IoT and technologies for the insurance sector

The insurance market is facing up to the process of digital transformation in ever more decisive ways. Virtually all providers in the sector see digitalisation as a vitally necessary course of action, in line with the new profile of their target customers and the main technological trends.

For companies in the insurance market, there are now clear opportunities to become a key player in the wave of digital transformation that is currently underway: that of the Internet of Things (IoT).

Self-driving cars, drones, smart buildings...

Much more than just a short-term phenomenon – in view of the estimates that around 25 billion objects will be connected by 2020 – the IoT represents the totality of interconnected “smart” objects that can identify and interpret the context in which we move to trigger “intelligent” actions.

Sectors with quite different characteristics are now all actively investigating the potential benefits offered by the Internet of Things. These are just a few of the examples being viewed with interest by the insurance market:

• The development, by the automotive and transportation sector in general, of “driverless” transport systems based on artificial intelligence. Such “self-driving cars” are concrete examples of a solution that could potentially impact on our everyday lives.
• The rapid growth in the field of robotics. Drones are already a fact of life with applications in a number of fields (including transportation, the military, emergency services and territorial recognition).
• The design of “smart buildings” and “smart cities”, now being vigorously pursued by the energy and utilities sector with the aim of intelligently managing energy consumption, safeguarding the environment, and improving quality of life (through traffic management and lighting, for instance).

The impact on business models in the insurance sector

Innovations of this scale will necessitate profound changes in the fundamental business models used in the insurance industry. To give one example, insuring “driverless” cars will involve products that have structures, analytic capabilities and pricing models that are completely different from those used today.

The challenge is not only technological

From a technological point of view, the key to success lies in harnessing the ability to manage the complexity arising from the proliferation of objects through platforms that can “integrate” them quickly and flexibly, while also managing and controlling the vast amount of data derived from the objects in a way that produces information of value.

Nonetheless, a purely technological response is not sufficient in itself. While there's certainly no single recipe for success, it is beyond doubt that companies wishing to anticipate the wave of change will need to make radical adjustments to their business models, based around:

• A new value proposition and a new value chain in which the provider positions itself as an integrator of cross-industry services.
• New partners with specific skills (in processes and in data and systems management).
• New distribution methods and channels that fit the new products and services being developed.
• An operational and organisational setup on a suitable scale.

A new way of doing business that is open to a broader competitive landscape which, while offering enormous opportunities, nevertheless requires appropriate preparation. Customer service based on the “retailer” model and a big data-based information management system both represent essential strategic imperatives for tackling the new market challenges in an optimal way.