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© All rights reserved Nizar AYED 2018
IoT business models
for Insurance
Nizar AYED - June 2018
nizar.ayed@upgrade-code.org
+33687574635
Most Icons and graphics in this presentation are my creation or made by Freepik from FlatIcon Licensed by CC 3.0 BY

What is IoT ?
Internet of Things - any object that can be connected to Internet to
send data and/or receive commands
Smartphones Smart TVs Computers Smartphones
Traffic lights Cars Road signs

Sensors
Internet of Things are embedded with sensors
Web Cam Heart rate
Or health related
sensor
GPS
Location
Sensor
Temperature
Humidity
sensors
Smoke
detector
Biometric
sensor

The global market Internet of Things Growth
includes all the by-products and the services ranging from infrastructures and platforms to consulting
Global IoT market
$655.8
Billion
$1.7
Trillion
2014 2025
Source : IDC Worldwide Internet of Things Forecast, 2015-2020, May 2015

Insurance and Technology Adoption
Percentage of the respondents to E&Y sensors survey, by sector, reporting that their companies can use insights from new data sources
to boost customer value
Source: E&Y The Internet of Things in insurance (http://www.ey.com/Publication/vwLUAssets/EY_-
_The_internet_of_things_in_insurance/$FILE/EY-the-internet-of-things-in-insurance.pdf)
Retail Automotive Transportation
Telecomm.Banking / FinanceElectronics
Insurance
54% 50% 47%
36%
46%47%47%

Data
Web Service
IoT
Web Service
External Data
Web Service
IoT ecosystem : Technical Overview
Data analytics
Web Service

Data Application
Data Gathering
Data Addition
Data Assessment
IoT : It’s all about data
IoT
Web
Service
External Data
Web Service
Data
Web
Service
Data Analysis
Web Services

Data
Application
Data Gathering Data Addition
Data
Assessment
IoT for Insurers
IoT Oriented Services
For Insurers

General Business Model for Insurance
Big, one-size fits all policies,
high deductibles
Limited data and historical
regression analysis
In-person agents, call centers,
basic online functionality
Manual, on-premise admin
and claims processing
Actuarial analysis, risk
selection, reinsurance
Product specs, rate,
calculation, market launch
Marketing, sales, distribution,
channel management
Customer management,
billing/collection, claims
Product Design
Service Offering
Pricing and
Underwriting
Distribution
Admin and
Claim mgmt
Customized, connected, low,
deductible, per-use
Big data and machine
learning predictive analysis
Online, mobile, social, quick
comparison shop
Cloud-based automatic
instantaneous billing
Source: Michael Fisher (Twitter account @Fisher85M)
In the past
and now
Future
One-sized Curative Less connected Manual process
The
activities
Customized Preventive Online Instantaneous

Where are the opportunities ?
Insurance
Sector
B2C B2B
Customer’s
Goal
Better Customer
Experience
Improved business
outcome
Personalized policies, well-fitted and less
expensive premiums, decreased claims’
delays, lower deductibles etc...
More savings with lower costs
More revenues with higher volume of
premiums
2 categories

The Combined Ratio
Combined
Ratio
Claims Costs
~ 60%
Operating Costs
~ 30%
Sales Costs
~ 10%
Premiums
The IoT strategy would help Insurers lower their Combined Ratio
How ?

Lower Claims Costs
Opportunities
for IoT
Claims Costs Rightful Claims Fraudulent Claims
Customer
Selection
(better risk pool)
Loss Prevention
Source: Ravi Kurani (https://medium.com/birds-view/dissecting-insurtech-part-1-where-is-the-value-f559d609cce6)
Fraud Prevention

Customer selection
Risk modeling and predictive underwriting
The IoT provides historical data on
Customer Behavior
⇒ This allows :
● Less expensive premiums
● Better pricing
● Usage-Based Insurance (UBI):
○ Indexed premiums (adaptative)
○ Per-use policies (predictive)

Loss and Fraud Prevention
Example of Home Insurance Example of Car Insurance

UBI Example
Traditional Pay-as-you-drive Pay-how-you-drive
● Estimated mileage
● Garage location
● Claim history
● Number of trips
● Time of day
● Real mileage
● Acceleration
● Braking
● Cornering
● Excess speed
● Location (GPS)
● Maneuvers
● Anticipation
● Aggression
● Adaptability
Behavioral Change
Auto UBI
Risk
proxies
Utilization
Event
counters
Behavioral
rating
Source: Published by Nicholas Chen for Willis Towers Watson (https://www.towerswatson.com/en/Insights/Newsletters/Global/Emphasis/2014/the-
internet-of-things-is-transforming-the-insurance-industry)

Health Insurance case
The IoT provides continuous follow-
up of customers
Customers benefit of coaching
programs
Outcomes :
● a healthier lifestyle
● and less claims

Example for Life and Health insurance
Traditional Healthy lifestyle Premiums based on lifestyle
● Age, gender, weight
● Medical history
● Occupation
● Lifestyle choices
● Wellness programs
● Encourage healthy
lifestyle
● Provide incentives and
discounts
● Premiums based on
Biometric data and
lifestyle
Behavioral Change
Lifestyle based insurance
Risk
proxies
Utilization
Premium
discounts
Behavioral
rating
Source: Published by Nicholas Chen for Willis Towers Watson (https://www.towerswatson.com/en/Insights/Newsletters/Global/Emphasis/2014/the-
internet-of-things-is-transforming-the-insurance-industry)

Challenges for the future
For traditional insurers, the main challenge is to stay on
the path !
The key strategic moves are :
● Stay tuned with tech novelties
● Look beyond business as usual
● Pay attention to new players and partner with them

Thanks for your attention
Nizar AYED
nizar.ayed@upgrade-code.org
+33687574635

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IoT business models for Insurance

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