As the world moves deeper into the “digital age” and the Internet of Things becomes a ubiquitous reality, the insurance companies of tomorrow will focus less on mitigating risk and more on offering end-to-end “customer protection services.”
So says Robert Cummings, the head of SAP’s Industry Business Unit for Insurance. Cummings was speaking during a session called “The Digital Future of Insurance,” held this past week at SAP’s Financial Services Forum in London at the Grange St. Paul Hotel. Cummings argued that insurance represented one of the last industries not to have been significantly disrupted by digital technology–and is thus ripe for such disruption.
“There’s really only been three major events in the history of insurance: when the first policy was written in 1347, the 1666 Fire of London that made people realize the need for home insurance, and now the digital revolution,” he said.
Cummings noted that the advent of developments such as telematics, wearable technology and connected “smart homes” portended a different kind of insurance offering in the future. Whereas insurance policies have traditionally offered products that attempt to mitigate risk by creating a policy around an event or object, the model will soon switch to that of a customer protection services.
Cummings gave examples, some of which already exist in the industry. He pointed to an AIG practice of using drones to monitor football/soccer stadiums it insures, in order to detect and repair structural weaknesses as well as check for damage after storms. This same concept could also be employed within personal homeowner’s insurance, with drones making periodic checks of houses with the goal of reducing claims and assessing risk much more accurately. Further, technologies such as Google subsidiary Nest Labs could allow for Internet of Things applications such as a smart home sensors capable of detecting anomalies in water pressure, potentially triggering a temporarily shut-off a home’s water.
Telematics and Wearable Technology
Similarly, while the use of telematics to measure a driver’s safety for the purpose of crafting an auto policy is not a new concept, the technology of the “connected car” can go even further with preventative measures. Cummings offers a scenario wherein an auto insurance customer gets a text alerting him that his vehicle appears to be parked outside and a major thunderstorm is forecasted for that evening, and suggests to him to move it into the garage.
Going even one step further down this path, smartwatch owners could conceivably get text message from their life insurer along the lines of “You should go for a walk; you haven’t had much movement today.” While the last example may be a bit creepy for many people, Cummings says it’s all part of the future shift in insurance towards preventing accidents and damages, as opposed to writing checks after they occur.
“Insurance as we know it will continue to exist, but the focus will be different,” Cummings concluded. “It’s won’t be just about selling products, but designing services for the customer and a blurring of lines of businesses.”