those carriers. Insurers will regularly provide personalized risk information to their customers by 2020, accordng to 80% of survey respondents.
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3. Risk mitigation
Another 80% of respondents expect that feedback to take the form of actionable insight or information that can help reduce a policyholder's risk. "Insurers would be able to inform drivers, for example, that their favored route to work has black ice and recommend safer alternatives," the survey posits.
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4. Claims
The 'moment of truth' for insurers stands to gain a lot from the IoT, according to the survey. "lockchain has the potential to transform the claims process: drawing on data from IoT to validate a claim – evidence rain damage to a crop, for example – could then autotrigger the filing of a claim, which is then promptly settled via a smart contract on the blockchain," the survey says. Twelve percent of respondents xpect the settlement of insurance claims using IoT data, blockchain and smart contracts to be mainstream practice within two years. That number rises to 85% within a decade.