IOT Insurance Market: Perks and Limitations
More and more insurance companies these days are incorporating IOT to better understand consumer preferences and their usage habits of different products to offer a superior personalized experience. In this fast-advancing world, it is of absolute importance that companies go along with the upcoming trend to better understand customers and offer better services than their competitors.
Internet of things (IOT) is a computerized network of physical things that are fixed with software, sensors and certain other technologies which enable different devices to identify themselves for connecting and exchanging data over the use of Internet.
IOT has already entered our day-to-day life through cars, smartphones, home smart appliances, etc. This opens up wider opportunities for insurance companies to track and analyze risks of misusage of products more efficiently while paying attention to the product’s operational efficiency. Certain products or devices send specific data to insurers about our usage, experience and habits which are further fed into Artificial Intelligence algorithms. This helps the company to manage risks, track usage, target new customers, and most importantly combat competition. According to a report by Research Dive, the global IoT insurance market is expected to observe significant growth in the coming years.
IOT ideas are convulsing the insurance space rapidly, and hence it is pertinent for insurance companies to incorporate IOT as soon as possible otherwise, the companies will have a tough time competing in the market in the coming years. Extensive connected sensors in various devices have globally maneuvered insurance companies to accelerate the amount of useful data to the insurance companies provided from the products used by the customers. Customized products or services can be delivered to customers with the help of instantaneous interpretation of the data.
The most prominent areas of insurance where IOT is significantly prevalent are as follows:
- Life insurance
Consumers these days use wearable fitness trackers which help them to monitor heart rate, pulse rate, active minutes in a day and so on. Doctors can easily analyze potential diseases efficiently, thus providing diagnostic services effortlessly. Certain gadgets help to anticipate acute ailments before they turn out to be intense. Hospitals also fit smart medical devices these days in order to track the daily status of the patients. These personal and corporative IOT systems help insurance companies to analyze data, segments, and demanded products or services efficiently.
- Vehicle Insurance
Cars these days are filled with electronic sensors and chips. These gadgets calculate various details about the car regarding its speed, handling, acceleration, location, etc. Modern cars nowadays have the ability to connect it with a smartphone and access certain functions of the car like starting the car and switching on the AC from the smartphone itself. Therefore, cars have accessed another set of sensors in the phone which collects information about customers. Insurance companies gather the information to manage risks, offer better services, and enhance claim management.
- Home Insurance
This segment is certainly trending at the moment but is a much narrower segment in terms of IOT data collection. Home insurance IOT data usually come from smart home devices like Amazon echo, Google home, Google smart lights, etc. Insurance companies feed algorithms with home IOT data to analyze the risks for each property. Data collected here are amorphous and vague due to the narrow reach of smart home devices compared to healthcare and vehicle sector.
Limitations of IOT in Insurance Industry
- Administration of data
Companies receive tons of data from various different segments, and hence sometimes they might fail to interpret key data they receive. The process becomes more complex in case of real-time data interpretation.
- Data Protection
Due to the rise of digitalization, more and more people tend to keep their confidential documents, information, and processes digitally secure and avoid unnecessary paperwork. But this also accelerates a series a fraudulent practices and hackers to try and break into the system. Thus, insurance companies should possess a strong cyber security system to prevent hackers from breaking in and access valuable information of the clients.
- Vast Investments
To regulate, analyze, and interpret real-time data, new strategies, tools, and systems are extremely essential. Highest level of cybersecurity systems is also vital for protection against breach of valuable information about the company and the clients. Therefore, higher investments are required for insurance companies.
- Stringent regulations
The government may impose rigid restrictions based on its privacy, ownerships, and other issues which could obstruct the flow of business.
Potential of IOT Insurance
IOT has great potential to bring out contemporary business models on data-driven interpretation which is vital to the coherence of value proposition. Companies can manifest best results by establishing trust with consent tracking and supervision among customers. To avoid data measurement issues, companies must ensure that systems are scalable or expandable and hence can take on big data. Insurers need to encompass ecosystem-based approach for maximum innovation which will then disrupt the world of technology.
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