IoT could result in fraud reduction in insurance

IoT could result in fraud reduction in insurance

IoT could result in fraud reduction in insurance
IoT could result in fraud reduction in insurance

Celent analyst Craig Beattie believes that IoT could help the insurance industry to reduce fraud.

Speaking with IoB editor Doug Drinkwater at the Internet of Insurance conference in London this June, Beattie discussed the insurance industry’s approach to innovation, as well as the fine-line that it must take in getting closer to the customer without being seen as Big Brother.

For instance, he said that technological innovation in the industry today largely hinges on whether customers are prepared to offer their personal data to insurers, in exchange for cheaper premiums. He questioned whether customers would even be willing to swap their current policies for newer ones.

“A lot of people are still quite happy with classic insurance policies,” said Beattie, adding they are not particularly interested in the development of new products, however technologically advanced.

Related: How insurer AIG is using wearables to reduce risk, protect workers

Can IoT bring insurers closer to customers?

Insurers are always under pressure to lower their costs, and yet at the same time they are now being asked to invest in innovation and offer connected devices to their customers (in the hope that this value-add will also result in reduced risk, reduced premiums and ultimately healthier company margins).

However, there is a question as to whether this will bring customers closer to their insurance providers, or whether customers become more trackable and less humanised. Black box telematics, GPS trackers and wearable IoT devices open up a wider variety of potential products that insurers can offer, at lower fees, but there are already fears over privacy and who owns the data.

Reduced premiums are not just the only result of this as the Celent analyst explains that IoT could also result in a reduction in fraud.

For example, technology such as GPS allows an individual or firm to identify where a car is at any point in time. This can help the customer identify when they have lost it in a car park or prove that they were not involved in an incident when a claim is made against them. This will also help to reduce administrative costs for insurers, and so help to lower their operating expenses.

However, Beattie explains that an additional issue created by this is the question about who is actually going to be paying for this. Should customers be paying more or less for having these devices? Or does the insurer pick up the tab?

By Oliver Baxandall

Click the video below for more analysis.

Related: How you can really finance your company’s Internet of Things development