Internet of things (IoT) is basically a cluster of computing systems and electronic devices each with unique identifiers with ability to transfer data over a network and communicate without any human involvement.
As we are witnessing in contemporary times our lives are totally relied on digital mediums and automated devices for survival unknowingly, we are using IoT many a times in our digital life.
Without the electronic gadgets and the internet for even one day there will be much difficulty for us to spend time in normal way.
This over reliance on electronic medium and the web is not only in metro and tier 1 cities of India but has already spread fast like a wildfire to rural areas and tier 2-3 cities as well.
In today’s world everyone has in hand a smartphone with internet connection and this opens an ocean of opportunities for them to use the social media to interact with the external world, learn new things and change their lives to a smarter and better one.
With the changing behaviour of customers and increasing use of online mediums for shopping in this COVID era, businesses have also been presented with an enormous opportunity which is also a sort of challenge to evolve their models to adapt the change and serve consumers well.
Harnessing IoT for a wide range of business activities as enhancing customer experience will be one thing businesses are closely watching at.
As human involvement is lesser and the digital mediums are interacting with each other there are many outstanding benefits that IoT can offer in this digital world and there is a lot to be devised in this field that what use it can made to business.
Being in a conservative industry insurance companies will also be eager to use IoT as the next big thing to change their orthodox way of operating and scale up.
It is evident from the past and certain for the future that those companies who will be at the forefront to employ technology for solving problems will be stay ahead in the race as per the old saying “If you are not adaptive enough to change you may become extinct”.
In this article we will discuss five dimensions where IoT is and can be employed by the insurers to create a difference.
Underwriting and Pricing
IoT is changing the way of traditional underwriting and pricing the insurance products.
We have heard recently that TATA AIG has launched a pay as you go motor insurance which was already prevalent in developed markets like US and UK.
Now there will be rat race among other Indian insurers to employ this model as motor insurance is the biggest premium generator in the non-life insurance segment.
Motor insurers have historically relied on pricing parameters like age of the vehicle, engine capacity etc. for calculating motor insurance premium.
Now with the help of IoT sensors installed in the vehicle connected with the digital systems of the insurers continuously interacting and transmitting data insurers are able to fine tune the motor insurance price on factors like driving behaviour, use of the vehicle, vehicle data etc.
Similar approach is used for accessing risk in health insurance by the help of devices like fit bands and others, rewarding the customers on the basis of lifestyle choices resulting in more appropriate pricing.
We will see similar approach to be followed in other lines of businesses like property by the use smart home products which can be extended to commercial products as well.
Digital marketing is the new buzz word and online sales is gaining momentum like at an unprecedented scale for financial products.
Providing greater customer interaction and cross selling products using IoT like telematics applications can be the new normal for the insurance industry.
Agents and intermediaries can evolve their customer segmentation capabilities and gauge the demand to take distribution of the insurance products to all time next level.
The collection of real time data using IoT and using analytics to curb fraud can give the insurers an edge ahead and help them in reducing huge costs which directly impacts profitability.
There can be sensor based driven decision analytics that enable timely recognition of emerging fraud patterns and which may help in curbing the same.
Exchange of data between the insurers fraud database and IoT sensors at customers devices, network hospital devices in health and garages in motor can definitely help in establishing the genuineness of a claim and establishing fraud patterns if anyone is trying to act smart to push a claim which is otherwise not admissible under the policy.
Enhancing Customer experience
With seamless data sharing a lot can be done to enhance customer experience using IoT concepts.
Like immediate dispatch of ambulance and relief services after an accident, appointment of surveyor based on real time data of say a faulty machine, sending health recommendations and preventive measures, maintenance reminders as per health data received and others.
This can create a positive impact on the minds of the customer and which is better for an industry like insurance which badly needs this trust.
Demand based allocation of resources like sales team, claims personal can be achieved by applying IoT.
Operational efficiency can be enhanced by using digital and electronic systems that communicates and transfers data, less involvement of human can make systems more accurate and help in reducing errors.