Making the case for the Internet of Things for insurance
The Internet of Things (IoT) involves interconnected ecosystems that can strengthen brand loyalty, create revenue streams and dramatically cut loss costs and risks. In the insurance sector, telematics can provide interconnectivity by capturing driver behaviors for insurance carrier use and analysis. By leveraging insurance business intelligence and insights gained through telematics, insurers can take advantage of differentiation in pricing, diminished loss costs and value-added services for policyholders.
Enhancing pricing levels
Telematics data enhances the 360° view of a policyholder, allowing insurers to go beyond demographic information when determining risk and pricing for insurance policies. Using telematics, insurers can obtain an accurate, holistic view of policyholders by using a specific driver footprint that is based on driving data. Accordingly, insurers can reward safe driving behavior—or provide feedback to drivers who are not contributing to a safe driving environment. Such driving data can be taken in combination with other rating factors to enhance segmentation and pricing, allowing insurers to deliver value to company and policyholders alike.
Decreasing loss costs
Telematics also enables models that predict the extent of bodily injury and degree of property damage as a way of reducing claim overpayments. The Internet of Things can offer significant value in this regard, not least because of the high loss ratios plaguing the insurance industry, as described in the IBM white paper Telematics insurance: a disruptive innovation: “Loss ratios in the UK motor insurance industry currently run at around 80 percent, with more than five percent of claims costs relating to indemnity settlements for injury claims.”
Other use cases for telematics include theft detection and rapid first notice of loss (FNOL). When onboard telematics devices detect that a vehicle has been involved in an incident that algorithmic interpretation identifies as being consistent with theft, appropriate action can be taken, such as sending a text message to the policyholder or contacting the authorities.
Creating value-added services
Telematics and insurance analytics can help differentiate a product that customers might otherwise view as a commodity. For example, insurers can notify drivers about maintenance issues before a vehicle breaks down, saving money for both policyholder and insurer. Moreover, using data provided by telematics, insurers can alert authorities when a theft is suspected, even bringing to bear GPS capabilities available through onboard devices. Parents may also set geographic boundaries for their young drivers, triggering an alert on the dashboard and sending a notification to the parent’s mobile device if the driver travels outside a designated area.
Leveraging the power of the Internet of Things
The IBM Internet of Things Foundation helps provide the basis for a successful IoT implementation—from application infrastructure to cloud connectivity and integration to enterprise-level mobile support. IBM provides purpose-built and custom-designed IoT analytics solutions to help create understanding of the physical nature of things, as well as the relationships between things and the data they generate.
Extensive industry expertise allows IBM to provide you with insights that can help you understand how the “things” in your world act, securely integrating their data with your processes. Moreover, IBM can help your back-end systems support a wide range of applications, allowing you to confidently and rapidly apply real-time IoT insights to your business.
All this is possible because IBM understands how to make the Internet of Things a part of your IT infrastructure. Accordingly, IBM has developed an insurance telematics solution architecture, built on open architecture, that features seamless integration from appliance to applications to tools, as well as assets that include BigSheets, BigSQL, Streams and the Spatio-Temporal Analytics Toolkit.
Discover IBM’s industry-specific insurance analytics solutions, including IoT for insurance, and then sign up for a live demo of IBM Behavior Based Customer Insight for Insurance, a featured IBM solution for customer retention, cross-sell and up-sell.