Insurance 2.0 is a
The IoT is already playing a significant role in managing risk and reducing
and predicting claims — defining insurance 2.0. Connected homes can now
use sensors to warn owners of the risk
of potential fires or flooding. Driverless
cars, which might not be able to eliminate car accidents by themselves, will
change the balance of risk management
Doctors can now access data from wearable devices, preventing a serious problem
by monitoring patients’ activity in real-time and notifying them to adjust their
behavior before it has an adverse effect.
Insurance 2.0 is a game changer — and
insurers will need to decide quickly which
way they turn at the crossroads. The Io T is
not an IT implementation — it is a change
of business model. Much depends on the
level of adoption of technology, but if some
of the more astute organizations within the
industry change their business models soon,
then the rest of the industry could change as
quickly as the next 12 months.
There is no doubt that a world where car
accidents are a thing of the past, medical
conditions are diagnosed and prevented
before they occur, and household acci-
dents like flooding or fire are prevented
before they happen, would improve life
considerably. The truth is that technol-
ogy and innovation are also allowing us
to move closer and closer to preventing, if
not eliminating, risk completely.
This means living in a world where risk itself
is reduced. The increased prevalence of connected devices, combined with technological
advancements, show very little sign of abating, and so the insurance industry finds itself
at a crossroads. Does it turn left and continue
down the path of traditional-style risk mitigation that will most likely lead to reduced
gross written premiums (GWP) and loss of
brand identity? Or does it turn right onto the
data-driven superhighway and embrace a
new way of operating? The point is that there
is only one option available.
The new normal of insurance will look
very different from today’s model, and a significant change of mind-set will be required
if insurers are to truly benefit from the more
proactive approach of Insurance 2.0. Where
they might once have only had one interaction with a customer every year — perhaps
at premium renewal — this model must
change so that insurers become relation-ship-focused every second of the day.
As an industry that has been built on
mitigating risks of all shapes and sizes
through a traditional system of premiums
and claims, these advancements make the
future less certain. A recent Capgemini
report suggests that the value of claims
relating to risk is set to suffer a potential
loss in value of 20 to 40 percent, which
could have profound implications for insurance demand and premium income.
Insurers must find ways to access the
data provided by customers from technology, including smart phones, wearables,
industrial monitors and IoT-connected
devices to add greater value. Insurers will
differentiate themselves by the value of the
relationship they add to their customers,
as well as the flexibility of their premiums.
Those able to leverage data to provide the
best service will be the most successful.
A new model
In this new data-driven Io T model, insurers and policyholders will collaborate to
create a partnership focused on improving overall quality of life. For example, an
insurer will be able to monitor water activity in an industrial property, and provide advice on any chronic performance
issues via immediate alerts.
This model adds considerable value for
customers and also provides important opportunities for insurers to identify good and
bad risks, minimize claims payouts and up-sell relevant products and services — creating a win-win situation for both parties.
Tom King ( firstname.lastname@example.org) is the senior
director and industry principal of insurance
at Pegasystems. He has more than 25 years
of experience in the insurance industry. Keith
Gage ( email@example.com) is a vice
president in Capgemini’s Financial Services
Global Business Unit and leads a portfolio
of insurance accounts within Capgemini’s
Insurance Sector. He has more than 20 years
of experience in the industry.
Insurance 2.0 is the evolution of the traditional insurance industry responding to the technological advancements of the Internet of Things (Io T), which are connecting our lives and reducing risk.