Insurtech and IoT: over 20 billion connected devices will lead to new insurance businesses (and not only)
We have become easily accustomed to the term Insurtech, perhaps because globally insurance companies have been better able than others to seize opportunities in the digital arena. So far, we have witnessed the digital transformation of existing insurance solutions, which have not yet touched upon the explosive impact that IoT is about to create in completely new business areas.
From Smart Homes to eHealth and wearable devices through to Connected Cars, Insurtech players are entering the large-scale IoT market (and not only the more traditional giants of the industry but also more innovative startups).
The motivations seem fairly clear:
- The number of devices we use in our daily lives is steadily increasing: from systems that allow us to control our homes and render them more efficient, to wearable devices and IoT for wellbeing and health through to apps featuring Augmented Reality functions;
- If we consider just the IoT Consumer market, over the next three years we will have over 14 billion devices in circulation that will be added to more than 6 billion smartphones (according to recent surveys by IHS Technology, SNS Research and IDC);
- The level of adoption of mobile devices (understood in the broadest sense, beyond smartphones) is growing overall and across the board to the point that the majority of business fields today benefit from new smart services. We could say that digital devices and services have now become a hub of connection and communication for people and businesses.
IoT: a data asset for risk management
Insurtech companies seem to understand where the real value of IoT lies: in the data that it is able to generate and through which custom-tailored services can be offered.
Some examples of opportunities that are emerging thanks to IoT in this area are:
- the ability to analyze and calculate more accurately the risk of illness or injury thanks to wearable and mobile apps and to offer their customers a more affordable life or health policy;
- the ability to offer an on-demand and custom-tailored insurance service, depending on the context and immediate needs, as in the case of American startup Trov that allows customers to secure their assets for a limited period of time and under specific conditions and to manage their own policies all through a simple app;
- the ability to create more and more embedded systems in next-generation connected cars to provide customized services and solutions, such as installing black boxes to track driving behavior, an area in which Italy is one of the countries that can boast the most significant projects.
To be really revolutionary is therefore a business approach no longer centered on traditional statistical models but on a real-time context analysis: an opportunity not to be underestimated in an age where the consumer is the protagonist and wants to choose independently and more carefully between an increasing number of proposals.
It is the user, once again, that drives the change
According to a recent report by Accenture (Financial Services’ Global Distribution & Marketing Consumer Survey, 2017), conducted on 32,715 insurance customers in 18 different markets:
- 64% of respondents would like to receive real-time notifications while driving to have useful information, for example, on routes with a high number of accidents;
- 30% are said to be willing to consider new insurance services by “non-conventional actors” such as Google, Amazon or even a supermarket chain.
What emerges is a process of transformation in the way we live with digital natives, less and less tied to the ownership of an asset and more able to make use of on-demand goods and services, depending on immediate needs and contexts.
Numbers, data and trends of a very promising market
To convince the less tech-oriented players will probably be the numbers that the market is generating. Investment in InsurTech over the past year has grown by 27%, going from 1.24 billion euros in 2015 to 1.69 billion in 2016 and 70% of spending is focused on Big Data, Artificial Intelligence and IoT (analysis by CB Insights and Accenture).
Analyzing the projects of over 450 Insurtechs examined between 2014 and 2016, Accenture also found that most were focused on non-life solutions, that is, the branch of policies that do not concern “life” (even though the percentage of investments in life solutions is increasing). An explanation might lie in the fact that other types of insurance services are generally more profitable.
IoT is also accelerating the growth of the Smart Home segment: Gartner estimates that by 2020, a third of European homes will be connected and smart, having at least 500 intelligent devices present. It is no surprise then that about 40% of Insurtechs examined by Accenture have started specific initiatives dedicated to the sector of Smart Homes.
One of the reasons that probably influences the still inadequate focus on life services is the current difficulty of fully capturing the potential of wearable devices, mobile apps, and big data analytics, where it is estimated that spending will be concentrated in the coming years.
According to predictions by ReportLinker, it will be technology such as IoT, artificial intelligence, and machine learning to help Insurtech companies, not only from the point of view of operational efficiency but, above all, in relation to customer relationships (enabling them to better understand behavior, habits and needs through the data produced by IoT and its advanced analysis).
Looking at the analysis from a selection of large research companies such as Technavio, which specializes in Insurtech, it is clear that the next three years will be characterized by a continuous growth in the sector, regarding both the field of insurance and also as a “parallel market” (in technological solutions and services): Growth is estimated at about +64% between 2015 and 2020, reaching a total business volume of nearly $6 billion with an average annual growth rate of 12%. Also according to the Technavio analysts, to stimulate this will be IoT and artificial intelligence.
Over the coming months, we will continue to strengthen our expertise in Insurtech with the aim of creating ever more innovative projects focused on the opportunities created by IoT, AI and Big Data: if you would like to examine in more depth the possibilities for your business, contact us for personalized advice.