Insurers currently occupy a wide range on the digital spectrum, explained Donald Light, director of Celent’s Americas P&C Insurance Practice, at the L&T Infotech Insurance Leadership Forum held this Wednesday at New York’s Waldorf Astoria hotel. While some experiment with paperless initiatives, others are venturing into mobile apps and core system replacements.
Many insurers are still in the early stages of digital, Light explained, but the future is promising. Technological advances in mobile, big data and analytics, and the Internet of Things will enable businesses to expand their offerings and enhance customer service capabilities.
“An advanced digital insurer exploits the inherent ability of digital data and information to transform products, processes and results,” said Light. “[Digital] does change processes – it can make them faster, it can make them more satisfying.”
The Internet of Things, in particular, is a key enabler of digital strategy. Light describes how objects with networked sensors will provide a vast amount of data that insurers will be able to access for the first time. This offers an invaluable opportunity to apply analytics and make better-informed business decisions.
Usage-based insurance (UBI) is the first example of how insurers can leverage the Internet of Things. In its first stages, UBI provides simple measurements, such as distance traveled and vehicle positioning, which insurers can use to evaluate ownership risks and incentivize policyholders to drive safely.
“The Internet of Things is really opening up broader horizons and more things [insurers] can do, but telematics for vehicles is kind of the pioneer here,” Light explained. “I think there’s going to be very strong economic incentives for companies to expand the pool.”
There are three constantly interacting components within the Internet of Things, said Light. These are objects with networked sensors, data stores, and analytic engines. The objects gather information, such as vehicle speed or home temperature, to data stores. The analytic engines, both human and machine, analyze this data then provide feedback and control to the objects with sensors.
“This data has not been available to insurance companies, but the Internet of Things throws data to insurance companies,” said Light. He predicts that it will impact every part of the insurance life cycle.