Emerging smart home technology offers the insurance industry a significant, potentially lucrative opportunity to enhance customer service and deliver experiences that people love.
Customers traditionally only connect with carriers during processes like acquisition, renewal and claims — moments that aren’t always associated with positive experiences. But now, with smart devices generating vast volumes of data through the Internet of Things (IoT), they can develop innovative insurance offerings that establish deeper, more frequent engagement with customers.
Savvy carriers must embrace the rise of the IoT by partnering with technology innovators to reshape their insurance policies and gain a competitive advantage.
The Old Model of Insurance Customer Engagement
Filing an insurance claim has traditionally been a complex, often traumatic experience for customers and insurance carriers alike. The claimant has typically been through a stressful situation, such as a car accident or damage to their home. They then have to go through the process of reliving that incident as they engage with the insurance firm and wait for a claims adjuster to review the case and determine their level of coverage.
Worryingly, these claims are frequent and costly. Data from the Insurance Information Institute (III) show that, in 2019, 5.13% of homes filed an insurance claim at an average cost of $13,653.
Insurance firms also face the constant challenge of fraud, which necessitates a full investigation into the validity of each claim. With that comes the high cost of detecting and prosecuting fraudulent claims, which drives up the price of insurance and eats into companies’ profits.
As a result, the old model of insurance customer engagement was complex and painful for both policyholders and their insurance firms. The good news, though, is that new technology is driving much-needed change in the insurance space.
How IoT Is Changing Customer Service in Insurance
The IoT is growing exponentially, with IDC predicting the number of devices worldwide will reach 1.4 billion by 2025 at an annual growth rate of 12.2%. We now rely on these smart devices to help us track our fitness activity and personal health, keep track of weather conditions, monitor our vehicles and keep our homes safe.
With these connected devices comes a mass of data that enables insurance carriers to transform the way they work from being reactive to proactive. For example, we’re seeing devices like activity trackers and sensors paired with customer service in insurance to measure risk and anticipate potential disasters, such as water leaks and fires in a home.
The automotive industry is an excellent example of how powerful this proactive insurance customer service approach can be. Auto insurance firms have used technology to help policyholders dodge dangerous weather or risky routes and avoid potential claims. Sensors can detect crashes, show where the damage occurred and advise insurance firms what caused the incident. This data can be used to improve policyholders’ driving habits, alert the authorities and provide the insurance firm with immediate, trusted insights.
As a result, the auto telematics industry has gone from offering commodity products with limited options to being saturated with different offerings. Buyers have become savvier and their expectations for insurance have evolved. Home insurers need to learn from these lessons, be more nimble and prioritize delivering the superior experiences their customers expect.
How Insurance Customer Engagement Benefits Carriers
Savvy carriers have realized they can no longer take a reactive approach to customer service in insurance. Instead, they need to be actively involved in the insurance customer experience and provide solutions that help minimize and prevent risk to policyholders’ properties.
Leading insurance carriers like Hippo, Honey and Nationwide use smart home strategies and expand them through customer touchpoints. This enables them to focus on educating customers and helping them to be more proactive through IoT technology. By partnering with technology innovators like Notion, insurance carriers can continue to evolve their offerings and create more dynamic policies that engage their customers.
Leading insurance firms are already seeing three major benefits besides improved customer acquisition.
Lower Loss Ratios
Pairing smart home devices with insurance claims helps carriers to identify and mitigate high-risk events, such as water leaks and fires. This is critical to helping to lower the severity and frequency of claims, which helps carriers reduce their loss ratio. It also helps to save customers the pain of significant property damage. For example, customers who keep Notion devices installed and online have been proven to lower losses by 20%.
Better Retention and Stickiness
Customers who engage with their smart device apps are more likely to stick with their insurance carrier. Our data finds the average user interacts with Notion’s app between nine and 11 times per day. Some insurance firms further customize the app to ensure access to more data, which helps them smooth out the claims process for all parties. Furthermore, technology services, such as Notion’s, can send policyholders alerts when a potential issue occurs, then help escalate it to the relevant authorities before a headache becomes a nightmare.
Segment Policyholders by Risk
Studies from auto telematics have found that the more often customers engage with insurance data, the more they begin to rely on it. As a result, insurance firms can increase their Net Promoter Score (NPS) and find customers are more likely to recommend services to their friends. P&C insurers can utilize lessons from auto telematics and provide value by segmenting by risk. For example, if a home is more prone to water leaks, then a carrier can help the homeowner take preventive measures against the risk. This value-add is crucial to help build customer loyalty, advocacy, and longer-lasting relationships.
A New Relationship Between Carriers and Customers
Insurance carriers must continue to embrace the rise of IoT technology and immediate data to stay ahead of their competitors. That means partnering with leading technology innovators to devise nimble, targeted policies that ensure happy customers and reduce claims and lower losses.
As new, more agile providers enter the insurance space, it becomes even more critical to deliver excellent insurance customer experiences. Carriers need to provide the latest interfaces and engaging solutions that attract new customers and encourage them to stay.
Smart use of data helps carriers provide more personalized experiences and design products and services that drive more engaging customer experiences. As a result, the traditional insurance firm takes on the role of a trusted advisor that drives customer loyalty and purchasing decisions.
Discover how to better engage your policyholders and reap the benefits of customer service in insurance by partnering with Notion.