How the internet of things is changing the future of insurance

The modern insurance industry is moving away from the grouping and aggregation of risks towards a more individualistic approach to underwriting.

That’s the belief of Vodafone head of business development internet of things (IoT) Phil Skipper, who says insurers are now much more interested in using telematics and the wider internet of things to drill down into individual risks.

“There is a definite move towards the quantification of individual risks,” he said. “We have been doing this for a number of years with usage-based insurance within the auto insurance industry, and that has very much become a full-chain service.

“We are now seeing insurance companies equally as interested in automating the claims service as they are in preventing claims in the first place.”

FNOL

As part of this race to automate the claims process, insurers are focusing on capturing first notification of loss (FNOL) in the event of a claim incident, and then combining it with additional data streams to determine the estimated cost and duration of the claims journey.

“First notification of loss is becoming increasingly interesting with the introduction of things like artificial intelligence,” Skipper said. “We can take all of the data from a car, add it to information we get from the environment, such as weather and traffic density, plus driver behaviour up till the point of the accident, and then combine it with some interesting technologies coming out that enable you to record the incident itself, and analytics can then look at the level of damage on vehicles and things like that.

“So, not only are you being able to allocate responsibility to the accident, you are also able to get a good handle on how much it will cost to fix it, and that is where we are seeing a lot of interest from insurers.”

But it is not all about handling claims more efficiently, with Vodafone keen to integrate its other insurance services into the claims process to help prevent additional claims occurring in the future.

“We are now linking our vehicle tracking service for stolen vehicles to driver behaviour data,” Skipper said. “So if you are going to leave your car, it is a really good idea to leave it locked, and if you look at that you have a really simple way of saying to the customer: “Look you subscribe to a stolen vehicle tracking service, but we’ve noticed this bad behaviour in leaving it unlocked.”

Micro-insurance

The increasing use of smartphones in day-to-day life is also opening up new avenues with insurers looking to open up new streams of business, and the rise of the sharing economy could create new ways to service emerging markets, such as car share schemes and the short-hire market.

“We are seeing increasing interest in the ability to provide micro-insurance services in the shared economy for things like bike, car and even bus travel insurance for a short period of time,” Skipper said.

“The smartphone is going to be the access mechanism to service and the mechanism by which payments can be made. It also provides a tag that is closely related to the driver, which allows you to triangulate between the driver and the asset being leased, such as a car or bike.”

“So the smartphone is pivotal, particularly in a shared economy environment,” he added.