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How IoT will change insurance

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The IoT is seen as futuristic in the insurance sector, with many insurers hanging back, but they are not unaware of its potential to grow the insurance industry, writes ECKART ZOLLNER, Head of Business Development at the Jasco Group.

We are in the midst of a digital revolution that is fundamentally changing the way we do business, the way businesses operate, and how they interact with both customers and competitors. The world is gradually moving online in its entirety, one device – one thing – at a time. And so, the Internet of Things (IoT) is here, making waves in both the private and business sectors across the globe. The Insurance industry is not exempt from the impact of IoT and, in fact, is poised for complete disruption in the way it traditionally interacts with customers.

While it’s true that IoT is still perceived as futuristic in the insurance sector, with many insurers hanging back on full adoption until they are assured that the benefits outweigh the risks, they are not unaware of its potential to grow the insurance industry and launch it into the Digital Age.

Leveraging IoT for the insurance industry

IoT offers insurers the opportunity to leverage data from ‘Smart’, connected devices such as residential and automotive sensors; wearable technology; drones; GPS, mobile and telematics devices; ‘Smart’ appliances and more.  This enables them to develop new business, improve risk assessment and proactively engage with customers on how to minimise risk for both themselves and the insurer.

High value assets can be effectively monitored through the constant relay of tracking and usage data, and dangerous conditions can more easily be identified, enabling insurers to react accordingly, potentially avoiding dangerous situations and the associated losses and damage caused to property or people.

The data collected from IoT devices, when properly collected, collated and analysed, can aid an insurer by offering predictability, helping to identify current and future trends which the insurer can then act on. Analysis of usage data will be able to pinpoint customer trends and patterns in their lifestyles, buying habits and risk portfolios.

Data accumulation over time allows for stored data to be analysed for patterns or trends for both predictive and comparative use, ensuring that insurers are on the right path and that mistakes are not repeated.

It can also assist insurers to conform and comply with legislation. The customer’s right to privacy, for ‘opt in’ and permission based policy execution, and for consent of data supervision or surveillance, has never been more important than now, with the Protection of Personal Information (PoPI) Act looming. Insurers will need to take care to moderate and control how they collect, use and disseminate data, and data storage and collection will be under the microscope.

Putting IoT to use

For insurers who are traditionally imbued with red-tape, bureaucracy and archaic siloed systems, digitalising and implementing an IoT strategy can prove a challenge. In order to be effective, IOT has to be operationalised through integration with existing business systems and workflow processes. These themselves may need adaptation to suit the introduction of digital technology and new data sources, as well as control mechanisms.

A step-by-step approach is recommended, starting with things like cloud adoption wherever it makes the most sense, and moving towards the goal of full IoT adoption.

Due to the multi-access nature of our environment today, customers expect to access service providers, like their insurer, from virtually anywhere across the platform of their choice. In order for insurers to maintain control of an omni-channel offering, they will need to integrate multiple channels through a single management platform, which will then be able to administer access rights and usage policies as required.

Monetizing IoT for insurers will ultimately come from the provision of greater efficiencies, greater data accuracy, better loss avoidance (predictability), improved compliance enforcement, and the influencing of customer behaviour. These, collectively, will serve to boost the capital growth of the insurance sector, and enhance profit margins significantly.

Navigating the challenges

Data security will be the prevailing challenge faced by insurers – in fact, any organisation or sector – looking to leverage IoT. Careful consideration of the digital strategy will need to be undertaken, prioritising end-to-end security in the overall system design. This will include data collection devices, aggregation gateways, operational platforms, back end business intelligence, and artificial intelligence/machine learning systems.

Where social networks and digital platforms are leveraged, it will be vital to establish the reliability of the data, its source and its compatibility with local compliance regulations. This data will likely only serve for indicative purposes, as it is not likely to comply across the board with legislation such as PoPI.

Embracing change

IoT will undoubtedly revolutionise the way that insurance is offered, brought to market, considered and chosen, and insurers should start looking at the steps they need to take to implement IoT now. The benefits are set to propel the insurance sector away from its perception as a grudge purchase, making it a value-added service that people will want to invest in. It will require, however, that insurers shake the chains of tradition and embrace the Digital Age.

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VoD cuts the cord in SA

Some 20% of South Africans who sign up for a subscription video on demand (SVOD) service such as Netflix or Showmax do so with the intention of cancelling their pay television subscription.

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That’s according to GfK’s international ViewScape survey*, which this year covers Africa (South Africa, Kenya and Nigeria) for the first time.

The study—which surveyed 1,250 people representative of urban South African adults with Internet access—shows that 90% of the country’s online adults today use at least one online video service and that just over half are paying to view digital online content. The average user spends around 7 hours and two minutes a day consuming video content, with broadcast television accounting for just 42% of the time South Africans spend in front of a screen.

Consumers in South Africa spend nearly as much of their daily viewing time – 39% of the total – watching free digital video sources such as YouTube and Facebook as they do on linear television. People aged 18 to 24 years spend more than eight hours a day watching video content as they tend to spend more time with free digital video than people above their age.

Says Benjamin Ballensiefen, managing director for Sub Sahara Africa at GfK: “The media industry is experiencing a revolution as digital platforms transform viewers’ video consumption behaviour. The GfK ViewScape study is one of the first to not only examine broadcast television consumption in Kenya, Nigeria and South Africa, but also to quantify how linear and online forms of content distribution fit together in the dynamic world of video consumption.”

The study finds that just over a third of South African adults are using streaming video on demand (SVOD) services, with only 16% of SVOD users subscribing to multiple services. Around 23% use per-pay-view platforms such as DSTV Box Office, while about 10% download pirated content from the Internet. Around 82% still sometimes watch content on disc-based media.

“Linear and non-linear television both play significant roles in South Africa’s video landscape, though disruption from digital players poses a growing threat to the incumbents,” says Molemo Moahloli, general manager for media research & regional business development at GfK Sub Sahara Africa. “Among most demographics, usage of paid online content is incremental to consumption of linear television, but there are signs that younger consumers are beginning to substitute SVOD for pay-television subscriptions.”

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New data rules raise business trust challenges

When the General Data Protection Regulation comes into effect on May 25th, financial services firms will face a new potential threat to their on-going challenges with building strong customer relationships, writes DARREL ORSMOND, Financial Services Industry Head at SAP Africa.

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The regulation – dubbed GDPR for short – is aimed at giving European citizens control back over their personal data. Any firm that creates, stores, manages or transfers personal information of an EU citizen can be held liable under the new regulation. Non-compliance is not an option: the fines are steep, with a maximum penalty of €20-million – or nearly R300-million – for transgressors.

GDPR marks a step toward improved individual rights over large corporates and states that prevents the latter from using and abusing personal information at their discretion. Considering the prevailing trust deficit – one global EY survey found that 60% of global consumers worry about hacking of bank accounts or bank cards, and 58% worry about the amount of personal and private data organisations have about them – the new regulation comes at an opportune time. But it is almost certain to cause disruption to normal business practices when implemented, and therein lies both a threat and an opportunity.

The fundamentals of trust

GDPR is set to tamper with two fundamental factors that can have a detrimental effect on the implicit trust between financial services providers and their customers: firstly, customers will suddenly be challenged to validate that what they thought companies were already doing – storing and managing their personal data in a manner that is respectful of their privacy – is actually happening. Secondly, the outbreak of stories relating to companies mistreating customer data or exposing customers due to security breaches will increase the chances that customers now seek tangible reassurance from their providers that their data is stored correctly.

The recent news of Facebook’s indiscriminate sharing of 50 million of its members’ personal data to an outside firm has not only led to public outcry but could cost the company $2-trillion in fines should the Federal Trade Commission choose to pursue the matter to its fullest extent. The matter of trust also extends beyond personal data: in EY’s 2016 Global Consumer Banking Survey, less than a third of respondents had complete trust that their banks were being transparent about fees and charges.

This is forcing companies to reconsider their role in building and maintaining trust with its customers. In any customer relationship, much is done based on implicit trust. A personal banking customer will enjoy a measure of familiarity that often provides them with some latitude – for example when applying for access to a new service or an overdraft facility – that can save them a lot of time and energy. Under GDPR and South Africa’s POPI act, this process is drastically complicated: banks may now be obliged to obtain permission to share customer data between different business units (for example because they are part of different legal entities and have not expressly received permission). A customer may now allow banks to use their personal data in risk scoring models, but prevent them from determining whether they qualify for private banking services.

What used to happen naturally within standard banking processes may be suddenly constrained by regulation, directly affecting the bank’s relationship with its customers, as well as its ability to upsell to existing customers.

The risk of compliance

Are we moving to an overly bureaucratic world where even the simplest action is subject to a string of onerous processes? Compliance officers are already embedded within every function in a typical financial services institution, as well as at management level. Often the reporting of risk processes sits outside formal line functions and end up going straight to the board. This can have a stifling effect on innovation, with potentially negative consequences for customer service.

A typical banking environment is already creaking under the weight of close to 100 acts, which makes it difficult to take the calculated risks needed to develop and launch innovative new banking products. Entire new industries could now emerge, focusing purely on the matter of compliance and associated litigation. GDPR already requires the services of Data Protection Officers, but the growing complexity of regulatory compliance could add a swathe of new job functions and disciplines. None of this points to the type of innovation that the modern titans of business are renowned for.

A three-step plan of action

So how must banks and other financial services firms respond? I would argue there are three main elements to successfully navigating the immediate impact of the new regulations:

Firstly, ensuring that the technologies you use to secure, manage and store personal data is sufficiently robust. Modern financial services providers have a wealth of customer data at their disposal, including unstructured data from non-traditional sources such as social media. The tools they use to process and safeguard this data needs to be able to withstand the threats posed by potential data breaches and malicious attacks.

Secondly, rethinking the core organisational processes governing their interactions with customers. This includes the internal measures for setting terms and conditions, how customers are informed of their intention to use their data, and how risk is assessed. A customer applying for medical insurance will disclose deeply personal information about themselves to the insurance provider: it is imperative the insurer provides reassurance that the customer’s data will be treated respectfully and with discretion and with their express permission.

Thirdly, financial services firms need to define a core set of principles for how they treat customers and what constitutes fair treatment. This should be an extension of a broader organisational focus on treating customers fairly, and can go some way to repairing the trust deficit between the financial services industry and the customers they serve.

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