With most industries embracing digital transformation in an effort to improve their bottom line and deliver benefits for the consumer, the insurance sector is no different as it is looking to invest in new technologies to not be left behind.
Insurers across the globe have been actively adopting new technologies such as the Internet of Things (IoT), cloud computing, artificial intelligence, big data and analytics, and blockchain to redefine their growth strategies, enhance their daily operations, increase revenue, reduce costs and improve their competitiveness.
Investing in IoT
As key enablers of digital transformation and the key to implementation of these new age digital technologies, information and communications technology (ICT) solutions (including hardware, software, managed IT services, network and communications, and IT consulting) are attracting significant investments from insurance companies.
According to GlobalData’s ‘ICT investment trends in Insurance’ survey report, 36% of respondents from the insurance sector said their companies had plans to slightly increase their ICT spending in 2018, while another 18% of respondents said they had plans to increase their ICT spending significantly during the year.
IoT is also expected to bring about a disruptive force for many sectors, with the insurance sector also looking to tap the power of a connected IoT ecosystem.
Early bird gets the worm
Early adopters have already gained a clear benefit of IoT by showing how data from automotive sensors, in-home sensors, wearable technology, mobile and telematics devices, drones, GPS and other network appliances can help grow business, engage policyholders in loss prevention and improve risk assessment.
For example, with the implementation of IoT devices, insurers can access a wide range of customers’ personal information for assessing risk, managing claims, and pricing their policies. Connected car data from smartphone telematics can provide critical data on consumers’ driving habits to insurers, helping them identify safe drivers and price their products more profitably.
On the other hand, IoT-enabled smart home systems bundled with insurance products may help insurers to not just offer insurance to homeowners against risk, but to also enable them to safeguard their properties, thus reducing the overall risk to both customers and themselves. Hence, businesses in the insurance sector are expected to increase their investment in IoT implementation in the coming years.
According to GlobalData’s survey findings, a solid 62% of respondents said that, as far as IoT hardware was concerned, their businesses would be investing in network sensors in the short to medium term, followed by security sensors, for which 59% respondents said they are investing.
With regard to software, a strong 60% of respondents claimed IoT/machine-to-machine (M2M) security to be the IoT software that their enterprises would invest on in the short to medium term, followed by enterprise IoT platform and supervisory control and data acquisition (SCADA).
With regard to IoT connectivity, while a majority of respondents confirm their businesses would be spending most on low-power wide-area network (LPWAN) connectivity, short-range connectivity is also expected to grow in prominence for IoT in the short to medium term.
Health insurers are also using connected wearable devices to collect huge volumes of health data on their customers that can be used to extend fair and profitable pricing and even help customers prevent any disease that can increase the overall risk to customers and their businesses.
Despite growing interest, the implementation of IoT in the insurance sector also has its own set of challenges such as stringent data storage regulations, IT security, data privacy and protection protocols, and digital identity authentication rules, among others.
With a huge volume of data to be managed, insurance companies need to ensure data security and privacy for safeguarding customers’ personal information.
Additionally, insurance companies should also focus on upgrading their IT capabilities and integrate high-end analytical methods for generating real-time insights. For achieving operational intelligence, enterprises are investing heavily in technology, acquiring a new talent pool, and transforming their corporate culture to encourage creative and methodological thinking for data collection and usage.