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IoT in claims - a tough sell?

Getting clients to trade privacy concerns for lower premiums

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Randy Barnaby

Claims practice team lead

July 9, 2018 - Here's a concept that's not really new: reconstructing accidents, based on data-device feeds, to determine the cause – and appropriate coverage – for insurance claims. In fact, experts have applied the technique for years in the commercial airline industry. You may remember the famous 2009 story of US Airways Flight 1549 – the one in which “Sully" Sullenberger safely landed on the Hudson River after the plane was hit by a flock of geese. Even then, the amount of data available, combined with digital recreation models, made it possible for us to view and hear what happened in real time.

Yet claims professionals in the home, auto, and health lines haven't had access to enough data to recreate loss scenarios – that is, until now. Today, these experts are clearly excited about the Internet of Things (IoT), which connects home and health devices by telematics that can quickly transmit information. The data these tools make available for loss reconstruction, mitigation, and prevention is truly a game changer. Many blogs and thought leadership articles on the subject point to a future of an efficient, precise, and nearly touchless claims process that promises to drastically enhance the loss resolution experience for all involved.

At the same time, the widespread adoption of IoT for claims is not all rainbows and roses. FC Business Intelligence asked 300 carriers what their biggest challenges were to IoT adoption. “Privacy issues," which came in at a meager 14.5%, placed well behind the number-one answer ("Lack of a clear strategy" – 40.7%).

In my view, this is shortsighted. It underestimates people's personal attachment to their homes and vehicles – an attachment directly linked to their sense of self. Most people think of their homes and vehicles as personal space – private areas of refuge. That's so widely recognized, in fact, that all but four states have enacted self-defense laws (castle doctrine) extending to homes and vehicles, effectively making them an extension of the individual. To allow the insurance industry 24/7 access to those areas of refuge is going to be a tough sell.

The news is not all doom and gloom, however. Many insurance consumers – particularly those under 40 – are looking for a more connected experience from their providers. For instance, a recent study surveying 8,000 consumers globally determined that 81% of respondents suffer from disconnected provider experiences, with 69% stating that they would switch service providers for an easier, more seamless service. The promise of a connected experience, coupled with premium discounts for people who adopt the Internet of Things (IoT), may go far to help clients overcome their security concerns.

Eventually, IoT will play a crucial role in claims investigation and settlement. Telematics alone will drastically reduce automobile lawsuits by recreating accident scenarios – much in the way these technologies are used to reconstruct airline flights.

And once the proper devices and programming analytics are in place, questions of fault should be put to rest. Take those common and costly residential claims for water damage, for example. They could become a distant memory thanks to smart IoT valves that can detect problems and shut off water before leaks occur. That's just one more example of how IoT devices can change the way we prevent, mitigate, and report insurance claims. In fact, IoT is set to positively disrupt the insurance industry on many fronts, with claims handling and settlement at the forefront.

Still, while insurance professionals are gleefully anticipating these positive changes, encouraging clients to adopt these devices won't be easy. The reality is that nearly 50% of the population has trust issues with the insurance industry. Getting people to invite insurers into the most personal areas of their lives is going to be an uphill battle. But it's a battle that can be won.