The insurance industry is at a crossroads. A new generation of consumers – the first to grow up in the digital era – is ready to examine insurance providers and decide which best fits their needs. These consumers have come to expect daily interactions with connected technology, and are eager to implement a more connected lifestyle in both their personal and professional lives.

The exponentially growing market surrounding the "Internet of Things" is poised to merge with the insurance marketplace, and insurers that prepare to support the concurrent technology growing alongside this lifestyle will help to future-proof their business.

Customer service and rise of the digital consumer

There is an emerging demographic gap between the way insurance policies are created, delivered and serviced and the sub-30 generation that companies need to nurture if they are to have a financial future. This new generation is familiar with the concept of receiving personalized service derived through personal data, and it expects direct and seamless communication. This rise of the digital consumer has brought along with it an expectation that a company make things as smooth and convenient as possible, no matter the industry.

This means that the way insurance has been packaged and presented in the past is no longer enough. Many policies have a "one size fits all" structure, but today's customers expect a higher standard of customization and demand to be treated as individuals.

Connected technology is becoming ubiquitous and our homes, cars and health trackers will all collect data in the very near future if they are not already. This data can help insurance providers develop more personalized policies that better fit actual lifestyle and risk assessment. By understanding a customer better, insurance providers can add value through proactive relationships, policy change recommendations or the addition of new products or services.

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From reactive to proactive

By leveraging closer and more personal communication between providers and consumers, the "Internet of Things" has the potential to change the way an entire generation views insurance.

Leading insurance companies have already built up an amount of trust; the most successful companies operate on the presumption that consumers can trust them in a time of crisis. But what happens when the connected lifestyle allows insurance providers to also provide proactive assistance?

In this new role, insurers may take the title of protectors, offering up automatic claims as – or even before – problems arise. For example, the placing of sensors around a home with communication capabilities built into the cloud can mitigate both the number of claims and the average payout per claim.

If a water sensor in a basement goes off, alerting not only the consumer but the insurer, the consumer could take action to prevent further damage, and the insurer could already start filing a claim as well as send over a service worker to help fix the problem. By helping to bring attention to an issue immediately, this not only gives greater value to a consumer by protecting their assets, but also reduces cost internally to insurers.

Industry convergence and ecosystem model

This increased communication will not only provide a greater bridge to interact with traditional customers, but also with other businesses and verticals that also have incentive to engage these consumers.

In the future, the insurance industry will become more ecosystem-based, because the products we own and the services we receive are all going to be connected. The car will connect to the home, energy consumption and health management will managed through common applications and service providers will all reside on shared platforms that manage smart data.

As a result, insurance companies will need to evolve in tandem. Understanding the interrelationships between formerly separate policies will directly inform how insurance companies create and deliver coverage in this new connected future.

Insurers will have the potential to construct partnerships between platforms, data sectors and other industries, opening up insurance to act as a conduit that brings services together. These new bundles offer increased avenues for ongoing revenue streams. We're already seeing the first stirrings of this trend, with health insurance companies teaming up with health trackers to measure fitness as well as vehicle manufacturers working with car insurance programs to lower costs to consumers and reward safer driving with less accidents.

[Read related: The connected car—from threat to opportunity]

For consumers, this convergence will allow for a more efficient and streamlined services. In many ways, how consumers interact with their service providers may parallel how consumers currently understand their connected home–through a centralized home automation hub.

Today, the most convenient way for people to interact with all of their connected devices is by being able to access all of them in one spot, usually through phones, tablets, web browsers or smart TVs. In the same way, providers will be able to deliver coverage for home, car and even health all from the same package, increasing their own revenue and making it more convenient for consumers to manage them all from one place.

Staying Ahead of the Curve

In the near future, the "Internet of Things" will enable smarter underwriting, greater flexibility to manage all policies at the same time and the opportunity to not only interact with more potential business partners, but to engage more proactively with the consumer.

Insurance companies can get ahead of the curve by offering their customers personalized smart home solutions for mitigating risk and enhancing customer relations. There are several challenges to be faced, including customer awareness and security concerns, but the landscape is rapidly changing. Today's insurance companies which recognize both the speed at which the "Internet of Things" is developing and the massive potential within the sector will see very advantageous returns.

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