Internet of Things, drones, new payment technologies and wearables to transform insurance industry over the next three years: SMA report

More than 40% of 147 insurance professionals surveyed by strategic advisory firm Strategy Meets Action (SMA) say that the Internet of Things (IoT), drones, new payment technologies and wearables will transform the industry over the next three years.

This week, SMA released a pair of research reports: Emerging Technologies in P&C and Emerging Technologies in L&A during the 2015 SMA Summit held in Boston. The reports assess 12 key technologies for the p&c and life/annuity industry segments, based on a recent survey of 147 insurance professionals in North America: IoT, drones/aerial imagery, driverless vehicles, wearable devices, payment technologies, gamification, semantic technologies, artificial intelligence, advanced robotics, biotechnology, 3D printing and augmented/virtual reality. The reports also map out the potential to transform the industry in three, five and 10 years. [click image below to enlarge]

Authored by SMA partner Mark Breading, the Emerging Technologies in P&C report covers insurance executives’ views on how the 12 emerging technologies will affect the industry over time, the specific technologies with the highest potential for each key business area and insurers’ expected investment plans for the next three years (2016-2018). In particular, while more than 40% of those surveyed say that the IoT, drones, new payment technologies and wearables will transform the industry over the next three years, driverless vehicles will have limited impact in the near term. But in 10 years, that impact “will be enormous,” the p&c report said.

“The implications for the industry touch every area of the business and are moving faster than expected, with four of them passing the tipping point in less than three years,” Breading wrote in the p&c report. “Insurers are already experimenting and investing in these emerging technologies.”

For example, many insurers are already embarking on pilot projects for drones and the IoT. Mobile payment technologies such as Square and solutions from Apple, Google and Samsung are already being used by some insurers, the report points out. A few other insurers are experimenting with Bitcoin, “although its ultimate potential for insurers may be in the blockchain technology at its core rather than in processing payments,” the report suggests.

Breading adds that emerging technologies have the potential to transform p&c insurance in three major ways: new/changing risks will provide opportunities for new products and coverages, emerging technologies will also enable operational improvements and, there is an expectation of “major implications for the customer experience.”

According to the report, driverless vehicles pose the greatest risk to the industry “by a wide margin. Every other technology is expected to have some level of risk, but the risk is far outweighed by the potential opportunities.”

The report concludes by saying that “while there is a flurry of strategy development, experimentation and investment underway, it is being done by a relatively small percentage of insurers.

“Undoubtedly, most insurers cannot afford the resources, time and money to investigate and experiment will all twelve of these technologies, especially while continuing to support their mature technology platforms and increasingly leveraging maturing technologies like mobile, collaboration and cloud,” the report says. “Emerging tech should be considered during business strategy development, including explicit assessments of which technologies are likely to have the most effect on your company and when, over the next few years, experimentation and investment should begin.”