Similar to driverless cars, machine learning, and augmented reality, IoT (internet of things) devices are here to stay. In fact, by the end of 2019, the global smart home market is predicted to amount to $73.7 million and is expected to show an annual growth rate of 17.6%, resulting in a revenue of $141 million by 2023.
Over the past decade, we’ve all seen highly regulated industries get shaken up by new technologies and business models. The success of companies like Uber, Tesla and Square stems from their ability to create value for their customers in ways that didn’t previously exist.
And in the insurance industry, one value opportunity is IoT technology.
From my experience working with insurance companies and building insurtech products, I’ve been able to witness firsthand a massive shift in the insurance industry. Businesses which, for a longtime, were slow to adapt to new technologies and approaches are now beginning to transform rapidly. And these transformations haven’t gone unnoticed.
To put it in numbers, in 2015, 83 million smart home devices were shipped to consumers. By 2020, that number is estimated to grow to over 193 million.
Of course, setting up a new IoT program isn’t as simple as flicking a switch. It’s often challenging for insurance companies to know where to start.
IoT programs are designed to help insurance companies incorporate IoT/smart home devices into their policies — and they can be as simple or as complex as you choose to make them.
For example, an insurer could simply offer their policyholders a discount on smart home products that help property owners prevent water damage, fire and theft. More complex programs might integrate product-service bundles, lower deductible options and rewards for reducing risk.
In any case, smart home technology programs are an excellent way to help drive claim reduction, increase customer engagement (everything from acquisition to retention) and generate new revenue streams. Plus, with the data collected, insurers can better understand their customers in ways they couldn’t before and quantify risk where it previously wasn’t possible.
In this two-part series, I will cover a few tips that will help you get started with your IoT/smart home technology program. Let’s start with two of the most important steps:
1. Form Strategic Partnerships And Alliances
One of the most important steps in building out your IoT program is finding the right strategic partner(s). This can make or break your program’s success. Your ideal partner shouldn’t just share your values and business goals — they should also share a passion for accelerating innovation and helping you drive a successful program.
When looking for the right IoT/smart home company to partner with, it’s important to also factor in product and program success. Have they ever partnered with an insurance company before? Do they have successful programs in the market you can reference? What support and services can they provide to help you set up your program? What do policyholders think of their products and services? Do they have a high NPS rating? What is their pricing model, and what is the cost to you?
Lastly, in insurance, it is also particularly important to understand potential partners’ knowledge of the regulatory environment and restrictions. This can be critical when it comes to data exchange and the validation of discounts.
2. Set Objectives And Define Program Success
The first iteration of your IoT program isn’t going to be perfect, but that isn’t the point. The point is to provide value to customers, learn from the program and continue to optimize alignment with your overall business strategy. This is where the balance between speed and scale comes into play.
Setting clear goals at each phase will help. Try to be as specific as possible here. Are you using this program to attract new customers? To retain current customers? Are you hoping to collect data? If so, what kind of data, and what for? Are you trying to reduce claims or improve the claims process? Answering these questions will help you define your program structure and success. However, you don’t have to do this alone. If you have the right partner, they will help you address these questions and build the best program for your business.
You should also spend some time collaborating with different departments to learn more about your policyholders and their largest risks. This will help you better understand what types of programs will provide the most value to you and your customers.
It’s important to remember that today’s digitally native consumers expect higher levels of service and engagement. They want stronger preventable measures and greater insight into their policies. They want insurers to be advisory-oriented and help them protect their property through value-add touch points. With this in mind, your IoT strategy should be heavily focused on your customer’s needs.
Building Your Foundation
The most important elements of your IoT/smart home technology will fall under these first two tips. It’s like building a strong foundation — without it, you won’t have a reliable, scalable program.
So, now that you have the right partner and program goals are set, what is next? Stay tuned for part two of this series, where I will cover how to nail your go-to-market strategy and leverage IoT program data to drive better models, products and services.