"Big data" gets its name in part because there is so much of it; it's in identifying discernible patterns that it actually delivers value. And in some cases, discovering hidden threats — or opportunity — is likewise worth the price of admission.
In January, global information technology innovators NTT Data released a report authored by Senior Practice Lead, Insurance Data and Analytics, Normand Lepine that's focused on smart homes and how insureds might share data on their domiciles if they received something in return — as well as what valuable data the Internet of Things, at least as far as smart homes in particular, might present to insurers in the future. Both consumers and carrier executives were surveyed. (It's worth defining at this point that "smart homes" are those that include devices that have networked connectivity, such as security systems, frozen-pipe sensors, cameras and smoke/carbon dioxide detectors, to name a few.)
"IoT: Disruption and Opportunity in the Insurance Industry" addresses such questions as whether homeowner-insurance buyers are ready for smart home technology, and whether those insureds would share data from those devices to reduce risk and save money. The answers were revealed by first dividing those consumers into two groups: Keepers, and Seekers.
Keepers (who represented 36 percent of the consumer survey base) are those who feel comfortable with their current policy and are unlikely to switch carriers. Seekers (who comprised 64 percent of the consumers surveyed), on the other hand, view their policies as inflexible and highly prefer more personalized services from their carrier — and, importantly, would consider switching their homeowner's insurer to save money. More than half of Seekers are interested in understanding the potential savings, but it depends on how personal that data is: They were less willing to share data on their cameras and doorbells, for instance, than on smoke/carbon dioxide detectors and frozen-pipe sensors. Lepine told me that this revelation is tied into a bigger discussion around the IoT, that an ethics policy must be developed around it so that greater transparency can be provided around what such data is used for, and why.
While the vast percentage of carrier executives polled (87 percent) believe that IoT will improve customer relationships and 74 percent believe the IoT will have an important influence on products and services, Lepine also noted that the vast majority of carriers do not believe they will get that data directly from their insureds, but rather from aggregators who are competing for this information. Among the players best positioned for playing a critical role in the smart home, carrier execs say, are Google, Apple and Samsung.
And that's where things really get interesting, because the report reveals that 53 percent of Seekers would consider purchasing their insurance coverage from an alternative provider (as in, a non-carrier). The non-carrier alternative source to top the list is the insured's primary bank (41 percent), followed closely behind by home-security provider ADT (39 percent); Apple (33 percent); and Google (31 percent), followed by Amazon (28 percent).
Sure, we're just addressing smart homes in this case, but … could financial institutions, Apple, Google or Amazon emerge in time as credible threats to traditional insurers (especially banks)? Perhaps. Or, viewed another way, as possible venues of distribution that may prove inevitable, generations from now? As carriers look to gain whatever leverage they can in a crowded P&C market with too much capacity, perhaps by looking outside the industry to identify possible alliances for the long game — in addition to continuing M&A strategies — executives can better identity those with whom they could work together for mutual advantage.
In time, such strategic alliances could prove to be less expensive than potential competitors well-positioned to serve an increasingly less discerning customer base. In the meantime, those interested can check out the report.
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Shawn Moynihan
Shawn Moynihan is Editor-in-Chief of National Underwriter Property & Casualty. A St. John’s University alum, Moynihan has earned 11 Jesse H. Neal Awards, the Pulitzers of the business press; seven Azbee Awards, from the American Society of Business Press Editors; two Folio Awards; and a SABEW award, from the Society of American Business Editors & Writers. Prior to joining ALM, he served as Managing Editor/Online Editor of journalism institution Editor & Publisher, the trade bible of the newspaper industry. Moynihan also has held editorial positions with AOL, Metro New York, and Newhouse Newspapers. He can be reached at [email protected].
