What is it that you buy and hope you never have to use?
Several things answer that question – an umbrella, a fire extinguisher, a first-aid kit. But I am talking about insurance. Insurance companies have become a safety net for us, our cars, our homes, our health. But now the insurance companies are facing the same challenges as the high street. It has become commoditised with comparison sites being the first port of call for an insurance quotation. Consumers giving little thought to switching providers and price being one of the most important buying criteria.
As prices have fallen, insurers have had to become a lot smarter in the ways and methods used to determine risk because getting the assessment of risk right is the difference between a profit or an unhealthy loss. Many data sources are used to calculate risk for an insurer but most are historic. Have we been ill in the past 5 years, have we crashed a car in the past 3 years etc.
The Internet of Things (IoT) may be the latest buzz word, but it is also the saving grace for insurers who want to differentiate and build a loyal relationship with their customers. IoT is all about connecting things so that they can be monitored remotely, giving opportunity in all areas of business to change the way business is done.
Take the example of the connected car. In the world of insurance, a connected car can allow an insurer to monitor how a vehicle is being driven in real time. In the event a crash occurs, an insurer can be informed immediately and does not have to wait for a claim to be made. IoT changes the assessment of risk to be dynamic and real-time, rather than simply considering how things were in the past. Now an insurer can assess driving style as the driver drives and even adjust his assessment of risk on an annual, monthly, weekly or even per-journey basis. The customer pays according to his actual risk, and not his historic risk or the average risk of all drivers the insurer insures. A much fairer and clearer situation! The same example applies to home security and personal health too.
Through connectivity, insurers also gain a new way to build relationships with customers. In the past, insurers communicated with customers only when a claim was made, or when the annual premium was due. Neither points of contact were particularly positive. Given the insight into actual driver style, insurers can interact with customers at times where risk is rising and advise on improvement and risk reduction. The insurer is now in a position to be pro-active and assist customers to prevent accidents rather than simply increase premiums after they happen. Again, this is true for cars, health, home and all things we insure.
But imagine now how much data is being generated from each connected ‘thing’. From the sheer number of cars, homes and people to be insured and monitored over time, massive amounts of data are being generated which needs to be analysed. But in reality, we only need to know when we actually need to act or to do something.
Enter a new generation of technology solution – event-driven applications. This enables a connected environment to monitor things in real time, look for events that are indicating risk, and only drive intervention when pre-determined conditions are met or exceeded. For example, if a car is being driven within the speed limits, is not being driven aggressively, and is not in danger of being involved in an accident, why would an insurer be interested? In fact, the insurer is only really interested in events where speeding, harsh braking, cornering or acceleration occur. It then needs to act. Non-event data is irrelevant and does not need to be stored or even looked at.
In the world of big data, not all data is equal. Real-time, event-driven applications allow insurers to look for the events that are of interest and to ignore the rest. Can you imagine how taking a similar, event-driven approach to sensing, analyzing, and acting on real-time data could digitally transform your business?
Nick Walker, is an advisor, consultant, and Coach at ManagementTeam GmbH. He has over 35 years international business leadership experience in growing and developing fast-paced, complex technology businesses of all sizes. Sectors include telematics, telecom, insurance, leasing, digital, manufacturing and dot.com.