What if an insurance company could warn a homeowner about a broken pipe before an accident occurs?
Now, take that a step further: What if that same insurance company could schedule and pay for a plumber to enter the home and fix the problem without directly involving the customer?
With the help of Internet of Things (IoT) sensors, this reality is not as far off as it may seem.
The idea of using consumer data gathered from IoT sensors is not a new one. The automotive and health industries are already using IoT sensors in cars and data from wearables to reward good habits with lower premiums. So why aren't home or property and casualty (P&C) insurers doing the same?
See also: 6 home safety and tech devices for 2017
A win-win for customers and insurers
The broader adoption of IoT sensors in homes could yield significant benefits for both customers and insurers. Access to new data from homeowners can help insurers write better claims and also prevent claims in the first place. For example, an insurer may not have to pay for fire damage if it can use an IoT-enabled smoke detector to remind customers to change batteries.
IoT sensors also provides insurers with the opportunity to add touchpoints within the consumer lifecycle. Customers often only interact with their insurers at the point of purchase or when filing a claim. More opportunities for customer contact can improve loyalties in an industry where relationships are largely dictated by premiums.
So what's in it for the consumer? First, lower premiums. Like auto insurers rewarding car owners for safe driving, P&C insurers can reward a customer who always remembers to lock the front door. What's more, just as insurers don't want to pay out claims, customers do not want to have to file them. In reality, consumers do not want to deal with the problem that triggered the claim in the first place. If insurance carriers, manufactures of sensors, and consumers and can more proactively work together, they can avoid potential problems. For example, no one wants live in a hotel while contractors fix a kitchen due to burst pipes. If an insurer can warn a customer about an issue it detects by monitoring IoT sensors, it potentially can prevent such incidents. Given the right access to data, insurers have the ability to solve problems for consumers from start to finish, which can save time, money and resources.
Related: How IoT offers insureds more value
The benefits also can be longer lasting. With access to vast amounts of personal data about what goes on in the home, insurers can influence changes in customer behavior on a more permanent basis. For example, teaching customers how they can alter their electricity use to save money and reduce risk of accidents means less claims and money saved for both parties.
Despite tremendous potential, consumers are not yet rushing to outfit their homes with sensors. (Photo: iStock)
With greater rewards come greater risks
Homes are safe spaces, and consumers are hesitant to give companies more access to private sensitive data. Insurers need to find a way to clearly outline and communicate the benefits of allowing them to access such data. Beyond lowering costs, how is this level of access going to help insurers to make their customers' lives easier? With any new technology, education is key. Once consumers understand how wide-ranging the benefits are, it will be easier for insurers to make the case for IoT sensors in the home.
Privacy concerns are not the only roadblocks. Carriers have not thought enough about managing data. Better data management is paramount to drive broader adoption. Incumbents have an advantage over insuretechs trying to utilize customer data because traditional insurance carriers have access to historical underwriting and claims information. Yet, the biggest hurdle for advancement is that there is not a standardized and efficient process in place to collect and use data. While connected devices (smoke detectors, appliances, etc.) create opportunities for more data insights, insurers must first give more attention to proper data management.
IoT sensors have a long way to go relative to both consumers' comfort levels and insurers' abilities to handle data on the backend. What is clear is that collaboration is key, and data is king. Collaboration with the customer is necessary to help understand that benefits go beyond cost savings. Clear and open communication between data owners and device creators is just as important. While incumbents have traditionally shied away from data sharing, they must become more open to doing so, or risk being left behind when insuretech companies do it first.
Sasha Sanyal is the business lead for insurance at Genpact. She can be reached by sending email to sasha.sanyal@genpact.com.
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