How insurance companies can make IoT projects soar
Gaining experience with the Internet of Things (IoT) is well worthwhile for insurance companies. The technical expertise comes from outside, the insurance know-how from inside. The pitfalls lie in the search for a partner - this is where it pays to be strategic.
A project can only end as well as it starts. This principle from project management is particularly true for IoT projects. That's why insurance companies shouldn't rush into working with startups or other companies.
Insight in brief
- The success of IoT projects depends on having the right partner
- The search for a partner should be strategically designed; cultures that are different should not be underestimated
- Successful and innovative IoT products are created through agile co-creation: both sides must benefit (win–win)
There are hardly any examples where this has worked in practice – in fact, many projects fail precisely at this point. It's therefore worth while investing some time in finding the right partner. The success of IoT projects depends on this point.
An example: if an established, larger insurance group plans to work with a five-man InsureTech business, some pitfalls await.
- How will the startup handle the issue of data security?
- How agile will the project be when the insurance company's legal or data-protection department comes along with a hefty catalogue of requirements?
Problems in these areas can be avoided at an early stage – but for this to happen, insurance companies must give a certain priority to the issue of structuring. The notion that agility is synonymous with "just do it"and "fast–fast" continues to be a common fallacy. On the contrary: a structured approach to IoT projects delivers results and value for all stakeholders more quickly.
How should we proceed?
It is advisable to first take a look at your own portfolio. Is it possible to identify a customer there who has the ability to innovate and implement, who has technological expertise and experience in cooperation, and who could therefore be considered for the joint implementation of a project? This would then be an ideal candidate, as a relationship of trust already exists.
However, other companies should also be considered. The result of the research is a 'longlist' of possible cooperation partners. The main questions insurance companies should ask themselves during the selection process: is the potential partner a good fit for us and our goals? And would they bring the innovation, agility and technology know-how that we lack? In this step, therefore, the capabilities of the potential partners should be analysed and compared.
The following applies: an enormous oil tanker does not automatically move faster if it is attached to a speedboat, and the same is true for a large project with all its complex processes and structures. Even if it is true that an insurance company can learn a lot from working with an InsureTech business, it is important not to assume – incorrectly – that certain things will happen automatically. The approach: "Insurance is partnering with a dynamic startup. Now everything will be faster and better." often does not work in practice. But risks, false expectations and different interests can indeed be managed in a structured way so that cooperation can actually lead to the hoped-for effects.
Co-Creation: thinking about solutions together
From the longlist of various possible partners, the two or three ideal candidates are gradually filtered out and evaluated. Once that is accomplished, the question becomes: how do we get to the product? The principles of agile project management are particularly applicable to IoT projects: fail fast and early. Putting all your eggs in one basket and pouring all your resources into one project would be wrong. It is better to move projects forward quickly with low input and then let them fail if necessary – for example, if the project partners cannot agree common goals.
First, insurance companies should reach out to identified partners and sit down with them. A successful product can only be created if it is developed jointly within the project and both partners have each other's expectations in mind.
Specifically, both parties should disclose as transparently as possible which goals and visions they are pursuing with the project. The common rules of the game also need to be defined, such as who puts how many resources into the project. The most important thing here: a partnership is only successful if both parties see it as a win. In many cases of cooperation projects, insurers make the mistake of focusing only on their own challenges. However, we need solutions from which the partner also benefits directly. It can be helpful to have such discussions moderated externally in the context of a workshop and to develop a common value proposition.
The nature of cooperation with partners can vary. There is a broad spectrum ranging from 'loose' project work to joint ventures between insurer and customer. Let's look at a specific example. An insurer plans to collaborate with a washing machine manufacturer. A new product was designed during the co-creation process: a special water-damage policy that is taken out directly when buying a smart appliance from the washing machine manufacturer.
In this example, various questions arise concerning the general conditions of the cooperation:
- Are we dealing with an exclusive partnership?
- Are there solutions for 'pain points', as they are known (for example, in the event that a washing machine leaks)? Does the partner bring the skills for the services with the smart home devices?
The latter should always be considered in IoT projects: as soon as hardware is involved, someone is needed to help the customer with technical problems.
To sum up, if something is important for all projects, then it's important for projects with partners: project-management overhead should be configured for maximum efficiency. If you also proceed in a structured and 'planned' way, the chance of being successful and generating added value for the user increases.