How insurance companies can utilize IoT data in their business strategies

Compiled by Insurance24

HARARE, Insurance professionals love the idea of IoT data, but they aren’t putting it to use in their own companies. A recent LexisNexis survey of 500 of them from auto, home, life and commercial lines of business found that 70% think it’s important to collect IoT data, but only 21% have an IoT strategy and a measly 5% of those that do gather data from a variety of technologies use it in their daily analytics.

As the survey proves, it’s easy to show an interest in implementing a strategy founded on IoT data – however, it’s much harder to actually do so, in part because of a few obstacles that stand in the way.

“Insurance companies must meet the challenges from disruptive competitors by adopting an innovative approach that enables rapid solution development and rollout. Only a few IoT providers among insurers have managed to execute successful platforms, but this number is likely to rise in the coming years,” said Bob Cummings, VP and global head of insurance for SAP Financial Services Industries.

The sheer amount of data available to insurance companies is also oftentimes staggering and can be difficult to navigate.

“Insurance companies are tasked with managing enormous amounts of data such as policy details, previous claims and information gathered from adjusters, which can be overwhelming,” said Cummings. “Vast amounts of data make it difficult to understand what data is most important and how to extract valuable insights from it.”

The good news, according to the SAP VP, is that insurance companies can hone their IoT data on specific areas of focus and be on their way to becoming an intelligent enterprise.

“As organizations become more focused on the customer, IoT data can be leveraged to enhance the customer experience by providing seamless touchpoints,” said Cummings, singling out MindHome Insurance, which uses AI to interpret signals from a customer’s home and respond in real-time with notifications and preventative actions, as an example. “Using IoT data in this way not only allows the company to provide superior customer service, but helps the end customer better manage risk and lower their premium rates.”

On the backend, IoT data can be leveraged to simplify complex processes, like policy administration and claims processing, but there’s many other uses for it depending on a company’s needs.

“The benefit of IoT data is that is can be tailored based on your business goals,” explained Cummings.

SAP has seen the benefits that IoT data can bring for insurance companies through its partnerships with insurers to integrate this data into their everyday processes. For example, Meteo Protect, which offers index-based weather insurance to farmers, developed an app that leverages SAP’s HANA platform to aggregate weather-related data, analyze risk and price, and underwrite the policy.

IoT data has the power to transform the business model of the insurance company, from reactive to proactive, and potentially change the insurance industry’s relationships with customers.

“With the strategic use of IoT data, such as data from flood sensors, driving devices or fitness applications, insurers can prevent disaster from happening in the first place through real-time notifications – saving money for both the company and the customer,” said Cummings. “The increased use of IoT data among insurers will help customers see these companies as an ally and partner in safe and healthy living, as opposed to someone to call after something goes wrong.”

How to assess intentionality in an insurance claim

Insurance24

How to assess intentionality in an insurance claim

The quandary of intentionality

Covered perils, such as fire, can be devastating, leaving the insured vulnerable. The carrier, in most cases, will come to the immediate aid of the insured and provide financial relief under the policy, but sometimes controversy arises, and claims are disputed, leaving the insured in a quandary. One such controversy concerns the intentions of the insured.

Filing the insurance claim then delays

Once resettled in temporary shelter, your immediate concern is filing a claim for recovery under your homeowner’s insurance policy. You report the claim and the process begins. You engage with the carrier to have all the claim elements considered. Eventually, some claims are accepted, processed and paid. Others are rejected. Your negotiations with a proposed home builder leads to time-consuming and costly additional steps for the rebuilding project to commence so the claim can be considered. You reconsider the sensibility of rebuilding the house, worrying if you can do so within the allowed time.

Your decision to rebuild changes to pursue replacement

With the high cost of construction, you realize that the reasons for rebuilding the house are mostly emotional. Eventually, you decide to consider purchasing a replacement property rather than rebuilding.

The law in New York State requires carriers to provide additional time to rebuild or replace property lost to insurable peril beyond what used to be 180 days to rebuild or replace—an impractical period. The law now mandates the acquired property, or the replacement property be completed or purchased within two years of the date of loss. Sometimes this is insufficient when facing hurdles, such as:

• Delays caused by multiple investigations of the origin of the fire
• Delays in processing the claim for structural damage
• Arguments over specific aspects of the claim
• Delays caused by changes in building code for various issues

Even though the insured communicates these concerns to the carrier, there is not, typically, an extension of time granted beyond the statutory two years provided in which to demonstrate replacement of the lost property. This is only problematic in cases where the policy provides for an extended limit of coverage conditioned on replacing the lost property where recoupment is completely dependent on completion of either the rebuild or the purchase of a bona fide replacement property. It is this extended limit portion of coverage that leads to problems for the insured who faces delays and other unforeseen obstacles to recover all the insurance for which premiums have been paid for many years.

Complications when choosing to replace lost property

Most policies contain a provision that the homeowner has the option of replacing the lost property by acquiring a suitable or bona fide replacement property – however, these policy provisions rarely are written in sufficient detail to allow the insured to fully understand their options.

A larger dilemma can occur in the case where the owner of a destroyed four-bedroom home is replaced by a two-bedroom condominium. The policy language may be silent as to what constitutes a bona fide replacement home.

Intentionality becomes germane

It is possible the carrier may deny a claim for reimbursement of extended limits coverage on the basis that the intention of the insured is to move into the newly acquired property only temporarily while the former property is rebuilt, then move back and resell the other property, thus cleverly sidestepping the two-year dilemma. This can be viewed as the intent of the insured or his intentionality. But how is the intent (or the mindset of the insured) determined? Take, for example, the case where the insured takes many steps to rebuild the damaged home only to find completion frustrating or the time remaining insufficient to complete the project. This frustration could lead to a change of heart and a new decision to abandon the plans to rebuild and, instead, to forge ahead with a new plan to relocate permanently. The carrier may argue that the homeowners’ actions justify the denial of the claim, but, in that case, is the carrier invading the mindset of the insured and adding facts not in evidence? If so, how can the insured provide adequate proof that their intention is to live in the newly acquired residence and not rebuild leisurely then relocate back to the former address? It may come down to a case of trust versus mistrust, but is suspicion an adequate and defensible way for a carrier to decline coverage?

In my view, the carrier should be required to accept the insured’s statement of his or her intentions. Absent evidence to the contrary, the claim, otherwise complete and thoroughly documented, should be paid. Evidence that the insured did intend to rebuild and then move back may be seen in the actions of the insured post-relocation to the replacement residence. These actions could be, for example, active construction of a new house on the former property, very immediate relocation back to the former address, or statements made by the insured that they always intended to move back.

However, consider the example of an insured who abandons such active efforts to rebuild, does move into a replacement residence and remains there for a long period of time. Then, even if the insured decides years later to rebuild a house on the former address, perhaps this is done with the intent of flipping the house or, perhaps, to operate it as a rental property, not to game the system. The rights of the insured should not be less than those of any other property owner. However, from the carriers’ perspective, it does make sense that they could question the intentionality of the insured. It is only when the insured does state, clearly, his or her intentions that the carrier could be playing with fire by denying the claim. Such denial could lead to unnecessary litigation filed against the carrier for acting in bad faith by denying coverage. InsuranceBusinessAmerica