iot: disruption and opportunity in the insurance industry

© 2016 NTT DATA, Inc.1

IoT: Disruption and

Opportunity in the

Insurance IndustryNormand Lepine | January 2017


Key Questions: Investigating Insurance IoT

1 2 3Are consumers ready for Smart Home

technology?

Are consumers ready to share data to reduce risk and save money?

4 5

Are Carriers ready for Smart Home initiatives?

What are the barriers moving forward?

What are the threats and opportunities for

the industry?


Survey snapshot

HOUSEHOLD INCOME AGE DISTRIBUTION

12%

28%

46%

14% Less than $49,999

$50,000 to $99,999

$100,000 to $199,999

$200,000 or more

35%

33%

32%18-34 35-54

Over 55

Overall mix of respondents reflects a

higher income base

Even distribution of respondents

across age segments

CARRIER INTERVIEW SUMMARY

101 surveys were conducted to understand investments, opportunities, challenges and

perceptions for Smart Home programs

40%

24%

36%


Top 10 P&C Firms

P&C Firms Ranked Below Top 10

Other (Not indicated, prefer not to disclose)

Consumer:

• 1,006 consumer survey responses

• Online survey

• U.S.-based

• Reflect higher income

• Required to be 18+

Carrier:

• 101 carrier surveys conducted with

executives involved in decision-

making, budgeting, strategy or

execution

• Director-level employees and above

• Distributed between regional and

national firms


59% of Carriers have made strong progress with

leveraging Smart Home technology to improve products.

There is a large distinct group of consumers who are

willing to invest in Smart Home technology; however, they

are less loyal to their current Carrier.

Consumers want their insurance company to be advisors.

The majority of consumers find the Smart Home to be

expensive and a challenge.

Carriers recognize the importance of IoT to

improve their business.

Findings



Study Definition of

Smart · Home · Devices


We are interested in understanding your views and interest to invest

in “connected home” or “Smart Home” technology. The Smart Home

includes devices that have networked connectivity, allowing them to

send and receive data. Categories include:

Security Systems Smoke/CO Detection Frozen Pipe Sensors

Doorbells Cameras Lights

Vendor Examples:


Top Five

Smart Home Devices

1 Thermostats

2 Smoke/CO Alarms

3 Garage Door Openers

4 Door Locks

5 Door Bells

of survey respondents expect

to purchase Smart Home

devices in the future50%

Millennials are becoming

the dominant purchaser of

Smart Home devices.

The interest in purchasing

cameras is growing

considerably.


There are trade-offs with the consumer decision to engage…

CONS

Safety

How does IoT fit into the insurance value proposition?

Cost savings

Convenience

Avoid liability

PROS

Opportunities for

value-added services

Privacy and security of data

Expensive

Complicated and difficult to implement

Increased interaction with carrier


Seekers

64% of Survey

• Policies are static and inflexible

• Feel Carriers don't see them as

unique customers

• Carriers could provide more

personalized services

• Would consider leaving Carrier

to save money

Keepers

36% of Survey

• Like the structure of policies the

way it is

• Feel protected by their

current policy

• Current policy does a good job of

tailoring their policy

Switched Carriers with current home

Will change Carrier if not innovative

Want Carrier to anticipate needs

22%

26%

59%

35%

46%

71%

Keepers are generally content while Seekerswant more

Homeowner insurance customers are segmented into two distinct groups


OlderTwice as many respondents in the 45-64 age range

Technology LaggardsTwice the percentage of late adopters

Satisfied with Policy35% of respondents rated their satisfaction with their policy a 10 vs 23%

for other respondents

Value RelationshipsMore likely to choose a policy because of a relationship with a broker

Value ServiceReputation for service is more important in selection, but Keepers are

more likely to switch Carriers due to a service problem

If It Works, Don’t Fix ItIf satisfied, prefer not to make changes

Keepersstruggle with technology and focus on relationships

Keepers are less likely to change Carriers

and prefer the status quo



Seekers are younger and always looking for improvement

Seekers are less loyal to their Carrier and

willing to make changes to make a policy

more customized

YoungerIncludes 72% of overall respondents in the 25-34 age group

Technology Savvy77% are early adopters

Moderate Satisfaction with Policy77% rated satisfaction 7 or lower (out of 10)

Value Cost-savings73% of seekers want to know the cost savings in order to consider Carrier

Smart Home programs

Value Personalized Offerings 81% of respondents would value a more personalized policy from their Carrier

Always Try To make It BetterSignificantly higher percentage of respondents always want to make their

policy better



Seekers

are more willing

to share data

Keeper % Responded 8-10

Device Seeker% Responded 8-10

Security Systems

Smoke/CO Detectors

Frozen Pipe Sensors

Doorbells

Cameras

Thermostats 28%

30%

37%

32%

25%

18%

47%

41%

59%

54%

40%

24%

But it depends

on how personal

the data is



Privacy and security for Smart Home devices remain a major concern

Trust in the future ecosystem for Smart Home data will be critical for future initiatives

56% 60%38%

Are very hesitant to share

data/information with vendors,

insurance companies and other

interested parties

Are very concerned about privacy Are very concerned about the

security of information


The opportunity for Smart Home programs

are interested in

understanding the

potential savings52%

believe that any investment

that will reduce premiums is

a good idea26%

state that it sounds great and

to sign them up!22%

• Cost savings

through discounts

• Proactive services

to protect dwellings

and minimize

liability

• Customized

homeowners

policies

• Programs to

facilitate Smart

Home installation

Seekers are ready for Smart Home programs from Carriers

… but are looking for the benefit

Cost savings through discounts

Proactive services to protect

dwellings and minimize liability

Customized homeowners policies

Programs to facilitate Smart Home

installation


believe IoT will have an important

influence on products

and services 74%

77%of Carriers are

ramping up IoT

initiatives

see the opportunity to attract

new customers83%

believe IoT will improve customer

relationships87%



1 2 3 4 5Customer Service

Customer service and technology are the top initiatives for Carriers

Initiatives are focused in targeted areas across the organization

RANKING OF INITIATIVES

Customer Service

TechnologyPartnerships

and Alliances

Sales/Distribution

Underwriting



Carrier executives see technology firms as the top players

Potential partners could be disruptors

COMPANIES BEST POSITIONED FOR THE SMART HOME

62%48% 44% 40%

28%12% 11%

SEGMENTS BEST POSITIONED FOR THE SMART HOME

72%

50%39% 37%

25% 19%

Major technology

firms (Google, Apple,

Samsung)

Home appliance

manufacturers

Telecommuni-cation firms

Insuretechcompanies

Insurers Utilities/Cable



53% of

Seekers

Seekers are both an opportunity and a risk

would consider an

alternative provider

(non-traditional) for

insurance coverage

TRUST SHARING SMART HOME DATA

Company or type of

company

Answered

4 or 5

City services 51%

Your insurance company 48%

Apple 46%

Primary bank 42%

Amazon 40%

Google 40%

GE 31%

Another insurance

company30%

Utility provider 29%

Samsung 29%

Lowe's 26%

CONSIDER AS AN ALTERNATIVE INSURANCE

PROVIDER

Company or type of

company

Answered

4 or 5

Primary bank 41%

ADT 39%

Apple 33%

Google 31%

Amazon 28%

GE 22%

Samsung 21%

Cable 17%

Walmart 11%


Resolve the

data issues

• Develop an ethics

policy for IoT

• Provide transparency

on data security and

privacy

• Address the data and

analytics infrastructure

Align IoT

objectives

• Understand consumer

goals first

• Plan initiatives to

converge Carrier and

consumer desires

• Get internal agreement

among business and IT

stakeholders

Focus on

value-add

services

• High priority for

consumers

• Offer advice and

assistance with Smart

Home value

• Use services to create

strong loyalty and new

revenue streams

Partner

• Carriers can’t manage

the ecosystem alone

• Potential disruptors can

become allies

• Cost-sharing

arrangements may be

highly beneficial

RecommendationsSafety, security and loss mitigation are still what insurance offers and what consumers and IoT players want