Wearable devices and other smart technologies are set to transform the insurance industry, with a third of insurers already using wearables to engage with customers and 63% betting that the technology will be adopted across the sector in the next three to five years.
This follows numerous reports warning insurers to adopt digital technologies or face being ousted by new players.
Companies can use data generated from smart devices to set insurance prices and reward customers based on the data collected about behaviour.
The research from Accenture – part of its Technology vision for insurance 2015 – digital insurance era: Stretch your boundaries report, also found that about three-quarters of insurers view personalising customer experience as a top priority, with half already seeing a return on investments made in this area.
Wearable technology can be used in health insurance, with fitness bands monitoring health, while vehicle insurers can embed devices in cars to reward drivers for safe driving.
“While insurers have traditionally based their underwriting and pricing processes on a limited view of certain customer variables, emerging technologies such as wearables and other connected devices can help insurers break from their traditional business models and provide outcome-based services for their customers,” said John Cusano, senior managing director of Accenture’s global insurance practice.
“One leading insurer recently announced that it will provide new policyholders with a free fitness band to track their health progress, and then reward healthy living with a reduction in life insurance premiums,” he said.
Big data presents challenge for insurers
But insurers face challenges using the huge volumes of data now available, with 56% describing it as extremely or very challenging.
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- Most insurance companies do not have an enterprise-wide big data strategy despite the industry's heavy reliance on access to accurate information.
- Insurance brokers are too slow to launch products and the products they offer are not keeping up with changing consumer behaviour, according to marketing executives that work in the sector.
- Insurance companies in Europe are under threat from companies outside their sector as they fail to keep up with digital developments.
This is not a new challenge. Insurers have been aware of the need to invest in big data technologies for some time. A year ago, research from business consultancy BearingPoint, found that most insurance companies do not have an enterprise-wide big data strategy, despite the industry's heavy reliance on access to accurate information.
According to the research, 90% of insurance firms had not implemented a company-wide big data strategy, and therefore risked being bypassed by new, more agile data aggregators taking advantage of the digital era.
Over two-thirds of companies surveyed by BearingPoint said big data had a highly important role in their future. Almost three-quarters (71%) said big data would be a top priority by 2018, but less than a quarter (24%) said their company’s big data maturity was advanced or leading, and only 33% have started a departmental or enterprise implementation process.
A lack of skills was a stumbling block for big data implementation, according to 53% of insurance executives across Europe. The survey also found that 16% don’t know enough about big data, 53% said IT executives are left alone to seize the opportunities of big data and only 37% view their company as ready to implement new ideas in connection to big data.
Insurance companies are under threat from non-traditional competition due to their slow take-up of new technology. In its Trends 2014: European digital insurance report, Forrester Research said companies in manufacturing, utilities and telecoms, as well as startups, could take business from traditional insurers.