Reinsurer Swiss Re says that the Internet of Things (IoT) offers a huge opportunity for insurers to get closer to their customer.
LONDON, UK – Speaking at the Internet of Insurance at the M by Montcalm earlier today, Swiss Re customer technology manager Oliver Werneyer spoke at length on how insurance business models are changing in light of the opportunities presented by the Internet of Things.
As a reinsurer, he said that Swiss Re does “quite a lot of research” in the area of new technologies, adding that the IoT represents an opportunity for insurers to improve their relationships with customers – and ultimately stay in business.
“When you think about IoT it is a community of data, so it seems quite a natural fit for insurance.”
Yet, with many early telematics and IoT projects revolving simply around offering cheaper premiums to healthy or safer customers, he urged insurers to go further, because this approach doesn’t necessarily result in reduced risk or cost savings.
After all, for every new low risk customer, there’s another who you’ve just found out is a much higher risk than you initially thought.
IoT – not just about saving money
“It’s great to figure out those people that are now healthier than they were, and for those you can give discounts. That’s exciting, except you now you have people that are not as healthy as you thought they were.”
He added that thinking IoT will only drive cost reductions would lead you to living in a “bit of a dream world.”
Werneyer ultimately believes there are three areas where IoT data could be used by insurers to build better relationships with customers and to generate new revenue streams:
Monitoring customers better and offering discounts and incentives to those considered to be ‘good risks’.
Werneyer said that insurers largely have no idea who their customers are, with this owing to a lack customer segmentation. Traditionally, he says, they’ve had very ‘cold data lines’, such as name and job function. However now “through IoT they have whole new dimension which is multi-dimension in itself, which is behavior”.
For example, IoT and data analytics can serve up what people think about being healthy. Werneyer talked of this as ‘impact-ability’ – or simply knowing how customers will react to your message.
Werneyer says customer engagement is something the “insurance industry is really, really bad at”.
“Trust me, insurance is the not the benchmark of good customer engagement”.
Yet he believes that IoT offers an opportunity for insurers to get closer to customers – so long as they’re willing to do so.
“There’s an opportunity to transcend beyond the numbers and the logistics and the data sets and provide something beyond some calculation. You’re talking about telling people ‘we’ll be there for you when you claim’.”
He warned that insurers still promoting themselves as paying claims will always get ‘bad reviews’ owing to the market and a continued lack of trust in insurers.
Nonetheless, he said that while insurers should become move away from traditional business models and become ‘lifestyle managers’, they must do this by leveraging expertise by partnering with other parties. For example, he mentioned the idea of integrating APIs from an external fitness service to keep your customers fit and healthy.
IoT is about offering industry a “tangible way” of getting to know the customer, but he warns that insurers must be “smart” about this.
“If you ask for random data, people will become suspicious.”
Competition – survive or die
Werneyer believes insurers are at risk from new players, especially in this growing age of InsurTech start-ups and new technology providers.
“50 percent of new entrants are an insurance platform or a group based solution, bring together people with similar mind-set or philosophy,” he said, before adding that these offer solutions “no different to rest of market. “
Werneyer said that it is “all about design and messaging”, and that these new players are “going after your customer”. He warned that they are on a war path to “commoditizing” insurers.
This cut could the insurer out, he said.
“If we have no connection with the customer, why would they care what we say?”
“If we don’t engage [with customers], insurance as product line will fundamentally cease to exist…You will be found in third-party environment, you will be in Amazon, under health, and there will also be some insurance there.
“If we believe insurance has to have future as a core product or proposition, we have to make clear how we stay relevant.
“IoT is such an opportunity; we know data, new data is exciting times in terms of what we can do there, so we have to look at new partnerships. What are the guys in the telecoms, mobile, health doing…what are they doing that we can learn from?”
He further urged that insurers need to get away from the ‘insatiable’ desire to know everything, citing privacy and security concerns. Furthermore, he said that good information security can only be achieved through the here and now (encryption and firewalls) and through security by design.
“It’s an age of opportunity and revitalization The worst thing you can do is ignore it.”