Every industry is being reshaped by the evolution of technology and consumers expectations as to how those technologies should enrich and inform their everyday lives. Over the past several years, the Internet of Things (IoT), has provided a steady stream of new technologies, brimming with the promise to “change the world.” For the most part, the impact and value realized has not lived up to the hype. Telematics, wearables, robotics, AI, and a myriad of sensor innovations have insurers scrambling to apply these technologies to their business. While companies will claim the center of it all is “customer focus,” most still take a product-centric point of view. Despite this, consumers are becoming more comfortable enabling devices that gather and share information about themselves and their environment, in return for convenient anytime, anywhere delivery of services. In short, they are living a “connected life.”
The connected life presents an unique challenge and unparalleled opportunity for insurers - how to remain relevant in policyholders’ lives. By and large, insurers are relevant on the worst days of a policyholder’s life; car accidents, floods, fire, medical/health problems, and more. While helping consumers deal with accidents and tragedies is paramount, that react and respond business model significantly limits the value policyholders expect to realize in the digital economy.
"With today’s technology, the possibilities for relevance are endless"
Sensors, connected devices and wearables enable insurers to shift from simply paying for a claim, to proactively preventing those claims or minimizing the disruption to a policyholder. New business models, built on predicting and preventing breakdowns and accidents, will provide new and integrated products and services to support the way we work, live and play. Insurance executives, and CIOs in particular, must constantly be investigating, identifying, and developing their eco-system of technology providers, partners and IoT solutions in order to react to changes in the market. They must understand the opportunities emerging across industries and drive technology investments to diversify and enable new revenue streams. The fast-changing demands of tomorrow’s consumer will only be met through the rapid deployment and flexibility of a well thought out and diverse technology eco-system.
A Vision Driven by Data-Rich Technologies
Until a hot water heater bursts or a hailstorm damages a roof, most consumers have very little interaction with their insurers. The IoT not only can, but must change that dynamic. Companies in the digital world gain relevance and win by making their customer’s lives better. Using advanced analytics tools, predictive models, social and behavioral analysis, and complex consumer trend analysis, companies such as Amazon, Google, Alibaba, Netflix, AirBnB, and others have changed the way consumers interact with the world. They have redefined markets, becoming highly influential and relevant to how we shop, explore, travel, communicate, and live our everyday lives.
Similarly, insurers must evolve their business models and engage customers in new ways in order to remain relevant. For example, instead of paying for repairs after a water heater leak has flooded the basement, insurers should be providing information and insights about the utilities, devices, appliances, and conditions of the policyholder’s home. With such details, the insurer could proactively arrange for the delivery and installation of a new hot water heater at a discount because a sensor within, or experiential information about the existing unit, indicates that mineral deposits had passed a crucial threshold and the need for a new water heater is imminent. A possible negative situation turns into a positive, proactive interaction that provides value to both parties; in this case, lower costs and no claims for the insurer and peace of mind and minimal disruption to the policyholder.
With today’s technology, the possibilities for relevance are endless. Insurers could help homeowners with financial strategies for major expenditures such as replacement roofs, re-piping older plumbing or ameliorating known regional issues, from flooding basements to shifting foundations. Additionally, utilizing a diverse and well-informed partner ecosystem would allow insurers to be relevant across the life stages of their policyholders. For example, offering services and discounts for remodeling a home to ensure it’s safe for a new baby or an aging parent, providing an auto loan for that special sweet-16 gift, providing college tuition for one’s high-school graduate, and more. In the end, proactive data collection and analysis, coupled with creative, integrated products and services, will help build trust, deepen relationships and drive much needed relevance with policyholders.
Building a Truly Technology Enabled Customer-Centric Model
The CIO’s organization must move away from a traditional “product-centric” view and develop a technology ecosystem based on a customer-centric view of the world, delivering an always-on customer relationship with high touch digital capabilities. Accomplishing this will require insurance CIOs to integrate business and technology strategies.
Insurers must understand how consumer behaviors prevalent in a “connected life” are driving changes in expectations. Only then can they identify the services, technologies, and data required to deliver on the expectations of those moments of relevance.
In order to deliver a ‘connected life’ model, CIO’s must act on the following:
• Harness the IoT universe. Understand and utilize sensors, big data, analytics, cloud and AI to create fresh value propositions for policyholders.
• Ingest and act on real time data. Data must be turned into meaningful information delivered in a useful format for policyholders’ everyday lives. Watch for new offerings and players to emerge in the space to streamline this task.
• Adopt Agile development processes. Integrate fast prototyping, minimally viable products and feedback from customers to quickly refine offerings. Don’t worry about having everything right; speed is of the essence. Get to the market and then refine, refine, refine.
• Enable robust and well-informed ecosystems to allow seamless connections while still owning the customer experience. It’s cost prohibitive to replicate every component in IoT, so partnerships are vital. While exploiting partner services, insurers should own the customer experience to reap the benefit of stickier customer relationships and new streams of revenue.
• Adopt a layered architecture. For future-proofing and tapping into market-driven innovation speeds, insurers should adopt open, innovative third-party offerings across these layers: devices, connectivity, data aggregation, platforms, applications, and systems of engagement.
• Acquire new skill sets for the digital age. Human behavioral insights, human-centered design principles, AI, machine learning, data science—all these skills must be part of the CIO organization. CIO’s must understand their team and reskill/retrain a workforce ready to take on the future.
Insurers likely will introduce IoT-based connected life offerings in phases. Understanding customer expectations, developing a plan and attacking in reasonable, time-sensitive chunks will separate the winners from the rest of the pack. Early adoption is key.
Insurers must go beyond enhancing traditional business models with IoT data. Other companies, including digital natives supplying disruptive in-home technology, are poised to capture a protective, advisory role among consumers. Insurance CIOs can help their companies win by thinking beyond the industry’s current boundaries, building new digital capabilities and becoming relevant in consumers’ connected lives.