IoT Integration in Insurance: Opportunities and Challenges

BACKGROUND

This proposal deals with the effects of Internet of Things (IoT) on insurance market and discsuss the future of IoT based insurance investments. There is no agreed unique definition for Internet of Things which is agreed by whole researchers, academicians, corporate people and other communities. The definition first used by Kevin Ashton, a digital innovation expert. All experts are agreed on a common idea, Internet was firstly about the data created by people, the next version of Internet is about data created by things.

In the light of this, the best definition for the Internet of Things would be: “the network of physical and smart devices, vehicles, home appliances, wearables and other items embedded with sensors and connecitivity which exchange data, information and resources” (1) The usage of IoT is growing incredible throughout the world. In 2020, 20.4 billion connected things will be used comparing to 6.4 billion in 2016 according to forecast of Gartner, research and advisory company. Gartner forecasts total spending on IoT services will reach around $2 trillion in 2017. (2) With all these figures in mind, it’s understandable why many leading companies are taking IoT projects in the agenda and investing heavily in developing new systems. Networking physical objects through embedded sensors and other devices that can collect information about the objects enables companies to reach huge amount of quality data. IoT can be the second internet and widely transform the financial industries as the internet itself. The research of Deloitte, the consultancy company, the added economic value of IoT could be anywhere from US$300 billion to US$15 trillion by 2020 (3) This new wave of technology from consumer-focused companies is forcing insurers to navigate the new technologies, which range from wearable devices to driverless cars and are expected to be taken up by many consumers in coming years. Enabling the advantage of IoT and minimizing the risks will be critical for insurance companies IoT offers a huge number of opportunities for the insurers. New generation customers spend 6 hours per day online. They expect to integrate with technology and have control over everything. There is an increase in connected homes, connected cars and in the use of health tracking technology – all of which change the nature of risk and insurance. Insurers have the chance to create a new, more profitable business model that leverages data to create a more personalized offering and, in turn, offers better customer service and reach customer satisfaction. This transformation will not be easy. It’s likely that insurance premiums will reduce quite significantly and there are significant implications in terms of data privacy and security. What’s more, insurers will have to act fast in order to adapt new customer expectations. Customer expectations are redefined in terms of service interactions, personalized products and efficiency. The customer experience bar is now higher in all industries, including insurance, and feedback is instant and global. The world is changing so fast and insurance will change with it.

RESEARCH PROBLEM – HYPOTHESIS

What are the benefits and risks after new IoT technologies for insurance companies? Will offering IoT integrated insurance solutions be effective when choosing insurance company for the customers? According to these research problems, the hypothesis of research will be like below. H1: IoT solutions affect customer decision for choosing insurance company. H0: IoT solutions does not affect customer decision for choosing insurance company.

RESEARCH OBJECTIVE

The objectives of my project are mainly three: – Understanding the evolution of the Internet of Things and the effects on insurance market – in the light of digitalization visions, place of integration to Internet of Things world. – Identification of opportunities and risks of IoT for the market players – Assesing the benefits of IoT, recommendation to insurance companies.

METHODOLOGY

The adopted methodology was as follow: – Analysis of the existing literature to understand the internet of things, identify the current position of the insurance market in terms of IoT; motor, home, health products and the other potantial areas and the future perspective. In conducting the literature review, several studies were found to focus on internet of things. However, the gap in literature, between insurance and internet of things has limited the literature review. – Interviews with insurance policy owners to understand their vision about the topic and the effect of IoT integrated insurance solutions on the customer decision. – Analysis of secondary sources: data, reports and analysis from reliable sources to obtain information

RESEARCH DESIGN

This research design is a combination of explarotary and conclusive / descriptive research. The explarotary research is used to provide insights and understanding while the descriptive research used to test hypothesis. Cross-sectional design method has been used for data gathering. The questionnaire has been processed through online survey. There are 8 questions and the interview has been lasted 10 minutes per person. As a sample, insurance customers have been chosen. The sample size was 50 people. Minimum 30 people is aiming to response with 60% response rate. As a scaling technique, likert scale is used in the questionnaire.

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