The Unstoppable Surge of IoT
IoT (Internet of Things) has long gone beyond a buzzword.
International Data Corporation (IDC) forecasts worldwide IoT spending to sustain a compound annual growth rate (CAGR) of 14.4% through the 2017-2021 forecast period surpassing the $1 trillion mark in 2020 and reaching $1.1 trillion in 2021.
IoT has important impacts on all industries. Insurance is second industry that is most-impacted.
The Power of IoT Data
Real-time data from the IoT (Internet of Things) sensors and devices are powerful new source of data for insurance.
Insurance applies actuarial science that uses mathematical and statistical methods to analyze historical portfolio and loss data, to assess present risks and to predict the future events.
Traditional actuarial science uses retroactive deterministic models to construct a series of rate tables with fixed coefficient in order to tariff the risks and calculate premiums. The innate lag of historical loss data prohibits actuaries from adjusting promptly the risk evalution and consequently correcting the tariffs.
Real-time IoT data are fundamentally changing the traditional approaches and are creating brand-new opportunities for insurers. Visionary innovators in the industry have started to apply real-time dynamic pricing and to tariff individual risk more precisely based on “WWWH” (Who, When, Where and How). Moreover, such data allow insurers to offer advices to prevent risk incidents from happening or to provide immediate helps right after the risk incidents.
Distruption to Status Quo
IoT technology has the potential to distrupt existing insurance models. The 3 key assets of insurance business are:
- Analytical Capabilities
The new IoT ecosystem – made of globale players, such as device manufacturers, automotive OEMs, home security providers, Isp operators – will become the new possessors of customer interactions and invaluable behavior data. The shift of data possession will eventually entice new-entries to cross traditional industry bondaries and compete with incumbents.
Acting as an invisible protector behind the scene could be one of the possible scenarios for the future insurers.
Opportunity of New Growth
Like all innovations, IoT technology is shifting the market boundaries, but at the same time, it’s also introducing possibilities of creating new value proposition for insurance to new growth opportunities. Visionary insurers can levarage its current customer base, take active control of benefiting from IoT to offer better products/services and enhance relationships with their customers.
The earlier insurers realize these opportunities and take actions, the more successful they will be in this continuously transforming market.
Top 3 insurance product lines that are already in the phase of transformation are:
- Motor / Car Insurance
- Health Insurance
- Home Insurance
InsurEngines offers End-to-End Solution for IoT insurance.
- Technology – InsurEngines systems are designed with modern architecture and uses main-stream technologies. It’s capable of handling terabyte-level data hosting and processing.
- Intelligence – InsurEngines has already collaborated with multinational insurers and leading IoT device providers to develop proprietary machine-learning algorithms specialized in IoT insurance.