While insurers in the U.S. recognize the impact the data will have on the industry, few currently have an IoT strategy, are collecting IoT data or have dedicated resources in place, according to a new LexisNexis Risk Solutions research. This creates a unique opportunity for forward-thinking insurers to create a competitive advantage.The study examines the insurance industry’s perspective on collecting, analyzing and using data created by the Internet of Things (IoT).
The 2018 LexisNexis IoT and the State of the Insurance Industry Study surveyed 500 US insurance professionals from auto, home, life and commercial lines of business to gauge how IoT data fits into their current and future business strategies, and the extent to which this data is being collected and used today. The research uncovered that while 70 percent of respondents agree that gathering IoT data is important to their organization’s current insurance strategy, only 21 percent have an IoT strategy and just 7 percent have the human and technology resources required to use it in decision making. Of those that said they currently collect data from telematics, wearables, connected home and properties, just 5 percent use it in their day-to-day analytics.
“Carriers already use data to make better decisions. But given the looming tsunami of data from the Internet of Things, we were surprised to learn how few are prepared to leverage it into their business strategies and customer offerings,” said Bill Madison, CEO of Insurance for LexisNexis Risks Solutions. “The good news is that the IoT playing field is currently relatively even. Partnering with an experienced organization to cleanse, normalize and analyze IoT data can help carriers gain a first-mover advantage in enhancing their existing portfolio and developing new products.”
Key Findings: Carrier Opportunities, Strategies and Resources
Data from connected devices can put real-time insights in the hands of insurers, which can create new business opportunities, help tailor product offerings, promote more proactive underwriting and claim resolution and personalize consumer interactions.
Yet, one reason the insurance industry is lagging could be that most carriers think of IoT at a tactical rather than a strategic level. When asked to define IoT, most did so in tactical terms like “a network of connected devices.” Few respondents discussed IoT in terms of strategic uses for underwriting, claims and other analytics.
48 percent of those surveyed believe the ability to collect and use IoT data will define industry leaders. However, while few are leveraging IoT today, most carriers believe their counterparts are ahead. This suggests that many are taking a wait-and-see approach and will use existing in-house systems until the Return on Investment (ROI) of IoT is proven in the competitive landscape.
IoT Trend Spotters vs. IoT Skeptics
The study didn’t find any clear-cut segmentation among lines of business or by job function, it identified two main groups – deemed Trend Spotters and Skeptics – based on the question “How important is gathering IoT data to your business in the next five years?”
Trend Spotters are 100 percent in agreement that IoT is extremely important to their future strategy, as opposed to 0 percent of Skeptics. Across the segments, Trend Spotters tend to work in commercial and auto insurance lines while Skeptics tend to work in home and life.
Nearly half (48 percent) of Trend Spotters believe investing in IoT will give them a competitive advantage in the future, while only 22 percent of Skeptics think the same. Similarly, more Trend Spotters tend to believe that operational issues like security, storage and analysis are difficult challenges to tackle, but understand that they are all part of the process. Skeptics, on the other hand, tend to view those issues as much more challenging.
For complete findings, download the 2018 LexisNexis IoT and State of the Insurance Industry Study whitepaper detailing findings by line of business.