by Alexey Shalimov, CEO, Eastern Peak
The technological world keeps transforming industries and businesses as we know them. The insurance industry is no exception. In fact, it is changing at a rapid speed, all due to the progress in IoT development, in particular. This technology promotes connectivity among various devices through sensors. Thus, insurance companies can collect data from various equipment and other objects (vehicles, homes, etc.) in real-time. The given technology innovation in the insurance industry allows accurate instant assessment, analysis, and monitoring for insurance purposes.
These new operational models open up numerous unprecedented opportunities for insurers. This equates to modern approaches, higher productivity, and accuracy, along with improved customer services. As a result, the IoT insurance market size in 2022 reached $27.5 Billion on a global scale. Moreover, it is expected to show a 34.8% growth rate in the following five years, reaching $168.5 Billion by 2028. Here is what you need to know about the IoT insurance business.
The role of IoT in the future of the commercial insurance industry
IoT development changes how the insurance business operates, evaluates, and connects with customers. It can change traditional insurance processes, making them more modern, efficient, and accurate. Overall, IoT in insurance can lead the industry to a new future. See the six areas where changes are already in progress.
Improve customer interaction
IoT driven insurance services can assess customers’ interests and preferences, providing insurance companies with valuable data. Thus, insurers know what their customers need and can optimize communications and sales. Plus, by increasing cross-selling, companies also enhance customer retention and loyalty. This technology will ensure more frequent and mutually beneficial communication.
Diversify insurance business models
Insurance companies have always put knowledge as the top priority. After all, data is the foundation of their business. The current IoT technology can provide the industry with better insights than any previous methods. The collected valuable insights on the insured objects can be monetized or used for other purposes, creating new business opportunities for insurance companies.
Review price models
More detailed and precise data opens up a greater variety of pricing models. For instance, companies can adjust pricing based on urgent requests or via monitoring objects with IoT sensors. Overall, higher accuracy means greater profits. Such precision gives a better understanding of the insured objects and reduce the roles of third parties or unbiased moderators.
Reduce fraud
Insurance companies have to detect fraud in all their operations. It’s a time-consuming and extensive process. IoT-gathered data can withstand any fraud accusations. It is impossible to stage a case without breaching security in the given technology. Thus, the Internet of Things and insurance fraud can rarely exist in one space.
Improve safety
Modern technology can help prevent any losses before they occur. Not only can IoT technology inform insurance services or customers about potential safety issues, but can act upon the issue. For instance, an insured car may have sensors to provide information about an accident and prompt immediate rescue service responses.
Optimize all insurance processes
Insurance inefficiency is often the biggest breaking point for customers. IoT solutions for insurance companies can optimize companies’ working processes and ensure a flawless workflow. Such changes will reduce human error in handling claims, adjust customer support, and set preventative mechanisms in order to automate maintenance processes.
Challenges of integrating IoT with commercial insurance
New technology often comes with newer challenges. The rapid growth of the Internet of Things insurance market requires fast and durable solutions to preexisting and the most recent issues.
Privacy
Data collection is the foundation of the Internet of Things insurance. However, it raises the question of who will own, monitor, and protect client data. Plus, such extensive monitoring requires an improved privacy policy along with client consent and understanding of such necessity.
Security
Such extensive databases of personal information require great care and responsibility. Data fraud is a common concern across all industries. However, insurance companies often operate sensitive personal information, making them a particularly valuable target. The IoT networks create constant flows of data, making them extra vulnerable to attacks. As a result, security breaches are among the main concerns of potential clients.
Of course, the solution to this challenge lies in enhancing cybersecurity before introducing heavy reliance on IoT technology.
New talents
IoT technology in the insurance industry will change the market from the inside. The more companies rely on IoT solutions, the more diverse personnel they will require. Thus, insurance companies will have to expand their job positions, creating room for tech-educated insurance specialists.
Trust
The future of IoT in insurance depends on people’s acceptance of such innovations. Yet, the integration of any new technology into the traditional market always comes with hesitation and suspicion from the common consumer. So, it is up to insurance companies to popularize and normalize IoT among the public.
Data management and storing
IoT devices will send massive amounts of data for processing daily. It means that insurance companies will need to adapt and enhance their storage and processing capacity to deliver useful insights from the gathered data.
IoT-connected insurance possibilities
After briefly learning about what IoT insurance can do, it only makes sense to see some of these applications in practice. See the top four popular technology trends in the insurance industry at the moment.
Enhanced consumer interactions
IoT technology can create more engaging and personalized communication patterns between businesses and consumers. Insurance IoT technology takes a step further and applies gathered knowledge to personalize communication and facilitate client relationships.
Connected healthcare homes
Healthcare and IoT technology go hand in hand. Modern IoT devices monitor patients’ recovery or treatment progress and vital signs (sugar levels, blood pressure, etc.,) to alert them of any medical dangers and more. Insurance providers can analyze such data for preventing health claims, reduce the loss ratio, and assess patients’ health and insurance plans accurately.
Smart homes
Home IoT devices are already widely used for enhancing home automation and security. However, any application of IoT in home automation can also be used for gathering insurance data. An IoT smart home can track health and safety conditions at home, send warnings about any hazards, and assist in measuring insurance rates.
Connected cars
IoT car insurance can gather all necessary data on drivers by observing their driving styles and patterns. Connected cars help evaluate insurance rates, prevent fraud, investigate accidents based on collected data, prevent further damage or health hazards by alerting the insurance provider, etc.
Conclusion
The insurance industry is going through a revolution at the moment. The IoT trend in the commercial insurance industry is transforming a business that hasn’t changed much since its inception. The current upgrades to insurance policies and operational processes can set a new course for the industry. Overall, the IoT insurance market is looking promising, even though it has only scratched the surface of what is about to become.