Is the IoT Value Proposition Valuable Enough for Commercial Insurance?
The Internet of Things (IoT) has caught the imagination of the property & casualty insurance industry. One IoT use case — telematics for personal auto insurance — is well on its way to becoming a standard industry offering. However, adoption of IoT-based products for other lines of insurance is proceeding much more slowly.
This Flash Insight by Donald Light describes a fundamental challenge to more rapid utilization of IoT in commercial lines of insurance, and what insurers could do to meet that challenge.
In many lines of business the IoT could increase an insurer’s profit margin. However, the insurer will have to provide an incentive to prospective policyholders to purchase the IoT-based insurance product. The incentive will often be a reduced premium, but could also be some form of safety/loss control services.
“In financial terms, IoT-based insurance products typically do not present a compelling value proposition,” commented Light.
“The challenge, then, for insurers is to broaden their IoT offers beyond premium discounts, by bundling new kinds of benefits and services that provide additional value to their policyholders,” he concluded.
FIGURE 1: COMMERCIAL POLICYHOLDER OBJECTIVES