The Internet of Things (IoT) stepped up a gear in the automotive world earlier this month, as 02 became the first mobile operator to offer a car insurance service with the launch of 02 Drive, a service that uses IoT technology to encourage safe driving. By installing a telematics device called Box on Board, the driver’s behaviour is monitored to build up a log of data. This will indicate how safe they are on the roads – which may positively or negatively affect insurance premiums. There’s an incentive for drivers, too, as those who choose to take the product will get an upfront discount on their premium.
This is exactly where innovation in the IoT should be focused. With momentum building over the past few years and technology trade events showcasing quirky uses of the IoT, it’s easy to get carried away dreaming about all the possible ramifications and opportunities that now exist. But I strongly believe that, amidst the excitement, it is critical that businesses remember the end customer and the need to bring real benefit. There’s no point driving forward new innovations if they don’t actually make a difference to day to day lives and strengthen a customer’s relationship with a brand. There’s a fine line between truly adding value and just being innovative for the sake of it.
How can the IoT transform the insurance industry?
In a highly competitive environment, insurers face the constant challenge of keeping customers satisfied and loyal. The IoT holds the potential to transform the service that insurance companies offer customers, and how they engage with them. I believe if they are able to offer a more sophisticated, personalised service to consumers via the IoT, they can deepen their customer relationships and ultimately enhance engagement and loyalty. Indeed, 74% of insurance executives believe the IoT will disrupt the industry by 2020.
The IoT has been gaining traction with consumers is in the day-to-day running of households. This is compounded by Vanson Bourne’s international research which found 76% of respondents already use mobile apps to interact with their home security systems. The thought of feeling the cold sweat of fear when arriving at work to realise you forgot to lock your back door after putting out the bins is something consumers would happily live without.
The potential for the IoT to bring increased security to households opens new possibilities for the insurance industry. Home insurers, in particular, have the opportunity to shift towards a new role in customers’ lives, moving from a reactive service when the worst happens, to a preventative service which is in place to prevent theft and damage happening in the first place.
This potential is already being recognised in the US, where home insurers are providing discounts to their clients for investing in smart home security devices. A home with an alarm system is 300% less likely to be robbed than a home without one – a compelling reason for customers to take the smart route. If customers are able to change how they perceive their insurers from a call they have to make when disaster strikes, to a deeper relationship based on the day-to-day security and reassurance they can provide, this could be transform the industry.
There are, naturally, security concerns around IoT – by opening up their homes and lives to yet more connected devices, it’s not unreasonable for people to be concerned that they are increasing their risk of a security breach. But there are no ‘new’ threats here – experienced providers of customer engagement products are fully in tune with what the threats are, and how to combat them.
Take inspiration from the automotive industry
The insurance industry can certainly learn from the automotive industry, which has led the way in adopting IoT technology over the past few years.
In November 2013, Affinion was part of the startup team when Verizon looked to add a telematics service to its IoT range – a smart, connected driving experience with a potential US market of 150 million drivers.
Launched in August 2015, the hum by Verizon product covers mechanical and safety assurance features – diagnostics, location, emergency SOS, arranging a tow vehicle – as well as commercial add-ons such as discounts on tyres, and consumer elements such as management of the car’s communications devices.
This product is specific to the automotive market, but the lessons learned can be extrapolated to any sector where you can aggregate services that are going to be useful to the consumer. Of course, security concerns are still paramount, to the extent that Volkswagen recently announced plans to create a new cyber security company devoted to protecting next-generation ‘connected cars’.
Respond to customer demand
What’s more, there is clear customer demand for insurers to move towards a more sophisticated service that is personalised for the individual. Research conducted by TNS found that 56% of current insurance customers would like their insurer to use technology, such as health monitors or connected cars, to provide a more accurate premium – even if this resulted in them paying a little more initially in order to lower premiums over time.
With the recent news that mobile has just exceeded desktop as the most used internet platform for the first time, it’s clear that the use of portable devices is now embedded in customers’ lives. Typically, insurance companies only interact with their customers at the point of acquisition, processing a claim, responding to complaints or at renewal. If insurance companies can transition from this role and instead become a crucial part of consumers’ everyday digital lives, I believe their overall retention and customer satisfaction levels will improve dramatically.
These are early days, but it’s my belief that the IoT presents a wealth of opportunity for insurers looking to build customer engagement and I’m looking forward to seeing what more it brings.