As insurers enter the world of the Internet of Things (IoT), they can use it to optimise several areas of their business right away. The technical implementation is less difficult than some people fear.
IoT offers great potential for insurance companies. Sensor- and data-based networking allows them to make their existing business more efficient and also to develop new products. Specifically, the following four areas are worth mentioning:
- With the help of IoT devices, existing risks can be insured in new ways, different from what was possible in the past. Using the example of household insurance in combination with water sensors, we have described how this works here.
- Risks that were previously uninsurable can now be covered without delay. For example, the risks associated with special industrial plants can be better controlled and assessed with the help of modern sensor technology. This makes it possible to insure 'major risks' such as electroplating plants.
- Internal processes such as claims handling become more efficient. Telematics boxes in vehicles collect data such as excessive speed or abrupt braking and make it easier to clarify questions of responsibility. They also shorten the time it takes to process a claim by automatically reporting it.
- Consistent IoT integration enables the creation of an entire ecosystem and new services, which can subsequently lead to new business models. For example, an insurance company can automatically warn vehicle or home owners of impending hailstorms and prompt them to take precautions.
More important than technology: the business case for IoT
Before selecting and installing hardware and software, businesses – including insurers – should first be clear about what business case they want to implement with IoT. What actual benefits will customers derive from the implementation of these ideas? This question can be clarified by talking to customers and partners early on and asking them about their needs. As an IoT expert in the interface between business and technology, Zühlke is happy to help moderate this dialogue – and then develop a realistic business model.
An example of such a comprehensive approach is shown by the company Dormakaba. This example involved developing the IoT platform 'exivo', which Dormakaba is using to transform itself from a manufacturer of locking technology to a service provider for access solutions. On the platform, customers can dynamically and flexibly control building access for employees as well as for visitors. IoT solutions such as this have the greatest success when they are tested and improved at an early stage and in constant dialogue with customers. As insurers therefore enter the world of the Internet of Things, they would do well to apply their agile operational procedures to this area as well. This will open up unimagined possibilities for them.
Using existing technologies for networking
After deciding the business case, we need to find the best technical solution. While deploying new technology is never child’s play, the barriers to implementing IoT solutions are lower than ever before. Whereas a few years ago it was often necessary for businesses to develop their own sensors to meet specific requirements, today they can draw on a wide range of existing hardware. Products of particular interest to insurers, such as detectors for fire, water or transport damage, already exist in fully proven versions.
If the required functions are not yet available on the market, an existing sensor can usually be redesigned or enhanced. An example of this is the IoT manufacturer Konux. The sensor it has developed is attached to railway rails and sends data about their material condition. It is designed to withstand large stresses such as vibrations and extreme temperatures. Nevertheless, it communicates precisely and almost in real time. In this way, predictive maintenance can be used to avoid losses that can cost insurers money.
Relying on end-to-end solutions
Once the sensor data has been collected, it must be stored in databases, then analysed and the results integrated into the business processes: in the case of insurers, for example, in the underwriting or claims processing. This can be a software challenge. In the meantime, however, specialised IoT providers offer standard solutions and platforms that make the path from collection to business-relevant analysis much easier.
An example of a complete IoT implementation is a project by Tracto-Technik. Working closely with this leading global manufacturer of underground cable and pipe systems, we jointly built the hardware and software architecture for using the IoT. This meets the requirement from Tracto-Technik to be able to offer its customers services such as data analysis and process automation in addition to the existing range of equipment.
Other industries show insurers how IoT business models can work
Even if some insurers still regard the path towards IoT business models as being a very long one, projects from other industries show that it is indeed possible to go down this path. On both the software and hardware side, many IoT components are already available in a fully proven form – they just need to be combined in new ways for your own requirements. If insurance companies keep a constant eye on customer needs and develop appropriate business models, nothing will stand in the way of success in the age of the Internet of Things.