Currently, ‘Digital Disruption’ is a key phenomenon being experienced by the global insurance
industry at many levels – empowering customers, offering customised solutions using various new
technologies, new business, operational and distribution models. The digital disruption is further
fueled by two key innovations from the insurtech firms – artificial intelligence (AI) and the internet
of things (IoT). Both areas are attracting large investments for innovations and finding new ways to
remain competitive.
The insurer’s business models are fast changing from risk based to risk averse; they are changing
their position from reactive claims payer to preventive risk advisors using various technologies.
The predictive analytics is not new to the insurers – it is widely used in price determination. That
along with use of sensors & IoT continues to garner momentum – both in the life and non-life
insurance areas. It enables insurers to anticipate risks and provide more precise and customised
offerings. The examples of use of IoT in insurance are numerous – John Hancock has partnered with
Vitality to distribute Fitbits to its customers. This helps them to track customer’s general well-being.
Liberty Mutual has partnered with Google’s Nest for their connected smoke alarms in homes. It
reduces the risk of fire for the customers and the insurer in turn reduce their premiums. Many
insurers are also using usage based insurance telematics program to monitor how the drivers drive
their vehicle, monitor their driving habits and offer customised premiums. Telematics is also helping
insurers in another business model – pay-per-mile auto insurance. For example, Metromile has
integrated its platform with Uber that can measure miles driven on more granular basis. And thus
the company offers variably priced, pay-per-mile auto insurance to Uber drivers. In the home
insurance area – many insurers including Liberty Aviva, Mutual, American Family, State Farm, USAA,
etc encourage their customers to use home sensors to proactively mitigate risk and in turn offer
them better priced covers.
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