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IoT: Disruption and Opportunity in the Insurance Industry

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Are customers ready for smart home technology? Today, 2 out of 3 U.S. homeowners insurance customers would be willing to change insurance companies to get policy discounts for using smart home devices, including smart thermostats, smoke/carbon monoxide detectors and garage door openers.

NTT DATA's national research study uncovers consumers' interests in using smart home devices and their concerns around sharing data from those devices with insurance companies.

Published in: Technology

IoT: Disruption and Opportunity in the Insurance Industry

  1. 1. © 2016 NTT DATA, Inc.1 IoT: Disruption and Opportunity in the Insurance Industry Normand Lepine | January 2017
  2. 2. © 2016 NTT DATA, Inc.2 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?
  3. 3. © 2016 NTT DATA, Inc.3 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% © 2016 NTT DATA, Inc.3 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
  4. 4. © 2016 NTT DATA, Inc.4 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 © 2016 NTT DATA, Inc.4
  5. 5. © 2016 NTT DATA, Inc.5 Study Definition of Smart · Home · Devices © 2016 NTT DATA, Inc.5 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:
  6. 6. © 2016 NTT DATA, Inc.6 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 future 50% Millennials are becoming the dominant purchaser of Smart Home devices. The interest in purchasing cameras is growing considerably.
  7. 7. © 2016 NTT DATA, Inc.7 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
  8. 8. © 2016 NTT DATA, Inc.8 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 Seekers want more Homeowner insurance customers are segmented into two distinct groups
  9. 9. © 2016 NTT DATA, Inc.9 Older Twice as many respondents in the 45-64 age range Technology Laggards Twice the percentage of late adopters Satisfied with Policy 35% of respondents rated their satisfaction with their policy a 10 vs 23% for other respondents Value Relationships More likely to choose a policy because of a relationship with a broker Value Service Reputation 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 It If satisfied, prefer not to make changes Keepers struggle with technology and focus on relationships Keepers are less likely to change Carriers and prefer the status quo © 2016 NTT DATA, Inc.9
  10. 10. © 2016 NTT DATA, Inc.10 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 Younger Includes 72% of overall respondents in the 25-34 age group Technology Savvy 77% are early adopters Moderate Satisfaction with Policy 77% rated satisfaction 7 or lower (out of 10) Value Cost-savings 73% 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 Better Significantly higher percentage of respondents always want to make their policy better © 2016 NTT DATA, Inc.10
  11. 11. © 2016 NTT DATA, Inc.11 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 © 2016 NTT DATA, Inc.11
  12. 12. © 2016 NTT DATA, Inc.12 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
  13. 13. © 2016 NTT DATA, Inc.13 The opportunity for Smart Home programs are interested in understanding the potential savings52% believe that any investment that will reduce premiums is a good idea 26% 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
  14. 14. © 2016 NTT DATA, Inc.14 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% © 2016 NTT DATA, Inc.14
  15. 15. © 2016 NTT DATA, Inc.15 1 2 3 4 5 Customer 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 Technology Partnerships and Alliances Sales/ Distribution Underwriting © 2016 NTT DATA, Inc.15
  16. 16. © 2016 NTT DATA, Inc.16 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 Insuretech companies Insurers Utilities/Cable © 2016 NTT DATA, Inc.16
  17. 17. © 2016 NTT DATA, Inc.17 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 company 30% 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%
  18. 18. © 2016 NTT DATA, Inc.18 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 Recommendations Safety, security and loss mitigation are still what insurance offers and what consumers and IoT players want
  19. 19. © 2016 NTT DATA, Inc.19

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