46 ITAPro // September 2014 // www.emagazine.ITApro.org
that gives physically active customers more money. Customers connect their activity tracker, such as Fitbit, to the
program. Based on their activity level, it will transfer money
from their savings to an account with a higher interest rate.
K A healthcare company is experimenting with how they can
use sensors in wearable or implanted devices to help manage
the healthcare of an individual by coordinating the doctor,
hospital, and insurer via real-time case management.
K An auto manufacturer is creating an in-car experience that
leverages sensors and data from the car and integrates new
services, via partners, to the system. Services include finding
and booking a parking space and paying via the car system,
buying groceries online and having them delivered to your
parked and locked car, and receiving icy-road warnings using
road friction data and communication between cars within
the network that are on the same road (based on GPS data).
By linking people, data, physical material, processes, and
ecosystems together, the Io T is transforming simple business
processes into holistic new business models. As companies shift
to smart or connected products that offer greater customer value,
the impact on insurance will be disruptive.
Long-held insurance business models and assumptions from
risk assessment and protection to legacy definitions of insurance
products, business assumptions regarding ownership of customer
relationships and customer data, and traditional revenue models
will be disrupted.
Reimagination of Insurance
The power and potential of Io T demands insurers reimagine,
redefine, and rethink everything: product definition, product
creation, the channels where products are sold, the services
offered, ecosystems of partnerships, pricing, data and analytics,
and new business metrics for success. We can no longer view
our business and value in isolation, as an insurance value chain.
We must broaden our vision and outlook to see our business as
an ecosystem of products, services, and partners for delivering
integrated, valuable services that will fundamentally change
business and revenue models. Why?
As other industries reinvent their businesses and offer
products embedded with Io T, they will gather data and insights
about their customers. This data can give insurers the potential to
manage or reduce risk; offer new, innovative risk-based products;
and create new services embedded with their products.
These new services can deliver new value—enhancing,
strengthening, and changing the customer relationship, commitment, and experience from other industries and companies to the
insurer—transferring customer loyalty, perceived customer value,
and business revenue. Just like Apple, with the introduction of the
iPod, iPhone, and iPad, companies embracing Io T will begin to
shift, destroy, and create companies. The question is: On which
side of the shift will insurers be?
The insurance industry’s first experimentation and use of
Io T have been with telematics, which uses sensors in the vehicle,
either in an attached device or installed in the car itself. The in-
surers using telematics changed an existing business process and
insurance product structure by using the actual number of miles
driven to price auto insurance: the pay as you drive approach.
It modified existing, legacy structures and models, rather than
reimagining them. While considered ground breaking within the
industry, in reality it missed the mark at leveraging the power and
potential of the technology to be truly disruptive and innovative.
This epitomizes why insurance will be seriously challenged by
other industries in the use of Io T.
New entrants are entering the market with reimagined
business models, processes, products, and services that move
well beyond pay as you drive to create a value-added customer
experience by influencing safer driving behavior, monitoring
the health of the vehicle, recommending service, and more. This
highlights the broader potential of Io T by shifting the paradigm
and rethinking the business model.
Riding the Wave of Opportunity
Some insurers understand the seismic shift underway with
Io T and are aggressively developing strategies, experimenting, piloting, implementing, and investing. They are seeking
outside-the-industry ideas, partnerships, and opportunities that
can be leveraged strategically to disrupt, innovate, and win in
this new competitive landscape.
Unfortunately, too many insurers are doing nothing. Preliminary results from SMA research about the planning, adoption,
and impact of emerging technologies in insurance indicate that
over 50 percent are doing nothing with Io T, yet nearly 70 percent
believe Io T will potentially transform and innovate insurance in
the next three to five years. This highlights a serious gap between
the adoption of emerging technologies relative to the perception
of their potential impact, placing many insurers at risk.
The vision and potential of Io T to make businesses and lives
better will be accomplished by connecting devices and data with
one another in meaningful, actionable, and impacting ways. Io T
will create masses of rich data within the cloud, offering countless
opportunities to rethink and reimagine the business of insurance,
challenging long-held business assumptions, traditions, and
definitions of what insurance is, should, and can be.
The opportunities are vast; the potential is great. The disruption to existing business and revenue models is significant. Those
who do not embrace Io T quickly will put their businesses at risk,
both competitively and financially. Which side of the paradigm
shift will you be on? Be innovative. Reimagine. Create an inspiring, impactful, and valuable connected experience. ITA
(Denise Garth, a partner and Chief Digital Officer at
SMA, leads the firm’s Innovation Practice, and heads the
industry’s first Innovation Communities, an avenue for
fostering and facilitating innovation across the insurance