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Are insurers struggling in our inter-connected world? Source Insurance

by: Kevin Paterson, managing director at Source Insurance
  • 14/11/2016
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Are insurers struggling in our inter-connected world? Source Insurance
While the insurance industry is awash with talk of innovation and disruption, it faces an enormous challenge when it comes to understanding how to underwrite and price new risks.

Take autonomous vehicles for example. With Volvo and Uber teaming up to take on the likes of Ford and Google in the race to launch self-driving vehicles, the likelihood of seeing someone sitting behind the wheel and reading the paper instead of focusing on the road is drawing near. Yet a report from KPMG found that just one out of 10 insurers had a strategic plan in place for the arrival of driverless cars on our streets.

Another recent study by Lexis Nexis found that only a quarter expect their future driverless car insurance cover to be provided by today’s insurance industry while 16% expected their insurance to be provided by a company outside the insurance industry such as their vehicle’s manufacturer. The study also found that 8% believed insurance wouldn’t be needed at all.

Turning to the challenge of insuring the connected home, a new solution has just hit the home insurance market which focuses on the prevention and mitigation of incidents, using smart technology that monitors things like motion and smoke to provide alerts controlled through an app.

Now this new offer is backed by a well-known insurer, however, it seems that many insurers are struggling with the concept of moving beyond the promise to pay and creating a more interactive solution that engages the customer. This is unlocking the door to competition from outside the industry and high street retailers, telecoms companies and utility companies are all eager to shove it wide open.

John Lewis has set up an interactive smart home in its Oxford Street store to give customers an opportunity to experiment with what’s on offer. British Gas has launched its Hive app which allows customers to control their heating from their smartphone and Google offers a competing solution in Nest.

While the connected home presents a complex proposition for insurers to get their heads around, there is a huge opportunity if they are willing to take the leap to evolve the home insurance model to doing far more than just paying out for claims. Surely prevention of damage in the first place should have equal if not greater importance than simply responding to claims? The smart home is happening and if insurers aren’t careful then they may just make themselves redundant or simply a bit player in that market.

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