This guest column is authored by Subir Mukherjee, Founder, GIBL.IN
The Internet of Things is essentially the network of interconnected computing devices, living creatures, sensors or other objects that can communicate on the network with other devices. These objects, or rather things are capable of passing on data. The capability to make any physical ‘thing’ armed with internet connection has been making huge impact in a multitude of industries including insurance. Indian insurance market is coming off age at a rapid pace and and the emergence of the Internet of Things have well and truly gracing the insurance tech space in India.
Essentially, the IoT uses the massive data flow from an array of devices like automotive and in-home sensors, wearable gadgets, GPS, telematics devices, smart phones and other sources to identify new business opportunity, assess risks more efficiently and help insurers engage with policyholders proactively to prevent loss prior to the occurrence of mishap. A wealth of things are connected with Internet at present such as cars, residences, fitness trackers and jewelries. Indian consumers have already started to use connected devices in their daily chores. This is just the tip of the iceberg as the estimation by Business Insider Intelligence suggests that there total number of IoT devices will reach a staggering 9 billion across the world by 2018.
How IoT will benefit insurance policies?
With the advent of IoT devices your health, home and car insurance plans will be more personalized. Customized coverage and premium will be viable by tracking down your behavior through smart connected devices. The way you engage with your own body, your car and residence is getting smarter with each passing day. Let’s go through some real-life problems to understand how IoT devices could influence your relationship with your insurance provider in India.
With your car insurer
Suppose, you are a safe driver. You maintain distance, park your car slowly and cautiously and refrain from hard braking. Understandably , your low-risk profile is beneficial to your car insurer, but you have no way to reap the rewards of being a good driver.
With the dawn of telematics technology which are IoT devices, you can have your driving habits recorded and shared with your car insurer. The real-time data that proves your good driving habits will make you eligible for lucrative discounts. Telematics technology can store a myriad of crucial data pertaining to one’s driving such as distance covered, speed history, turning and braking patterns, time of the day of driving. All these data contribute to pricing and maintaining of “usage-based” insurance.
With your health insurer
Suppose, you are a health-conscious person. You work out regularly and take all sorts of preventative measures to stay out of ailments’ way. But you end up paying the same premium as a person with sedentary lifestyle does.
With the widespread adaptation of wearable gadgets that are capable of keeping a tab on your healthy activities you can earn points to have your health insurance premium reduced. Health insurers in India have already started to incentivise their customers with healthy lifestyles. These wearable gadgets being an integral component of IoT devices can record vital information such as calories burn, sleep pattern and heart rate and help health insurance providers come up with personalized coverage and premium.
With your home insurer
Suppose you own a residence and you take good care of your household. Even though you do damage control on your expensive household items your home insurer seems not to take notice of it.
IoT connected environmental sensors can be installed in residences and also in commercial establishments like office buildings, factories and warehouses to detect temperature, sound, smoke, toxic fumes, water presence humidity and many other hazards. These sensors can send out data to keep the home-owner aware of small issues before they turn big.
IoT devices will help insurers protect the connected consumer proactively
Insurance companies in India traditionally resort to past data to work out premiums and make decisions about future contracts. If you stay connected with IoT devices that offer consistent flow of real-time data insurers can shift from their historical data dependence to analysis of new information to come up with actionable insights by making predictions and suggesting preventive measures. Let’s take a look at some real-life scenarios where your insurers can keep you abreast of latest situations with the help of IoT devices.
Your car insurer
In case you drive too fast and recklessly which trigger risks of accident you may well receive a text from your car insurance provider to check your speed and drive cautiously. Car insurance providers can also reward you with points if the data received by telematics show you are a safe driver.
Your home insurer
Your home insurance provider can gain all sorts of information about your residence through the environmental sensors integrated in the walls and roofs of your household. Wouldn’t it be great if your insurer could alert you about leakage on the roof and cracks in the wall? This will not only help you take evasive action and avoid a disaster but also your insurers can also evade massive claim payout.
Your Health insurer
Your health insurance provider can incentivize you for working out and completing a particular number of steps specified by your insurer. All your health related data will be transmitted through the gadgets you wear and help insurers make decisions accordingly.
Sounds too good to be true? Actually not! In health and car insurance frontier the practice of incentivizing the safe drivers and people with healthy lifestyle is already underway. It is just a matter of time for the home insurers to get on the IoT bandwagon.
How can Indian insurers leverage on IoT connected devices?
Just like the policyholders, insurers can also cash in on the enormous amount of data they receive from IoT devices. By staying connected with the insured round the clock, insurers can garner the following benefits.
With IoT, insurers can gather data from sensors, gadgets and telematics and make use of advanced analytics to come up with the following;
- Understand their customer better with a closer look into their lifestyle and driving habits
- Reveal actionable insights that can potentially lead to higher customer satisfaction at a lower cost
- Treat the customer personally based on their personal needs.
- Interact with policyholders to take hold of potential problems and to seek new opportunities
Many damages and claims in consequence can be avoided if policyholders and insurers get the right information in the nick of time. To accomplish this, it is critical to gather and analyze real time data and protect the insured proactively. Damage control in advance will lead to reduction in the number of claims filed. IoT connected devices can help Insurers enhance their performances in the following ways;
- Take proactive actions to lessen severity and magnitude of claim and improve on claims service.
- Provide alerts and other personalized actionable insights to help policyholders curb issues in advance and avoid major mishaps.
- Combine real-life data on traffic or weather conditions with parameters of policy to provide timely instructions.
Manage and mitigate risks
Insurers can leverage both structured and unstructured data IoT from devices like sensors to help the policyholder manage risk. Here is what insurers can do to mitigate risks;
- Create risk profiles of all policyholders on the basis of the data received on their habits and conditions.
- Keep an eye on the behaviour of their customer to assist them make smart and risk-reducing decisions
The IoT ecosystem have been expanding the world of accessible data in India and opening up new possibilities. New data sources and streams armed with advanced analytics have founded new business models. The trend of “pay-as-you-drive” and “pay-as-you-live” business models has finally set in India after proving their usefulness across the world.
Challenges in IoT landscape
To leverage IoT connected devices, insurers in India need to meet the following needs in order to protect data, and issues related to device failures and errors.
Ensure data privacy
IoT connected devices send out data on customers’ health, residence and cars to fine-tune and work out personalized coverage and premium. Since, customers are highly sensitive about their personal data, insurance regulators need to observe the dynamics in the new ecosystem minutely, and come up with apt regulation for the usage and adoption of IoT connected insurance products.
Manage errors of IoT connected devices
In an IoT connected ecosystem that is driven by sensor, telematics and several different gadgets, the responsibility to mitigate and control losses will be on IoT connected devices. However, if a device malfunctions in time of a loss event, the assessment of the loss will not be flawless.
It is an undeniable fact that the IoT will augment Indian in insurance tech space. Insurers have already come a long way from the traditional way of doing business and are committed to come up with risk-informed strategies. This type of strategies is essential to improve core business processes and practices. Most importantly, insurers need to seize the full potential of the IoT and harvest the value it has in store for the Indian insurance tech space.
The policyholders can manage their own risks by leveraging IoT and can save a big chunk of cash. The FinTech ecosystem has been taking Indian insurance industry to a new level. It will be rather interesting to see whether the newly emerged insurance tech space will learn yet another trick.
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