How insurers can take advantage of the Internet of Things

19/10/17 15:59 / by The Insurance Institute

The Insurance Institute

How insurers can take advantage of Internet of Things

Internet of Things (IoT) technologies allow multinational giants like Google, Facebook, Amazon and Netflix to better serve their customers. But it's not just the larger players taking advantage of IoT and insurers are behind the curve when it comes to utilising these technologies. The insurance industry has much to learn from tech start-ups, writes Hesus Inoma, CEO and Founder of WeSavvy.

In this new era of hyper-connected society where we are embracing Smart Homes, Smart Health, Smart Mobility, Smart Agriculture (to mention but a few), in truth – how far are we from Smart Insurance?

To answer this question, I will discuss the differing cultures between the traditional insurance industry, perceived to be driven by reducing claims ratios and increasing investment return, and innovative startup firms seeking to transform the business models and processes of the industry. To seek to enhance the necessary collaboration between these opposite worlds, I will discuss ways in which the gap between their objectives can be bridged by a shared drive to deliver a more customer-centric model.

As part of this discussion, I will refer throughout to the concept of adjacent possibilities in the insurance industry versus the 'existing reality' of the industry as it stands today. My view is that the cultural differences between the two worlds can be overcome to offer a more enhanced and customer-centric service offerings, but that collaboration will only become more prominent when the two worlds meet in the middle.


Cultural differences

In my view two polar worlds exist today. There is the startup world (full of adjacent possibilities) that promotes purist Internet of Things (IoT), machine learning and AI solutions to disrupt how business models and processes are currently structured, seeking to introduce Bots, Robo-Advice and Blockchain solutions to traditional insurance business.

On the other side is the traditional insurance world (the existing reality) which is predominately non-digital sales, paper-driven, non-real-time underwriting and manual processes. The key difference between the two worlds is evident in different engagement models utilised by each. IoT driven engagement models promoted by the adjacent possibilities increase the volume of touchpoints with the customer, which in turn brings greater opportunities to generate value. Firms that employ enhanced engagement models with more effective, meaningful and value driven touchpoints with the customer are among some of the most loved brands in the world – these include Netflix, Amazon, Google and Facebook.

On the opposite spectrum, the traditional insurance world currently has a low level of customer engagement, limited to times of sale, renewal and claim/alteration. This is very likely one of the strongest contributors to the industry’s renowned acquisition, retention and relevance problems it has with its customers, and a great incentive to entertain innovative concepts to generate more customer-centricity and in turn, loyalty.

In addition to differing engagement models and cultures, the reality of collaboration of the two worlds presents challenges such as a clash of methods of working, unrealistic expectations of the collaborative relationship and different measurements of success. However, a necessary solution in bridging the gap between the two worlds, may lie in initially pursuing commonly accepted concepts that are evident in frequently used and loved brands by the existing policyholder base.

I must clarify upfront that personally, I am a Purist, I have been a big advocate for innovation and transformation in the insurance industry over the years, however I have also learned that in order to “get the ball rolling” on collaboration, a change in approach is vital.


Meeting in the middle

In order to transcend the cultural differences and differing objectives between the two worlds it is necessary to meet in the middle. A startup seeking to collaborate with an insurance entity that requires an entire end to end transformation of their IT infrastructure, including abolishment of their legacy systems and potentially members of staff, is far less likely to get the opportunity to collaborate than an entity proposing a plug and play, process enhancement that creates pragmatic efficiencies and customer value from the outset.

In that vein there are many concepts that I could discuss at length that would be easily incorporated into insurers’ businesses, that would have a richer customer-centric impact from the outset. I have selected just a few to discuss for the purposes of this Article as examples of quick wins to begin the technology and non-technology innovation agenda:

  • Recommender Engines are commonly used by Netflix, Amazon, and Google whereby the provider collates data relating to the customers’ purchasing/viewing/search activity and using predictive analytics proposes areas of interest/necessity for further purchasing/viewing/search activity.
  • Social Network Affiliate Referral Programme, which is extremely well provided by the likes of Uber and Airbnb whereby at on-boarding (and thereafter), each customer is given the option to invite their network of contacts and is given rewards for each connection uptake in service.
  • Linking reward programmes to causes, charities, movements etc. Companies such as Toms, Etsy and Panda have differentiated their businesses by aligning their corporate cultures to the objectives of socially conscious individuals who not just want the best branded products but also want to make a difference in the world. 

Bridging the Gap

In order to bridge the gap between the adjacent possibilities and the existing reality in insurance and incrementally increase the transformation of the industry business model, the above three commonly used concepts can be seamlessly rolled out across all insurers irrespective of their legacy system builds, their restrictive regulatory obligations and/or the organisation's traditional culture and values. I will speak to how each of these concepts might materialise in insurance and give examples of new entities already offering these plug and play concepts to insurers that are easily incorporated into existing businesses. You will note that some of these concepts consist of machine learning technologies, elements of artificial intelligence and customer goal driven innovations, however they are not so transformative as to require intense business downtime or large programme implementation teams and resources.

Recommender Engines

How can this be translated into insurance:

Collecting and understanding some key elements of data pertaining to each of their policyholders (e.g date of birth, marital status, number of children), presents insurers with an opportunity to cross-sell and up-sell policies to their customers. Through enhanced connectivity, each time an insurer connects with their customer in their connected home, car or workstation, gives the insurer the opportunity to understand increased selling opportunities to that customer and potentially their network e.g. a customer moving from a two-seater car to a family car may require further life/health insurance cover for a potential new addition to the family.

Social Network Affiliate Programmes

How can this be translated into insurance:

Incorporating a Social Network Affiliate programme amplifies the size of the existing Portfolio of customers by leveraging each customer’s network of contacts.

For example, if an insurer has a client portfolio of 10,000 customers and 7,000 of those customers connect with the insurer online, referring 300 of their network connections, this increases customer engagement not just with your existing customer but with a potential 2.1 million customers within reach.

In many cases, a referral through a friend or a network contact is more relied upon than a referral through a traditional introducer/broker given the decreasing trust in the financial intermediation model.

Reward Programmes Linked to Causes

How can this be translated into insurance:

By embracing technology and non-technology innovations, the industry has an opportunity to transform how it’s viewed by its customers. Aligning the firm’s corporate culture to the renewed societal drive to effect a positive impact on the world can be made all the more real through the power of technology whereby a potential API could link a customer’s sale/donation/reward retrieval directly with a charity/cause/movement of the customer’s choice, via an insurer's or service provider's application.

An example of an IoT driven reward programme aligned to customers’ values may include a connected home environment, whereby every litre of water saved may be elected to be donated to fund fresh water for a village in a developing country. In addition the information from the connected home environment provides the insurer with richer touch point opportunities and a wealth of data around the general consumption of utilities within the home, enabling the insurer to more accurately underwrite the risk.

In summary enhanced collaboration between the startup world (adjacent possibilities) and the traditional insurance world is not too far away, but will be all the more prominent where InsurTechs can propose more containable, plug and play solutions that gradually introduce and incorporate the customer-centric, innovative technologies that accompany their culture in a more consumable and sellable fashion to traditional insurers within the market. 

While in hindsight the great transformations that we have recently seen in many industries appeared to use a big-bang approach, the reality was in fact gradual acceptance of changed practices culminated in a far–reaching affect. The fact is that the technology to establish a smart, IoT-driven insurer on the Blockchain exists today, but for that insurer to be regulated, accepted, profitable and operational, gradually transforming practices to ultimately cumulate in this result is the easiest route to market. Even the Purists must dilute to reach the Promised Land! 


Unstructured CPD

If you are ACII or FCII qualified, reading this article may count as Unstructured CPD under the Chartered Insurance Institute's CPD scheme, if it is relevant to your learning and development needs. Learn more at