Digitalization has turned common practices on their head. People now prefer fast and instant solutions to their complex issues. Even in insurance, consumers today are more conscious about their choices and prefer to inform themselves through digitalized services and optimized interactions.
This explains why and how murmurs of connected insurance have come to the fore. While still a fair way from becoming operationally common, the promise is, that this is a significant evolution from conventional insurance business model. Powered by IoT technology, connected insurance directly connects customers and insurers to enhance services and add value to both the insurer and insured.
In essence, a connected insurance ecosystem is a way to improving agility and developing relevance by leveraging technology.
The three potential areas of connected insurance include
- Connected car
- Smart home
- Connected health
These are all fields with tremendous potential for growth. The CAGR for connected car revenues is expected to be more than 18% until 2028. Likewise, for connected insurance, it’s anticipated to be more than 21%. Agreed that they are starting from small bases, but such growth rates could change all that if they do come about.
Role of IoT and Telematics in the Connected Insurance Business Model
IoT is being employed everywhere, including workplaces and homes. It has become an integral part of life; therefore, introducing IoT into the insurance business model works to complement the insured’s connected lifestyle.
Telematics is another important aspect of connected insurance. It’s one of the most accurate tools to track and transfer data relating to driving. Telematics-enabled UBI (Usage-based Insurance) helps insurance businesses to customize the plans for their customers. In fact, by 2028, the global UBI market is expected to grow to $78.9 billion.
Types of Connected Insurance
Insurance companies hope they can drive higher revenues through connected insurance and look to innovate the policies in a customer-centric way. In that light, the following are the two types of connected insurance:
1. Dynamic Insurance
The word dynamic itself highlights flexibility. It is a type of insurance where a policyholder can increase the benefits and premium. They can increase the benefits by a fixed percentage each year. The premium is increased based on the growth of the consumer price index. As such, this policy is ideal for protecting the policyholder from inflation.
2. On-demand Insurance
A digital insurance model allows consumers to turn on and off their insurance policy as per their requirements. The insured has to pay only at the time when protection materializes. This can be done using a smartphone — akin to managing subscriptions.
This policy often has a lower per-policy premium value and huge transactional volume. Following are the three types of On-Demand Insurance that you can leverage.
- Micro-insurance
- Asset and Liability insurance in the sharing economy
- Usage-based Insurance
Benefits and Challenges of Connected Insurance
Technological improvements place insurance companies in a position to benefit from data, giving them a holistic view of their customers, underwriting, and claims. But while advancing the case for connected insurance, insurers are under pressure to develop a flexible and resilient business model to ensure that challenges are kept at bay. Let’s study both the benefits and challenges more carefully.
Benefits
- An insurer can provide enhanced products that are data-driven.
- New customized products can be introduced based on customer engagements.
- With the data management and automation of each process, credibility and loyalty are nurtured among insurers and insured.
- Consumers are getting better policies that address their situation and deliver precisely what they need.
Challenges
- From the Perspective of Insurer – There are chances of data inaccuracy. Lag in a system can cause delays in data updates leading to out-of-date responses.
- From Consumer Perspective- The charges are high for the policies, and they may be unaffordable for the consumers. Government intervention is also challenging here in case of being uninsurable.
Frontiers of Connected Insurance
Following are the three frontiers of connected insurance.
Connected Car Insurance
Connected Car Insurance is a program that intends to reward smart and safe drivers. It is a tech-driven insurance policy that leverages IoT to gather masses of data to drive decision-making. Here insurance premiums are dependent on the driver’s behavior. Also, to bring forth the safe driving scheme, potential drivers receive discounts and savings on their monthly premiums.
Connected Home Insurance
Connected Home Insurance is for the smart home. The company tries to utilize the connected home within a property insurance space. The motive is to identify the problem early and place accurate policy pricing.
Connected home insurance offers convenient need-based insurance coverage. It uses smart tech automation to cover all connected devices and related services in a single insurance product. It’s a win-win approach for both customers and insurers.
Connected Care Insurance
Connected Care insurance is an accessible, personalized, and quality system. It combines health technology and telecommunication to empower healthcare service providers like hospitals. It’s an ideal approach to establishing remote care as it bridges the gap between the patient and healthcare provider — especially vital in the post-pandemic era.
Wrapping Up
Digitalization in insurance requires complete data management and a profound understanding of the client’s requirements. At Gonzalez Insurance, we ensure that we collect, share, and analyze data at all stages of the insurance cycle — from when the policy is issued to when the claim is settled. This helps us provide an optimal level of protection and coverage based on specific needs.
Check out our offerings here and get a free quote.