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Global insurers to spend US$77.7 million this year on Internet of Things initiatives, US$102.9 million in 2018, survey says


July 22, 2015   by Canadian Underwriter


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Global insurance companies will be spending an average of US$77.7 million this year on the Internet of Things (IoT), which will increase to US$102.9 million in 2018, according to a report released on Wednesday by Tata Consulting Services (TCS), an IT services, consulting and business solutions organization.

IoT spending is expected to grow 20% by 2018 to US$103 million

Internet of Things: The Complete Reimaginative Force, TCS’ Global Trend Study, surveyed 795 executives from large multi-national companies in 13 industries, including insurance. The survey found that more than 80% of companies increased their revenue by investing in IoT, with an average increase in revenue as a result of IoT initiatives being 15.6%.

Company executives still see IoT as a growing area for businesses, the release noted, with 12% of the 795 companies surveyed identifying planned spending of US$100 million in 2015 and 3% looking to invest a minimum of $US 1 billion. The report also shows that companies predict their IoT budgets will increase year-on-year, with spending expected to grow by 20% by 2018 to US$103 million.

“The age of IoT is well underway,” said Natarajan Chandrasekaran, CEO and managing director of TCS, in a press release. “The question is whether businesses are ready to realize the full potential of this technology. Our latest global trend study found that leaders, in using IoT technologies, are using it to completely re-imagine their businesses by changing every aspect of them from business models and products to business processes and workplaces. Now is the time for every leader in every industry to reimagine the possibilities for their businesses in a world of smart, connected ‘things’,” he said.

Despite a significant increase in projected IoT spending in the insurance sector, the report said, insurers don’t project an equally large revenue impact. “Between 2013 and 2014, IoT drove a 15% revenue increase in these companies,” the report said. “Through 2018, respondents from insurance companies expect the same level of impact.” [click image below to enlarge]

Nearly half of insurers surveyed (48.5%) reported that they use IoT technologies through mobile apps that customers use on their smartphones, tablets or other digital devices

Nearly half of insurers surveyed (48.5%) reported that they use IoT technologies through mobile apps that customers use on their smartphones, tablets or other digital devices

Customer monitoring is the largest IoT budget outlay for insurers (35% of 2015 budgets), the report said, as monitoring customers gives insurance companies precise data on customer behaviour so they can tailor products and pricing to specific customers. Nearly half of insurers surveyed use digital devices to monitor customers and 4% monitor wearables. Only 18% of insurance companies use IoT to monitor products, however, monitoring products accounts for 33% of average 2015 IoT budgets, and is projected to increase to 36% by 2020.

“Usage-based auto insurance is a prime example,” the report said. “Up-and-coming wireless devices and mobile apps provide driver-specific behavior information that allows insurance companies to set premiums and incentives based on a customer’s actual behavior instead of aggregated data.”

By 2020, 36% of insurance companies are expected to offer products where pricing is based on the customer’s driving distance, locations, speed, and braking behavior, the report said. The number of telematics-based policies worldwide is projected to balloon from 5.5 million in 2013 to more than 100 million by 2018.

Almost half of insurers surveyed (48.5%) reported that they use IoT technologies through mobile apps that customers use on their smartphones, tablets or other digital devices, while a sizable 34.8% use IoT in production and distribution operations to track product flow to customers.

“An insurance company’s supply chain is primarily data, and IoT is boosting the quality, accuracy, and volume of that data,” the report said. “Providing more data to the insurance industry represents a burgeoning business. Twenty percent of insurance companies use IoT to monitor the places in which they do business with customers, and this type of spending will account for 15% of IoT budgets between now and 2020.”


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