Capgemini has released its World Insurance Report for 2016, saying that IoT is likely to “transform the insurance industry in stunning fashion” and “redefine the very notion of insurable risk.”
The report, based on a survey of 15,000 respondents in 30 countries, identifies the three technologies most likely to impact current insurance business models as being smart ecosystems, wearable devices and autonomous devices such as driverless cars. It promises to “provide guidance on effective technology investments insurers can make related to the IoT, as well as specific action plans that insurers can refer to as they develop their future strategies.”
Compounding the impact of IoT, says Capgemini, is the growing influence of Gen Y on the insurance market. “Individually and in combination the are expected to act as major disrupters to the traditional insurance business, affecting everything from risk assessments to customer interactions. … The tech savvy gen Y is likely to be at the forefront of … change, making it critical for insurers to understand current consumer attitudes and behaviours, the impact of IoT and how these two forces will interact over time.”
The report tells insurers that the must begin to make strategic decisions, device short, medium and long term plans to streamline, enhance and transform their businesses as the nature of risk transparency risk ownership and risk itself shift making conventional insurance principles less relevant.
While the report does not specifically canvass the major disruption of current insurance business models by new ones, it does warn that “affluent customers are likely to turn to technology firms that offer new ways of delivering insurance, rather than traditional firms.”
A particular impact of IoT will be that it will enable ‘risk transparency’ based on real-time data, be it heart rate or in-vehicle devices. These data will “reduce the unknowns that have traditionally driven statistical models for risk assessment, making it possible to create more dynamic pricing models.”
The report argues that “in general risk is decreasing.” However it is a moot point whether there is, or likely to be, any net reduction in financial risk as climate change drives more extreme weather with consequent large-scale disasters, as has been amply demonstrated over the past few years.