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The insurance market is undergoing a digital transformation, just like the financial sector, healthcare and many other sectors.
This is more than a trend, it’s a reality. The market has the tools and technologies to hugely expand its capacity to offer increasingly personalised insurance to customers. It’s not about lowering the price of policies, but about making better use of the opportunities.
In general, insurers can provide a much better service based on three main pillars:
When a car leaves the plant, it is designed so to include various sensors in the engine, wheels, steering wheel, radiator and so on. Each component has a series of sensors that will indicate to the car's control system whether the component is working properly or not.
This will allow drivers to see if their product is working as promised by the assembler and, more importantly, it will guarantee complete safety for users and pedestrians.
In the case of a house, which takes much longer to build and does not usually include any type of sensor, how do you know if you are susceptible to problems with the foundations, issues with termites, infiltrations, or even a dangerous neighbourhood?
The answer to these and other questions lies in the Internet of Things (IoT).
In short, the Internet of Things is the connection of any device to the Internet. Your television, car, wearables (smartwatches) and even smartphones are all part of this massive network, which comprises more components than there are human beings on Earth.
With the lower cost of hardware prototyping devices and the growth of startups in this area, having a series of sensors in a connected device is no longer as expensive or as futuristic as it may seem. Some popular examples are Google Home and Alexa. If you do not have one, you will certainly know someone who does. Others could be included on the list, which will soon be part of our routine.
As a pragmatic example, the thermostat market is growing rapidly in the United States, where the cold is quite severe during several months of the year. As a result, the startup Nest was created to sell smart thermostats that connect to the home's Wi-Fi network and can be configured using an app.
It was such an ingenious idea, in fact, that it caught Google's attention. It even led some to question what Google really knows about thermostats, or why it would enter a home automation market.
Eventually, critics realised that Google did not buy Nest because it wanted to enter the thermostat market, but it is a data company and want to offer useful services (and useful advertisements) to its service users.
When users are not browsing their Android phone, searching in Chrome or creating spreadsheets in Docs, they are probably at home, relaxing. Together with a device like Chromecast, connected to the television, a thermostat can provide insight into a good part of the users' routine.
The growth of the smart home device market reveals a trend of data collection on homes. It also helps residents better understand what is going on in their homes, as I previously mentioned with the car.
It’s simple: every house is different. It would make no sense for me, living in a flat in Campinas that has never been affected by a flood, earthquake or explosion, to pay for the same services as someone living in a mansion in downtown Sao Paulo, where the level of burglaries is higher, for example.
As you probably know, the insurance business involves considering characteristics that could prevent claims from occurring. If the chance of something bad happening is greater, the insurer is taking more risks when issuing the insurance policy, so it will charge more.
Demographic information such as the social profile of the neighbourhood, crime rates, climate effects, the presence of parks, hospitals and schools in the neighbourhood, and even disease transmission in certain [arts of a city, are all useful data for public policies and, of course, for insurers.
This also provides more tools for insurance brokers and for plans tailored to each customer's specific needs. There is no need to choose the cheapest or the simplest plan (because some are very complicated!).
This, of course, includes the Open concept, which I cannot fail to mention here. Based on an open innovation strategy, Open Insurance promises to be a facilitating tool both for insurers and policyholders.
Imagine if you, the insurance company, were able to create multiple insurances and offer a greater variety to your consumers without necessarily providing that service yourself. What if you could also make more money from a single policy? Great, right?
Here is a practical example!
Imagine your home insurance company offers plans that only cover structural damage to a property. However, thanks to the integration with services from other partners, you can also offer coverage for damage to appliances and emergency services (such as a locksmith or plumber) that are provided by other companies, but that also earn you a profit.
That is the idea behind Open Insurance. If the Internet of Things allows us to have increasingly intelligent and connected equipment, it is understandable that we will want to make sure they are protected.
For consumers, this idea is also excellent because they can agree on several plans through a single channel - and a single policy. Less bureaucracy and more efficiency in the purchasing journey. Everything is simplified.
In this article, I have provided several examples of how policyholders can benefit:
Of course, insurers also have a lot to gain:
This is just an overview of the subject.
I’ve made it to the end of the article without talking about APIs! They are evidently involved in all of this by allowing integration between software and hardware. In this case, the main thing is the disruption of a market, thanks to technology .
Learn more about open insurance and how to get the most out of this new concept. Marcelo Meireles, our account manager, has prepared a special video to talk about the subject. Watch it here!
