IoT Insurance Part 2: IoT and the Auto Insurance Market

IoT and the Auto Insurance Market

IoT and the Auto Insurance MarketDoes the Internet of Things (IoT) affect the auto insurance industry? You bet it does. If you do sales prospecting with aged auto insurance leads, sooner or later IoT lead data is going to influence the product offerings available to your customers and even the price point of their monthly premiums.

It’s happening fast, across all sectors of insurance. A few days ago, I told you about how IoT will affect your health insurance and life insurance business. This week, the topic is auto coverage. Buckle up as we explore a new technology that’s going to impact your customers and your business down the road.

What’s IoT, Again?

The Internet of Things (IoT) is a new set of technologies that deal with a connected world, not only people interacting with machines but also smart machines that can talk to each other. IoT isn’t just about regular communication devices like your cell phone or WiFi-connected computer. With IoT, washing machines can talk to security systems or your digital calendar planner. As Forbes noted with IoT, one day in the near future your internet-connected alarm clock could tell your internet-connected coffee pot to brew a fresh pot because it’s time for you to get up.

For the purposes of auto insurance, IoT means that data about how well individual customers drive and how much time they spend driving could affect their coverage options as well as their insurance costs. But that data could also be compiled by insurers to fine-tune their risk assessment models, to price coverage more accurately, predict losses more accurately, and offer incentives and discounts to lure in the safest driver clients.

IoT and Auto Insurance

In order to get to savings for customers and better models for insurers, companies need data. That comes from our increasingly smart cars. Connected cars may have an advanced electronics system that can share relevant data with an insurer or insurers may loan clients a device that hooks up to the car to track mileage, driving habits, safety behavior, and so on. The insurer can then base premiums and models on this data, in something called usage-based insurance (UBI).

Business Insider says UBI has surged in the last couple of years and will likely continue to do so over the next several years. About 20% of U.S. households took part in a UBI auto insurance plan in 2015, and that figure is expected to nearly triple by 2020.

The same article says insurance execs are enthusiastic about the future of UBI. 74% said it will disrupt the auto insurance industry by 2020 and plan to put in place more IoT strategies by the end of 2016. One reason these folks are so gung-ho is that real-time IoT car safety monitoring reduces crashes — and costly auto insurance claims — significantly. Business Insider says those savings could be $45 billion over the next five years.

IoT and Your Auto Insurance Business

For agents working with aged auto insurance leads, IoT is likely going to be part of your discussion with prospects and existing clients over the next couple years. It may take some thought as to how you should best talk to your leads about UBI. Technology can seem too complicated or too invasive for some older folks, so part of an agent’s job may be explaining what it is, how it works, and why it matters. Of course, saving money, safety, and efficiency are things all customers can appreciate, and these will be your best approach discussing UBI when the time comes.

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About Troy Wilson