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Insurers Still in Nascent Stage of Adapting to an Increasingly Connected World – #WIR16

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Over the past decade, each year we have embarked on our primary research for Capgemini and Efma annual World Insurance Report (#WIR16).  We typically hold a kick-off workshop with our global insurance network with anywhere from 8 to 12 countries represented.  We recap and evaluate how well the previous year’s Report resonated with the industry and we brainstorm what topic we think would be most relevant for our clients.

This past summer, we had a lively discussion around the topic of Internet of Things (IoT) and our hypotheses around how we see this impacting insurers . . . and more importantly . . . WHEN will it start to impact them.  While we had some differences in opinion, we agreed to focus our research on this whole concept of connected ecosystems, embedded technology and machine intelligence.

We developed our hypotheses and set off to roll out our global voice of the customer survey in 30 countries and to start scheduling CxO interviews across the Americas, Europe, and Asia-Pacific.  I had the opportunity to run a number of the interviews and each interview was eye opening – both in terms of how advanced some firms’ planning had evolved, as well as how little mindshare others had given to the topic.

Technological advances, driven by IoT, are shaping customer lives and will have a profound impact on the insurance industry

Our first hypothesis was that three technological advances, all tied to Internet of Things, are shaping customer lives:

  • Connected Ecosystems: The digital world is moving towards an advanced stage of interconnectivity, where devices form a self-managed, independent ecosystem through machine-to-machine communication.
  • Embedded Technology: As electronic devices become smaller in size and more portable, they are gradually integrating into human lives through wearables and disappearables that can fit into the human body, as well as devices that can be embedded into other devices and products.
  • Machine Intelligence: The third emerging theme in technology is that of machine intelligence where machines are increasingly being equipped to perform human tasks and take intelligent decisions.

Under these themes, three technologies that are especially important and impactful for the insurance industry are: Smart Ecosystems (such as smart homes and smart buildings), Wearables, and Driverless Cars.

Likelihood of customer adoption is high, with affluence being the strongest correlation to adoption

Globally, customers have shown similar interests in Smart Ecosystems and Wearables, with approximately one-third noting their likelihood to adopt these technologies.  And while certainly a lower level, nearly one-quarter of customers noted their likelihood to adopt Driverless Cars.

Not surprising, Gen Y did note a higher interest in adopting these technologies.  However, an interesting finding that emerged was that affluence was a more significant factor than age in determining customer uptake of the new technologies. Globally, more than 45% of affluent Gen X customers rated that they are likely to adopt smart ecosystems and wearables whereas only 30-35% of non-affluent Gen Y customers rated so. Similarly, more than 50% of affluent Gen Y customers rated that they are likely to adopt Smart Ecosystems and Wearables vs. only approximately one-third of the non-affluent Gen Y noted the same.

Most insurers are still in early stages, but are expected to move fast

Insurers clearly noted the current maturity level of their offerings tied to these connected technologies to be very low.  However, across the board, they expect to their offerings related to Wearables and Smart Ecosystems to reach full maturity within five years.  This suggest that these technologies are not only relevant, but that investments are already being made to address the demand.

Insurers noted the greatest interest in being first movers (36.9%) in developing offerings related to Smart Ecosystems.  A slightly lower percentage (29.9%) were planning on being first movers in the case of Wearables.  However, an even larger percentage (32.9%) were ready to wait until they saw successful case studies on use of Wearables from other insurers.

With Driverless Cars, insurers are following a more cautious approach. Their planned maturity level for offerings related to Driverless Cars is lower than that for Smart Ecosystems and Wearables. Also, a greater proportion of insurers wish to follow a wait-and-watch approach when it comes to making investments in this technology

After interviews with over 180 insurance executives and survey data from over 15,500 insurance customers, it is clear our initial hypotheses had some legs.  Customers across all demographics (although especially the affluent and Gen Y) have noted a high affinity to adopt new technology related to the Internet of Things.

It is also clear the adoption of this technology is going to provide a significant opportunity for insurers.  However, existing maturity levels are very low across the board and represent a big threat if they fail to get moving quickly.  If insurers are to believed that they will have fully mature offerings related to Smart Ecosystems and Wearables within five years, they must start planning their investments and building their capabilities yesterday.

More to come next week as I dive deeper into some of our findings around Smart Ecosystems and Wearables.

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