What will be the hot technology over the next few years? While no one can sayfor certain, it's not difficult to make a case for smartphones andmobile devices.

Consider these numbers: In the fourth quarter of 2011 alone,according to industry observers, 157.8 million smartphones flew offstore shelves worldwide, bringing the total for the year to 491.4million units. AverageU.S.smartphone ownership is at 41.8 percentof mobile subscribers, or 98 million people.

Industry reports indicate smartphone sales are expected to hit 1.5billion units globally in 2016. Over the next five years, saleswill see a 30 percent compound annual growth rate. By 2016, thesedevices are reportedly set to make up about two-thirds of allmobile phone sales. If you compare this with the number of PCs soldthis year, which stood at 350 million units, smartphones areclearly going to be the gadget of choice for customers accessingthe Internet.

Smartphones and mobile devices have forever changed the way we communicate. We're now permanentlyconnected—wherever we go. Work, family, friends, schedules, andfinances are all instantly available. And while there are obviousdownsides, we still expect and demand immediacy in almosteverything.

Unlike cell phones of the past 20 years, smartphones provide aricher user experience on many levels:

• A sophisticated camera is always available to take, send, post,and store thousands of pictures.
• The GPS capability always “knows” where you are and can guideyou to places such as restaurants and shopping venues.
• Apps with Internet connections provide instant connectivity toyour bank, insurance company, airline, department store, socialnetwork, and most accounts with online access.
• Your entire music collection is always with you.
• And yes, your mobile device is even good for phone calls,texts, and email.

Will Insurers Innovate?

As the smartphone becomes ubiquitous, insurers must decide whenand how they'll leverage the mobile revolution and provide newproducts and services to their customers, agents, and supportentities. Will the industry aggressively invest and innovate? Orwill most carriers wait until a few brave trailblazers lead the wayand demonstrate a financially viable business model?

Let's hope not, for their own sake. As more insurers perfect themobile arm of their business, it will be a hard-fought battle forlatecomers to make inroads against established competitors thathave developed a customer base with a new level of mobileexpectation.

In the near future, customers will ask for mobile solutions tobe included in their offerings and demand them at no additionalcost. Just as today's customers have assimilated online payment ofpolicy premiums, they'll also expect to upload possible claims data(with photos) using their mobile applications.

Meanwhile, many carriers, especially in the personal linesautomobile arena, have developed basic mobile applications. Mostinvolve an app for initial claims reporting, basic policy view, orbill paying. A few new quoting applications use the camera and barcode functionality in smartphones to capture VIN or driver'slicense images to launch a prefill process for completing quoterequests.

Mobile Win-Win

To create a win-win scenario, the insurance industry must make agreater investment in mobile advances. And policyholders, agents,and other stakeholders must be willing to take important nextsteps. Customers—defined as the mobile app user—must perceive andwant a benefit from the mobile application. That benefit can fitinto a number of categories: convenience, saving time or money,safety, streamlining work efforts, improved service, or justfun.

So what's likely to be next? How can the capabilities of thesmartphone provide effective services for both the insuranceindustry and consumers?

One intriguing possibility would be to geo-tag smartphonephotos. Would drivers be interested in policy discounts in exchangefor uploading pictures of their car? Would carriers be willing toprovide discounts in exchange for verifying the car exists, has nodamage, and is located at the policy address?

On the home front, insurers might replace certain traditionalhome inspections with an app-guided self-inspection, withinformation and photos provided by the homeowner. The smartphone'scamera and bar coding features might significantly enhance theability of a homeowner to inventory valuable assets and provide aself-inspection. Could such an inventory provide peace of mind toan insured and also enable the claims adjuster to settle the claimquickly and accurately?

Currently, there are dozens of free apps available in the iTunesand Android marketplace that allow for indexing, categorization,and photo collection of everyday insurable items in your home.These apps offer a number of ways to list and itemize purchases,hobbies, books, jewelry, and so forth. Soon, policyholders may beable to contact their insurer immediately after a loss and uploadall their household items with an estimated value directly intotheir insurer database.

Additionally, location-based technology can enhance customersafety and security. Weather is the direct cause of a largepercentage of both automobile and property claims. Mightpolicyholders sign up for a smartphone service that could provide atext or email alert warning of a storm approaching their home orcurrent location?

Paperless Insurance

As a macro trend, mobile technology is increasingly facilitatingcustomer self-service. Consumers are demanding instant access toservices and information, and the use of paper and traditional mailservices continues to decline.

For example, pending legislation in several states would permitdrivers to use their smartphone apps to show their insurance IDcard virtually. These statesincludeAlabama,Arizona,California,Colorado,Idaho,Maryland,andMississippias of first-quarter 2012. This trend may continue asmore and more states bring similar bills to the floor of thelegislature. The new era of paperless insurance documentation isalready here and gaining ground as more insurers commit resourcesto mobile app development as a cost-saving initiative. As mobileapps provide more options for policyholders, insurers can realizesavings on printing and postage.

Both mobile technology and social media have altered the wayrecent generations think about privacy and sharing information.Should your mobile device allow you to connect to otherpolicyholders who live nearby when you have the same agent orinsurance company? Could such a network support ride sharing or thepooling of certain services? While most people rely heavily ontheir cars, could the combination of rising fuel costs and theemergence of technology-based services change the way people thinkabout transportation options? Commercial ride-sharing companieshave already been launched in many urban markets.

A Model Person

All current telematics programs are linked to information aboutthe vehicle, such as speed, location, time of day, brakingand cornering data, and so forth. But could the next generation oflocation-based risk models be linked to information about theperson? The implications could be dramatic.

What if a person's mobile device contained his or her riskprofile and “permitted” driving parameters? For example, a16-year-old driver might be permitted to drive only before 9 p.m.within ten miles of home and no faster than 50 miles per hour.Could future vehicles be programmed to operate based on theparameters provided by the driver's mobile device? The industry,not to mention legislation, may never get to the point ofperson-based insurance policies, but the possibilities forinnovative underwriting and pricing models areintriguing.

Finally, mobile devices may forever change what the insuranceindustry considers “data.” Legacy underwriting, policy management,claims, and management information systems do not typically supportimages associated with the enormous amount of data stored andupdated daily. But images will increasingly become an integral partof the underwriting and claims processes—many such images comingfrom the mobile devices of customers, adjusters, law enforcement,and others. It's likely the carriers that can more quickly takeadvantage of images for underwriting, claims, product development,and service will have a significant competitiveadvantage.

There are numerous possibilities to consider. It will beinteresting to observe how the industry reacts to the mobilerevolution and what innovations will change the way insurance isdelivered and managed.