Key research questions
- What is digital twins?
- What are the use cases for digital twins in Insurance?
- How to implement digital twins in insurance industry?
Data is the foundation of the insurance industry. Traditionally, it utilises historical data to calculate the premium of the products it sells to customers. As the world faces new risks such as cyberattacks, climate change, etc., the insurance industry cannot depend only on historical data to address these challenges.
Compared to other sectors, the insurance industry lacks customer data due to its limited touch points. Its interactions with customers occur predominantly when they buy insurance products and at the time of a claim.
“Digital twins” is a fast-developing concept predominant in manufacturing, building, and supply chain industries, and it is catching up with other sectors.
A digital twin is a virtual representation that serves as the real-time digital counterpart of a physical object or process. Adopting the digital twin is increasingly gaining momentum across industries as companies see value in various types of digital twins. Advancement in technologies such as IoT (Internet of Things), 5G, artificial intelligence), cloud computing, and virtual reality allows companies to collect a large amount of data, analyse it, and use it in decision-making.
IoT is a technology already used in the insurance industry for usage-based products like cars and health insurance. The focus for insurers has changed recently from paying and repairing to preventing and advising. Digital twins offer new ways to visualise and contextualise data from both physical and digital assets and assess their readiness to face disasters, prevent damages, and optimise core insurance operations. Digital twins can help insurers with underwriting, claim management, and fraud detection, offering new types of products, better customer engagement, and back-office operations. It is relevant in products related to digital, weather, fleets, home, buildings, etc.”
The effectiveness of digital twins is in gathering data and using it in decision-making and eventually taking actions autonomously. The following diagram shows the maturity levels of digital twins.
For insurers, the IoT and digital twins will bring real opportunities to rethink and reshape their customer relationships and redefine how they evaluate risk and price their premiums.