Changing Nature of Risk and Insurance due to Connected Technologies

Insurers Maturity for Offerings Linked to New Technologies

Connected technologies are altering risk fundamentals such as risk transparency, and thereby changing the nature of risk as well as the insurance business as a whole. While traditional insurance models involved statistical risk assessment based on proxy variables for the customer as a category, connected technologies are poised to bring in more real-time and individualized insurance models.

Three key connected technologies for insurance are smart ecosystems (such as smart homes and smart buildings), wearable devices, and driverless cars. It was observed that insurers are most interested in exploring smart ecosystems, followed by wearables and driverless cars.

Key Implications for Insurers

Short-, Medium-, and Long-Term Implications

Connected technologies are realigning risk fundamentals in numerous ways: risk transparency is increasing, risk ownership is being shared by multiple stakeholders, and safer technologies are slowly reducing customer exposure to risk itself.

These changes have important implications for insurers in the short-, medium-, and long-terms. In the short- and medium-terms, insurers should strengthen and enhance their business so that they can be prepared for the transformation of their business in the long term.